Joan Burton (Dublin West, Labour) | Oireachtas source

There are just a couple of points I want to make. Senator Mooney referred to Waterford Glass. I understand the thinking behind the two amendments but one should bear in mind the position of Waterford Glass and what ultimately triggered the problems aside from the difficult trading results and trading conditions. The point at issue for the Government in the late 2000s was its guarantee and a request from the company of a bond of €40 million. That was not forthcoming and one of my predecessors, possibly Mary Hanafin, spoke about why it was inappropriate. It was a general bond; it was not specifically related to the pension fund and concerned the company's borrowings. It was finding it difficult to renew it. One of the problems is that we have been in a period of unprecedented difficulty. What one wants to try to do is to have maximum protection for the maximum number of defined benefit schemes and the maximum number of parties to such schemes. I include the pensioners, the already retired, those who have deferred their pensions and will not reach pension age for some time and the active members who are coming in. We spoke on the last occasion about the contrast between somebody who is 66 and on a pension and somebody who, at 62 or 63, is almost at pension age. Currently, without this legislation, the 66 year old could be quite highly protected and the person who is not yet at pension age could lose everything. The legislation seeks to offer protection in this case.

We examined the issue of employer risk extensively. What one opts for involves a balanced decision. In the Irish circumstances, however, one should bear in mind that we are just emerging from a unprecedented, difficult period. The history of pension funds shows that the major problem in Ireland has primarily been the promise made by good employers. Most employers establishing pension schemes intend to fulfil their promises. It is important to recognise and acknowledge that. Those employers are as distressed as many of the members of the schemes over the fact that the schemes have got into difficulty. The most difficult issue employers faced was the change in life expectancy, which has an effect on the period over which one can benefit from a scheme. I refer in particular to older schemes. When these schemes were set up, life expectancy after pension age was a fraction of what it has become. This means the original promise, perhaps based on an expected life expectancy of 15 years after reaching pension age, is harder to honour as the period for which one lives after reaching pension age has almost doubled. Therefore, it is almost inevitable that a scheme will be under-funded unless both the members and employer find a way of contributing or changing the promise to reflect the changes in the financial circumstances of the employer.

I agree with Senator Jim Walsh that mutuals in America have much to offer. The route for us, as I stated on the last occasion, is to look, as we have done - we have asked the OECD to comment on it - at the development of a further contributory pension aimed at those on low and middle incomes, either on a mandatory or - this may be more attractive in an Irish context - an auto-enrolment basis, the OECD's first and second preferences, respectively. We should try to move in that direction, sooner rather than later, particularly for the current generation of new workers coming through who, in many cases, will be relying on the State pension only. As Senator Jim Walsh stated, the advantage in the case of mutuals is that they could then join in a general fund, whereas the Senator and I, or other individuals, particularly somebody in his or her 20s, are trying to make decisions about in what exactly one invests in a defined contribution scheme as an individual, which is a fairly tough call. It is a fairly tough call for young people in their 20s and 30s and practically everybody else, unless one has considerable financial acumen as compared, as the Senator said, with the advantage enjoyed by the mutual. That is one point. That is not included in the Bill, but it is something I certainly hope to advance. The OECD's recommendation in the report published in April is positive in that context. The issue is whether an obligation, if we were to place it on the employer, would make more employers want to walk away and whether it would disadvantage the good employer who had made pension provision and was committed to it, as opposed to the employer who had never made any provision? As I stated, pension schemes are based on trust law. They are based on the employer's promise, but if the employer's financial position is precarious, putting an additional obligation on him or her might make what is already precarious far worse. That really is the fine balance one must manage.

In the United States and the United Kingdom, far bigger economies than this one, owing to the population to be covered, the risk can be spread, whereas here, because the population is so small, it is much more difficult to spread the risk among a much wider population of employers. We do not have the capacity to the same extent as they do in the United States and the United Kingdom. In the long run, in 30 or 40 years time, one might say the way to do it would be to have some level of risk coverage in the European Union or like-minded countries in it. Seeing that we are still sorting out the issues of the ECB and the euro, that matter is a long way down the road. For that reason, I am not inclined to accept what is a thoughtful amendment, one which has been debated and discussed. On balance, it would not be appropriate to place an obligation on the employer, the administration of which might be difficult and advantageous to employers which did not have pension obligations and relied only on the State pension.

On Senator David Norris's point, I would like to see the paper from which he has read as I did not catch all of the figures. He mentioned the value of pensions falling below €12,000. The purpose of the Bill is to protect pensioners up to a figure of €12,000. Much has been much written about this. There are those in the pensions sector who have advocated a protection level of €6,000; perhaps some of the examples might be based on that figure, I simply do not know. In the Bill we are addressing a protection level of €12,000. As I stated, if there is a protection level of €12,000 and if, as in the case of defined benefit schemes, the majority also have access to the State contributory pension, one is talking about a further €12,000, bringing the total of €24,000. I will certainly take the figures the Senator has put forward and ask the staff of the Department to have a look at them.

For the reasons I have set out, I do not propose to accept the amendments, although I understand the spirit behind them. It really is a finely drawn decision. The real difficulty is the position the economy is in. It would be risky to place an additional significant burden on employers and it might result in more schemes than the Senators might have anticipated deciding to close. What we want to do is keep as many schemes as possible open and to get them to a better place, even if that means restructuring and amending the promises made in order to conserve the maximum pension for pensioners, current active members and retired members. I would also be wary because of the financial position of placing additional burdens on the balance sheets of employers, some of whom, although it is improving, are still in a precarious position.