Joan Burton (Dublin West, Labour) | Oireachtas source

-----and the Senator can read the history of what happened. I wish this never had to be and that all of these defined benefit schemes would have been significantly and healthily funded, but the purpose of the Act was to get those schemes over the line in so far as possible.

The Irish aviation superannuation scheme has 5,000 currently retired members and approximately 5,000 workers. An important element is that the companies and the employment that those companies provide currently to 5,000 people is of some significance so that the continuation of that employment is a significant element and also the protection of the existing pensioners is a significant element. I acknowledge the great difficulty for the people who are deferred members.

I refer to recommendation No. 10 proposed by Sinn Féin. I had a similar discussion with Deputy Ó Snodaigh. The recommendation proposes an alternative wind-up priority order and to give first priority to awarding the full State retirement pension. This legislation deals with the distribution of an occupational defined pension scheme fund. I reiterate and stress that there is no direct connection between the contributions made to or benefits received from an occupational defined benefit scheme in the private sector and the actual payment of the State pension. The provisions contained in this legislation have no impact whatsoever on any entitlement to the State pension or to the PRSI contributory system. The contributory principle whereby there is a direct link between social insurance contributions made and a resulting entitlement to a varying range of benefits and pensions that are payable as a right is an underlying principle of Ireland's pay related social insurance scheme. The contributory State pension is paid from the Social Insurance Fund to any individual from the age of 66 who meets the qualifying criteria on his or her State and occupational pensions. It is important to recognise, however, that the benefits of current and former employees who have made contributions to the schemes are also protected. That is why my priority with regard to pensions and payment was to ensure the greatest level of protection was afforded to those on low to moderate pensions. Therefore, it was decided to maintain 100% priority for pensions and payment of up to €12,000 a year and to protect pensions up to this level in the event of the restructuring of scheme benefits. The determination of this benchmark was informed by pension data which indicated that the median pension in the private sector defined benefit schemes was €11,000. This approach facilitates the rebalancing of the distribution of scheme resources between pensioners and current and former scheme members while providing full protection for pensions below €12,000. I emphasise that this is the way the 2013 legislation operates.

Section 50 of the Pensions Act was reviewed in 2009 by the previous Fianna Fáil Government and again in 2013. I have just set out the changes to the 2013 Act. The changes to 2009 essentially provide for the sharing of the risk of scheme under-funding across all scheme members, and this was the basis of the 2009 Act. The issue of how these changes might be applied is a matter for the trustees of the pension schemes.

I just want to repeat what I said at the beginning. The Pensions Act does not prevent the action desired in the proposals and in recommendations Nos. 11 and 12. The trustees decide how provisions are actually implemented. I want to stress that this is a matter for the trustees and I believe Members should give this point consideration.

The provisions in section 50 of the Act do not differentiate between active and deferred scheme members as these members are participating in a scheme during periods of employment where members accumulate pension rights. It is a matter for the trustees of a scheme, who are required under trust law to act in the best interests of all scheme beneficiaries, to deliver a fair and reasonable solution which will secure the sustainability of the pension scheme. It would not be the practice to make a change to the Pensions Act, as Senator O'Brien correctly acknowledged, because of a difficulty in a particular scheme, unless it was apparent that it applied across schemes generally. Some 11% of defined benefit pension schemes had used this provision by the end of 2013 to reduce scheme benefits. Most of these adjustments to scheme benefits applied to post-retirement increases in pension benefits.

As I said, I appreciate very much the difficulties for people in regard to this pension scheme. Unfortunately, as was said, the level of the deficit in this particular scheme is extremely high and the members, deferred and active, have had to deal with proposals which were put forward, and which, in the Act and in pension law, are put forward by the trustees of the scheme.