Sean Barrett (Independent) | Oireachtas source

I thank the Minister. The way in which the trustees make the request to the Minister is the kernel of the issue. The new section inserted by amendment No. 17 states: "the Minister shall request the Minister for Finance to pay out of the Central Fund to the trustees of the relevant scheme, an amount equal to the certified amount for the purpose of the discharge, by the trustees of that relevant scheme, of the liabilities of that scheme in respect of the benefits referred to in section 48(1D)."

I was pleased to learn that 40% of the schemes are fine and that problems arise in only 20% of them, as I had heard that up to 80% of the schemes were in trouble. The Minister informed the House that the position is more optimistic than we expected, which is good. I commend her interest in this area. Arising from the annual addresses she gave to my students each year after the budget, I am aware that she has the business and accounting background to tackle this problem, which has been around for much too long, and I support her in that regard.

The problem of moral hazard arises. How will we be certain of the reasons the schemes that apply to the Minister to request that the Minister for Finance make a payout have got into trouble? The Minister may have learned today that Legal & General in the United Kingdom has found that older schemes have an administration charge of 2%. The British Government is considering imposing a cap of 0.75% on administration fees, but this one company believes it can do it for 0.5%. That is an important development. I do not know if we have a figure that is comparable for Ireland, but in the United Kingdom, each 1% charge costs £170,000 where a saver pays £1,200 per annum for 46 years. Are excessive administrative costs one of the reasons pension schemes get into trouble? I pose this question because we have had a succession of bankers, accountants, fund managers, credit unions and others seeking to have moneys paid to them from the public purse, in many cases as a result of their own inefficiencies.

We spoke yesterday to the Minister of State, Deputy Sherlock, about the need to have much stricter regulation of all financial services because €64 billion in debt was incurred by the State as a result of one sector behaving in an incompetent manner and visiting the entire burden on the Exchequer and citizens.

Take, for example, the role of trustees as expressed in the 2010 publication of the Pensions Board. Did they always act prudently and diligently in the interests of beneficiaries or were they incompetent? The Minister referred to longevity. One can argue, to the contrary, that the studies showing we are living longer have been around for a long time. Should the Exchequer be bailing out incompetents who did not do their life expectancy sums properly? A girl born today can expect to live for close to 100 years. Did the trustees and actuaries keep up with the research? Has the industry been keeping an eye on costs? Why does Legal and General state in the report it has published today that costs are too high? Rather than shift the burden to the Minister, Deputy Joan Burton, or the Minister for Finance, Deputy Michael Noonan, there has to be some penalty for people who invest poorly. Were too many years added in?

My fears increased when I read in The Irish Timeson Monday that pension scheme members in County Clare planned to sue their trustees for €50 million. Will an amendment be needed on Report Stage to provide for strict controls ovn who can qualify or will we be bailing out the funds because of the problems to which I have referred? If we were to bail them out, why would pension funds ever take steps to reduce their costs and fees? They could make themselves popular by awarding added years or not doing their actuarial sums properly and then transfer the ensuing problems to Leinster House. I appreciate the reason for intervening in the current context. That need has decreased with the good news that 40% of schemes are now fully funded. Given what has happened in related financial sectors such as €52 million for a credit union and the uncertain cost of banking and accounting schemes, do we need stricter controls on fund managers? When people are incompetent or excessively generous, should they not bear some of the burden? Can the Exchequer be protected in a way that did not happen in 2008 when the financial sector dumped its financial problems on its doorstep?