Leo Varadkar (Dublin West, Fine Gael) | Oireachtas source

This is a State Airports Bill which mainly deals with Shannon Airport, but also deals with a number of other issues, including aviation security and the use of lasers to blind pilots. It is not just a Shannon Bill this matter has been tagged on to. If that had been the case, the Bill would not have been cleared by the Attorney General. Therefore, I cannot accept Senator Cullinane's charge in that regard. The Bill will get plenty of scrutiny, both in this House and in the Dáil. This is the third occasion on which I have been in this House on this Bill and I may well be back, if necessary.
In regard to Senator O'Brien's question, I am not aware of similar legislation pertaining to other private pension schemes, although similar legislation may well exist. I note his acceptance this is a private pension scheme, not a State or public sector scheme. However, some people do not seem to realise this.
In regard to the extra panel, it is important to point out this is not involved in negotiations per se.It is not a round table negotiation and the panel has more of an arbitration role and will meet individually with representative groups. It has already met the group representing some of the deferred pensioners and I have asked it to do so again. For what it is worth, I agree the trustees' proposal was disproportionate in its recommendations for the deferred pensioners. However, that was the trustees' proposal, not my proposal and it is not what is being debated now in this House. It may well be the extra panel's proposal, when we see it, will be different again.
It is important to recap on this topic because it is of great importance and is a major part of the Bill. I gave an overview on Second Stage of the intentions behind section 33 of this Bill, in particular the proposed section 32A to be inserted into the Air Navigation and Transport (Amendment) Act 1998. I listened carefully to the views of Senators at the time and welcomed their views. I fully appreciate that Senators have a keen and genuine interest in the subject and assure them that my interest is no less. We all share a common desire. Like Senators, I want to see the parties to the IAS scheme - the members, employers and trustees - reach an agreement to resolve the serious and long-standing problem with that scheme.
I must also ensure that if and when an agreement is reached, the parties have the tools available to them to implement that agreement. What will happen if an agreement cannot be reached by the parties and should we completely ignore that possibility? Should we not provide for some fallback mechanism other than a forced wind-up of the scheme in that eventuality? In a nutshell, these are the basic considerations behind the provisions in this section of the Bill, particularly the proposed new section 32A to be inserted into the 1998 Act.
It would be helpful and useful to remind ourselves of the current situation regarding the IAS scheme and how the proposals in this section are intended to assist the parties to implement whatever solutions are agreed by them to the serious problems in the scheme.

As I said on Second Stage, the provisions of section 33 do not anticipate or pre-empt any solution the parties formulate. If the serious deficit in the scheme were to somehow disappear and the IAS fund were to find itself in a healthy surplus as soon as the Bill were enacted, the possibilities under the legislation would include the continuation of the scheme. The Bill does not preclude that as a possible outcome. One of the central problems with section 32 of the 1998 Act is that it currently provides only for that particular outcome. In short, it provides that any separate pension scheme that the DAA establishes for IAS scheme members must include pension benefits and terms and conditions relating to those benefits which are no less favourable than those which are currently applicable. In other words, if DAA were to establish its own separate pension scheme for those of its members who are in the IAS scheme, it would have to be a replica of the IAS scheme with which there is such a problem. All of the current scheme's problems and inflexibilities would transfer to the new scheme.

The DAA and SAA do not have a mandate in the current legislation to introduce any other type of scheme for the members of the IAS scheme, which is a potentially serious barrier to the implementation of whatever agreed solution emerges on foot of the problems in that scheme. We could find - and I very much hope we do - that a compromise solution to those problems is arrived at over the coming weeks. Even if it is, the current legislation precludes the DAA from implementing it. The DAA will not be able to implement that solution unless the flexibilities provided for in the Bill are passed by this House and the Dáil.

It was suggested on Second Stage and again here today that the provisions are premature and that we should wait for the current discussions among the parties to reach a conclusion. The implication of that suggestion is that I would bring a separate Bill to the Oireachtas at that stage to provide for the legislative tools to implement whatever compromise solution has been arrived at by the parties. Leaving aside the prospect that the Houses may not even be sitting, as the summer recess is almost upon us, it would be a very inefficient use of Oireachtas time and resources when there is absolutely no need to take that course. We can provide the necessary provisions here and now in the Bill which I hope can be enacted before the recess. In addition, any further delay to the implementation of a solution to this most complex of problems, which has been ongoing for years, is not one that should be attractive to any of us. It would certainly be grossly unfair to the parties involved.

Section 33 of the Bill contains two subsections, the first of which amends the superannuation provisions applicable to the State airport authorities that are currently contained in section 32 of the Air Navigation and Transport (Amendment) Act 1998, as amended by the State Airports Act 2004. The second subsection repeals section 9 of the Aer Lingus Act 2004. Subsection (1) proposes to substitute two new sections in place of the existing section 32 of the 1998 Act. There are new sections 32 and 32A. Most of the provisions of the new section 32 are similar to the provisions contained in the existing section 32 which it will replace. For the most part, it contains the standard provisions governing pension schemes which appear in legislation governing commercial State companies. Such provisions include the power of airport authorities to establish superannuation schemes for staff, a requirement for ministerial approval for such schemes, and provision for any proposed subsequent amendments to them. Powers to establish a fund associated with each approved scheme from which benefits can be paid, a requirement that an appeals mechanism be provided for in each scheme, and provision for the laying of the schemes before the Oireachtas are further such provisions. The new section 32 also future-proofs the section, having regard to any future Government decision to separate Cork Airport from the DAA.

The new section 32A contains a number of different provisions to facilitate amendment by the trustees of certain provisions of the IAS scheme in the context of current discussions to find solutions to the problems in the scheme. As emphasised on Second Stage, the provisions do not pre-empt or anticipate any particular solution that may emerge from those discussions, nor are they intended to undermine the terms and conditions of the employment of staff.

It would assist with a better understanding of the new section if I grouped the relevant subsections together for ease of reference. Subsections (1) and (2) will allow IAS scheme members who become members of another pension scheme to cease to make contributions to the IAS scheme, which many of them would like to do at this stage. The airport authorities will, of course, be required to submit that other pension scheme for ministerial approval in the normal way under section 32, which I have just mentioned. The employer contributions to the IAS scheme in respect of such a member would cease simultaneously and no further superannuation benefit would accrue under that scheme for that member.

This is entirely voluntary and there is no obligation on IAS scheme members to cease contributing to the scheme. The problem with the IAS scheme will still remain to be solved by the parties. However, it does address the desire expressed by many employees who currently have no option but to make contributions in respect of future service to a pension fund other than the IAS fund where there is a prospect of a better future benefit. SIPTU had a vote on this issue last February and the overwhelming majority voted in favour of withholding contributions to the IAS scheme pending a solution to the problems in the scheme. The provision in the Bill are providing them with that option if, on a purely voluntary basis, they wish to avail of it.

The provisions in subsections (3) to (10), inclusive, are very much in the nature of a fallback position. In the event that general agreement on the IAS scheme cannot be reached, they will facilitate each individual employer in negotiating its own pension solution with its own employees as an alternative to a wind-up of the IAS scheme. We must provide for all eventualities, including the possibility that, despite our best efforts, it may ultimately prove impossible for the parties to the current discussions to agree to a resolution. We must, therefore, provide some backup mechanism because, in such a scenario, the only other likely alternative would be a direction from the Pensions Authority to the trustees to wind up the scheme altogether. Continuing with a scheme with an unresolved substantive deficit is clearly not tenable.

A winding up of the IAS scheme would constitute a very serious situation for the members and be likely to have very serious industrial relations implications at airports and Aer Lingus also. In a wind-up the trustees would have to purchase annuities for the pensioners - an expensive exercise - and reduce their benefits in line with the provisions of the Social Welfare and Pensions (No. 2) Act 2013. Whatever little funding would be left would be distributed to the deferred and active members. In the Bill I am providing for an alternative to the winding up of the scheme, if it comes to this. This will keep a measure of control with the employers and their employees.

Subsections (3) to (10), inclusive, provide for what is called a "replacement scheme". A replacement scheme is one which can be established by an employer for the specific purpose of receiving a transfer of assets from the IAS scheme in respect of that employer's members of the IAS scheme. Essentially, we are providing for the break-up of the IAS scheme but in a circumstance that would be very different from that originally envisaged under the 1998 Act. These provisions will allow for the employers to take members out of the scheme and they can then each negotiate directly with their own staff representatives on a solution without the multi-employer constraints and inflexibilities inherent in the current scheme. It is true that these subsections do not provide for consent by employees. In the scenario about which we are talking, namely that the IAS scheme is about to be wound up by the Pensions Authority, that would not be appropriate. However, the replacement scheme put in place will, of course, have to involve discussions with staff representatives.

The remaining subsections of the new section 32A stand on their own and I will deal with them individually. Subsection (11) provides the trustee of the IAS scheme with power, without the need for the consent of members or employers, to amend the provisions of the scheme in order to cease contributions to the scheme by both members and employers and, of course, to cease the corresponding accrual of further benefits under the scheme. This will facilitate the implementation of an overall solution to the problems in the IAS scheme, be it along the lines of the Labour Court recommendations of May last year or some variation thereof.

In deciding whether to exercise power the trustees must consider what is in the best overall interests of scheme members and have due regard to the interests of the different categories of member and any other matter they consider relevant, including the funding deficit and the implications of the deficit for all members. Clearly, an agreement among the parties will make the trustees' job a lot easier. The trustees of the most modern pension schemes would, in conjunction with the schemes' employers, have this power. Obviously, there would be a requirement for the new pension scheme under which the IAS members and new employees would accrue benefits in respect of their future service and such new scheme would be subject to ministerial approval under section 32(1), to which I referred.

Subsection (12) is to clarify that the IAS scheme trustees have the power to amend any provision of the IAS scheme that is necessary in order to comply with the directions of the Pensions Authority pursuant to section 50 of the Pensions Act 1990, as amended. While it may seem strange that there should be any doubt about the power of the trustees to institute rule changes without seeking the consent of members and employers on foot of a statutory direction issued by the Pensions Authority, there is potential nevertheless owing to the inflexible nature of the scheme for a challenge to any such action taken by trustees. This subsection is designed to remove any doubt that there may be in any quarter that in order to implement statutory directions from the Pensions Authority under section 50 of the Pensions Act, the trustees may make any necessary change to the provisions of the scheme without any requirement to seek the consent of members or employers.

Subsection (13), the final subsection, provides a number of definitions for terms used in the new section, the most importance of which is perhaps the definition of a replacement scheme. I have explained this definition.

Section 33(2) repeals section 9 of the Aer Lingus Act 2004 which is similar to the existing section 32 in the 1998 Act applying to airport authorities. It allowed Aer Lingus to set up its own replica IAS-type scheme for its own staff. That section of the Act was never commenced and, thus, the provisions were never used. Replicating the significant structural issues inherent in the IAS scheme does not make any sense. Hence, retention of section 9 of the Aer Lingus Act 2004 makes no sense either.

This section of the Bill, particularly the proposed new section 32A, is very complex. While I have taken a fair bit of time to explain it, it is important that we all appreciate the background to it and its intentions. Why should we not let the employees who have expressed a wish to do so to voluntarily cease making contributions to the IAS scheme if they so wish? The section provides for this. If the parties to the scheme can reach agreement on a way forward, surely it makes sense and is imperative to ensure the legislative tools are available to them to implement that agreement. This section gives them these tools. If, on the other hand, the Pensions Authority is about to move to wind up the scheme, does it not make sense that we should provide for that eventuality and an alternative that holds out a better prospect for those members? Thus, they would at least get to hang onto something in such an awful eventuality. This section allows for that to be the case.

I hope the Senators will appreciate that there is nothing sinister whatsoever behind these provisions. Nevertheless, I will take note of what they have to say. On Friday last the expert panel stated it was entering what it believes is now the final phase of engagement with the various parties. It expects to complete its work and make a final report by the end of next week. I will have regard to the outcome of its work in any further consideration of the provisions of this section when I return to the Seanad or the Dáil thereafter.