Jim Walsh (Fianna Fail) | Oireachtas source

I apologise for my late arrival. I was in a meeting with someone when I noticed that amendments Nos. 9 and 18, in which I was interested, were being discussed and rushed ihere.

The Minister will recall that on the last day she attended I mentioned the EMI pension scheme. I had been approached by a number of its members. Obviously the Bill will be of advantage to those who receive pensions to some degree, but it will also be of advantage to persons who are still in employment and will leave in a few years time. I understand the thinking behind the provision. EMI was owned by the investment company, Terra Firma. Owing to leveraging, the Citigroup foreclosed on the loans, took control of the company and sold it to an American company for a few billion dollars. When Citigroup dealt with the matter in Britain in order to achieve a sale, it had a hole to fill in the pension fund. EMI has operated in Ireland for between 40 and 50 years and in the early days there was one pension fund. Later the company was split, which meant that there were separate companies under the same parent company and the pension fund was split. My information is that in Britain EMI was required to meet the fund deficit and I understand it put £200 million into it to enable it to sell the company. There was no such requirement for it to do the same here and it chose not to do so. The Irish employees were seriously disadvantaged vis-à-vis their British counterparts. There is a great disparity between British and Irish pension laws. I raised the matter with the Pensions Board, but I got no comfort from talking to it. As a consequence, the matter needs to be addressed, which is why I was so critical of the legislation on Second Stage. There are lots of issues with pension schemes and unless we tackle and address the loopholes in a manner that will encourage and incentivises people to provide for their own pensions, our policies will be counter intuitive and we are being counter intuitive, given the fiscal policies the Minister's colleague, the Minister for Finance, has pursued by taxing pension funds and, in particular, the imputed distribution arrangements that apply to private pension funds. Obviously, some private pension funds are shipping a lot of losses and will not yield large pensions. We are now saying to the people affected that they must take out a figure of 5% per annum. Originally when the provision was introduced, the rate was 3%, but then it was increased to 5% and, in the case of a pension fund worth over €2 million, 6%. I do not object to a rate of 6% because €2 million in a pension pot is a substantial amount of money. However, there are people with much smaller pots to which no imputed distribution arrangement should apply.

I know that taxation is the responsibility of the Minister for Finance, but I have raised this matter because I want to draw attention to the fact that there is a ream of pension issues that need to be addressed.

I was surprised, perhaps I should have known, having spoken to the pensions board, that it appears to have no interest or no remit to deal with companies who are closing down their pension schemes, in particular, defined pension schemes. I cannot understand the reason the legislation will adversely affect many people who have invested in private pensions and who are in receipt of private pensions but at the same time does not do anything to focus on the employers. I have argued in the House many times that wages and salaries across all of Irish society, particularly in the public service, are much too high and are 22% or 23% higher in the private sector. There is no justification for that. I am one of those who receives a public service salary.

It is also the case that our pension entitlements supersede anything that, other than a small coterie, of people at the top in the private sector would enjoy. There is a need to look at that issue. It is the same in the private sector where wages are too high. We should be aiming to maximise the number of people in the private sector who are entitled to a pension. There is a huge fiscal challenge coming to us in the future with our public service pensions and our State pension. It has been estimated that if an actuarial valuation of the public service pension was undertaken there is probably a shortfall in it. The last figure I saw was one of about €120 billion to €130 billion. These are significant issues which need to be addressed. I hold the view - this is a change of opinion from five, six or seven years ago - that, perhaps, all defined benefits should be looked at with a view to changing them, including public service pensions, to a defined contribution scheme. I remember ten, 15 or 20 years ago, in the 1990s, looking at pension entitlement in the US. The US introduced what I think was called "mutual funds" or something similar, under which individuals made a contribution to a pension which grew. I remember speaking to people in the US who said that they had created within that fund a level of wealth they had never dreamed of being able to do. It is right to give the taxation provision for it. In this way people should know on an annual basis the amount in the fund and the growth in the fund. There should be no disadvantage by way of imposing levies on the fund. It should be allowed to grow. People will pay the full amount of tax on it when it is due - that is really the third tax on the fund. If we can do that, perhaps, in 2030, 2040 or 2050 when the demographics change dramatically, those retiring will have sufficient funds to live their life in a reasonable degree of comfort. I would like to see that proposal examined.

The amendments focus specifically on a situation where we allow trustees, because the company decides, as many profitable companies do, not to make any more contributions. There is no doubt that many companies have gone to the wall as a consequence of this unprecedented recession but there are also many companies who have taken advantage of the economic downturn in order to suppress wages and entitlements. I am strongly in favour of the private sector, as that is what drives the economy. However, there must be equity, fairness and ethical policies in the private sector and it is up to the State to ensure that is case.

We must ensure that companies fulfil their commitments to employees. It would be in employees' interests and in the State's interest if we were to seek to benchmark all salaries in the public sector and the private sector, which should have happened at the time of benchmarking, with those of other western European countries, that is, the countries with which we are competing. An analysis I did in 2008, based on research conducted by the university of Glasgow, showed that wages and salaries in Ireland were significantly higher than in any other country. I suspect wages and salaries are still higher here but if we are to be competitive we must bring pay rates to the average of those countries. In doing that the quid pro quomust be that people who are now much more likely to enjoy a longer retirement will be properly supported. The State pension will not achieve that.

Amendment No. 9 seeks that the sponsoring companies should not be allowed to close the scheme without ensuring the scheme has reached a minimum 90% funding standard. As I said on Second Stage, I think the OECD has recommended that. I ask the Minister to look favourably on this amendment because it is essential that we do more than is provided for in the Bill. I acknowledged on Second Stage, even though I have been critical, that what the Minister has done is a step in the right direction but there are too many other steps that have not been taken and that is where my criticism lies.

Amendment No. 18 seeks that the pensions board would not have the entitlement to direct the trustees of a pension scheme to reduce the benefits of current or former scheme members and-or post-retirement increases where a sponsoring company or its parent company have the financial capacity to meet the under-funding in the scheme. It is important to make the distinction that sometimes the sponsoring company may be borderline viability but its parent company can be well positioned to meet the funding deficit. Where a sponsoring company applies to close a scheme it should be required to provide the financial information necessary for the pensions board to assess whether it, the sponsoring company, or its parent company have the financial capacity to deal with the shortfall and should not be allowed to close the scheme. That they are not prepared to do so should not be a factor. There is a real need to protect pensions in this regard.

As I said on Second Stage, the Bill is about robbing Peter to pay Paul. It is seeking to take money from current pensioners to assist employees who have paid their contributions and who, perhaps, within a short number of years may seek to access the pension to which they have contributed. It also seeks to take money from those who have worked hard all their lives to provide a pension for themselves - that is a small percentage in the private sector. That is fundamentally wrong. If, on the other hand, employers, for whom all these people worked, are highly profitable have very good reserves and are not prepared to make their contribution to fixing this particular issue, that is fundamentally unfair. We should aim to be just, fair and ensure that those most in need are catered for. If the Minister does not accept the amendments now I implore her, between now and Report Stage, to examine what can be done. I would be very surprised if the concept and the principles I am proposing do not find favour with her thinking and analysis in this regard.