Darragh O'Brien (Fianna Fail) | Oireachtas source

I move amendment No. 11:

In page 16, after line 35, to insert the following:

"26.The Pensions Act 1990 is amended by inserting a new section 48A as follows:

"48A.A solvent firm shall not be allowed to close a defined benefit pension scheme except where the scheme has reached a minimum 90

per cent funding standard.".".

I referred to this issue on Second Stage. The purpose of the new section and these amendments is clear given what has happened with some pension schemes already when we relaxed the funding requirement for employers and pension scheme trustees. In effect, these amendments would remove the single insolvency introduced by the Government. We can understand why a pension scheme might have to be wound down if the company and the scheme were insolvent. We have the example of the IAS scheme where a profitable employer with hundreds of millions of euro in cash reserves ran down its pension scheme and doubled its deficit from €350 million to €760 million in two years by starving the scheme of funds. The employer told existing scheme members not to contribute to the scheme and doubled the deficit. The Government introduced legislation under the Social Welfare and Pensions Act and the State Airports (Shannon Group) Act that actually showed a roadmap to Aer Lingus, the DAA and former SRT as to how they could back slide their way out of the commitments they had given to the detriment, in particular, of long-standing deferred members who had not drawn down their pensions. People lost up to 60% of their promised benefits, retired members lost at least six weeks pay and active members have been put into an inferior pensions scheme. That legislation allowed members of a pension scheme to be unilaterally moved out of a scheme without their permission. That never happened before. The single insolvency is a retrograde step. It was a mistake and it should be fixed. My amendment No. 11 seeks that a solvent firm should not be allowed to close a defined benefit pension scheme except where the scheme has reached a minimum 90% funding standard. That is what it should be and that is what it is in many other developed countries across the world and in most European countries.

Amendment No. 13 is specific to the IAS scheme and would reverse the scheme brought forward by the Government. It states that the IAS scheme shall not be allowed to close its pension scheme except where the scheme has reached a minimum 90% funding standard.Amendment No. 14 seeks that the IAS scheme shall not be allowed to close its pension scheme except where all pension scheme members are treated in an equitable manner on the winding up of that scheme. Those amendments are clear.

I would like to quote some figures from Lane Clark and Peacock's pension account and briefing of 2015 which are particularly interesting.As most people know, equity markets in managed funds have been the subject of substantial growth in the past two years. However, Senators might be surprised to learn that the deficit in the defined benefit schemes of the State's largest private and public sector companies increased by 50% in 2014 and that the average level of the equity markets in those schemes decreased by 49%. In the same period, there was average pension scheme growth of double digits in standard managed funds, yet the level of funding of the underfunded schemes increased by more than 90%. Only one company reported that it had sufficient funds to meet its funded liabilities. The average funding level of schemes fell from 86% in 2013 to 83% in 2014. This is in the context of a market that is on its way up.

This is happening because all of these employers - public, private and semi-State commercial - have seen what has been allowed to happen at Aer Lingus to the Irish aviation superannuation scheme, IASS, and spotted a way out via single insolvency. If profitable companies run down their pension schemes, they can extricate themselves and write off the schemes' deficits. This is happening on the Government's watch. Private schemes are preparing to boot members out of their defined benefit arrangements and place them in inferior schemes. It will happen wholesale. Under my first amendment, what occurred with the IASS could not happen again unless a scheme reached a 90% funding rate, at which point it would be more equitable and a lesser reduction would be vested upon its members.

The other amendments relate specifically to the IASS. I do not want to delay the House. I do not know how many times I have raised this issue but no one can stand over what has happened to the 15,000 people in that pension scheme. It was done to permit the sale of Aer Lingus. The Government could not sell Aer Lingus with a pension deficit of €700 million plus. Instead, facilitating legislation was introduced and the State received a paltry €342 million, none of which is legally allowed to be invested in the pension scheme to reduce its deficit. The people who have paid for the sale of the State's share are the 15,000 IASS members, in particular the 5,000 retirees, many of them in their 80s, who have lost six weeks' pay and the further 5,000 members who have lost significant benefits. The active members have significantly inferior pension arrangements with lesser benefits for them at retirement.

The same company that advised the trustees of the IASS in Aer Lingus is advising other semi-State commercial companies on their pension arrangements. They will do the same thing. It is also happening with private pension schemes. I have the details but I will not mention the companies' names because it would not be appropriate to do so in the House. All of this will make it more difficult to provide for pensions in the future and to entice people into schemes. I have mentioned a number of other reasons as to why I believe this will be the case. I am speaking as someone who worked for 15 years in the pension sector before entering the Oireachtas. I would not advise anyone to take out a pension now. The situation is insecure because the foundation of pensions as a secure form of savings has been badly undermined by the private pension levy, what happened with the IASS and the changes to legislation that allow profitable companies to wind down their schemes instantly, high-tail it off and write off the deficits. People would be better off putting their money in post offices. Until we change pensions to become lifetime savings plans from which individuals can access funds at certain times, for example, to buy a house, get married or pay down debt via specific arrangements, I would tell people not to go near a pension based on what has happened in the past three or four years. We have failed miserably in that regard.

What can anyone say to the members of the Tara Mines pension scheme who lost more than one month in benefit payments to pay for the private pension levy? Ironically, the IASS, which was effectively wound down with the assistance of the Government, had to pay the pension levy in cash. The scheme's members are suffering for that. Many joined the scheme because it was compulsory while some made additional voluntary contributions and did what Governments of all hues told them to do down the years, namely, provide for their retirements. They made their sacrifices. They did not blow it all on a horse. After making that provision, they found that their legs had been taken out from under them. It was wrong.

I will not delay the House further. I will continue to fight on this issue. However, we should ensure that what occurred in this instance never happens with any other pension scheme. Whoever is in government next should give a commitment to the members of the IASS that the savage cuts to their scheme will be reduced, be it by way of a levy on other arrangements or a special payment. I hope that I have made my point.