Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

As I stated on 18 November when I last made a statement to the House on this matter, resolution of the IASS funding difficulties is primarily a matter for the trustees, the companies participating in the scheme, the scheme members and the Pensions Authority.

The difficulties in this scheme have increased to the extent that the deficit is now in the range of from €700 million to €750 million. With the scale of this deficit, based on a minimum funding standard update from the IASS actuaries in December 2013, the estimated coverage for deferred as well as active members' benefits would be in the range of from 24% to 31%. This takes account of the pensions legislation introduced in December 2013 that allows reductions to be made to pensions in payment.

The solution proposed involves funding of over €260 million from Aer Lingus and the DAA to help mitigate the impact of the trustee proposal. Aer Lingus is holding an extraordinary general meeting of shareholders today - the meeting commenced at 2 p.m. - to seek shareholder approval to contribute €190.7 million towards the fund. This is a single issue EGM. There is only one resolution to be voted on and shareholders can either vote in favour of it or against it; they cannot vary it. The board of Aer Lingus has issued a recommendation to shareholders to accept the proposal as it considers that it is the only viable solution capable of being accepted and implemented by the affected parties.

On this basis and in view of the very significant risks that will arise for all members, the companies and the wider economy in the event of failure of this solution, the State's shareholding is being voted in favour of the resolution at today's EGM.

The deficit in this scheme is so large that the scheme is unsustainable as it cannot meet the minimum funding standard. The solution proposed is the result of more than four years of complex negotiations involving the parties. Earlier this year, an expert panel was established by my Department, the Department of Jobs, Enterprise and Innovation, ICTU and IBEC tasked with finding the fairest way to distribute the burden of resolving the current deficit in the scheme. As a result of that process, the total contribution of over €260 million includes almost €20 million in extra funding proposed by the employers in addition to the €40 million already being made available for deferred members, bringing the full amount for this group to €60 million.

The deferred members are particularly affected by the proposal to co-ordinate their pension with the State pension as they have left service. However, while there may have been an expectation of unco-ordinated pensions, the reality is that this was neither funded by the members nor the employers. Only those members who have paid for unco-ordination will maintain that under the current proposals. There are no funds available to mitigate the loss of this element of the proposals.

On Friday 14 November 2014, the trustee sought approval from the Pensions Authority for a funding proposal and requested that I commence legislative provisions to facilitate implementation if approved. The trustee believes this is in the overall best interests of the members of the IASS. This was also the view of the expert panel. Following requests on behalf of deferred members that more funding be made available for that group, I raised this issue directly with the employers. However, it was clear that the funding proposed is the maximum that can be achieved.

Having considered this and having reflected on all of the issues, including the significant deficit in the region of from €700 million to €750 million, I signed the commencement order on 17 November 2014. Had I not signed the order, this would have posed an unquantifiable risk to the entire scheme and could have had profoundly serious implications for all members of the scheme. I met with the deferred members group on 4 December to set out my position and to explain why I commenced the provisions. I am extremely conscious of the difficulties the funding proposals will cause for many members, but the risks that will arise for all members, the companies and the wider economy in the event of failure of this solution are even greater. I believe that the funding proposal put forward by the trustee offers the best possible outcome for all members given the exceptionally acute difficulties and unsustainable circumstances of this fund.