Hildegarde Naughton (Galway West, Fine Gael) | Oireachtas source

I thank the Senators for giving me the opportunity to respond to this matter.

As is established practice in State agency restructurings, transfers or mergers, the pension provision currently being experienced by employees should not be impacted. Employees should be no better nor no worse off under the new arrangements. The Bill provides safeguards regarding this and ensuring this has been a key objective for my Department.

It is currently the case that the IAA may grant pension increases from time to time following authorisation from the Minister for Transport, and the Minister for Public Expenditure and Reform. However, any such increases are discretionary in nature. Decisions around providing such discretionary pension increases are based on the IAA having sufficient funds being available.

There are other important considerations when examining pension increases, namely, the affordability and sustainability of the increase, and the impact that such an increase may have on funds of the pension scheme itself. Additional considerations on providing for a pension increase also include the solvency of the scheme, scheme rules, the risk profile of the scheme and, as referenced earlier, the ability of the original employer to meet financial obligations arising from pension increases should the need arise.

On a regular basis the scheme actuary must certify that the scheme meets the minimum funding standards. This tests whether or not the scheme holds sufficient assets to meet accrued benefits if it were to wind up on the valuation date. Pension increases on a non-discretionary nature, as proposed in this amendment, would significantly increase the risk of a scheme failing the minimum funding standard. Such failure would require that the funding proposal is put in place under the Pensions Act 1990. A funding proposal could result in a combination of increased member contributions, increased employer contributions and-or benefit reductions to move the scheme back on track.

To be clear, section 114(2) of the Bill does not expressly provide for pension increases to Commission for Aviation Regulation, CAR, staff. What section 114(2) of the Bill does is make it clear that any existing terms that allow for discretionary increases survive restructuring. This amendment, which appears to have no precedent across the commercial semi-State sector, would see a cohort of employees becoming better off due to changed terms and conditions following the establishment of AirNav Ireland and the reconstituted IAA. The amendment runs counter to the long-standing established practice in terms of superannuation and State agency restructurings, and could carry increased risk of a scheme failing the minimum funding standard with the commitment implications, as outlined. As such I cannot accept amendment 3ia.

I wish to state that there are currently 443 pensioners who are beneficiaries of the plan. The company has requested more detail from its actuarial advisers on the matter of increases to pensioners, which will inform decision-making under the process being chaired by Mr. Kieran Mulvey. As Senators will know, Mr. Mulvey has been appointed to carry out a pensions review.