Ruairi Quinn (Dublin South East, Labour)
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Question 91: To ask the Minister for Social and Family Affairs if his attention has been drawn to the situation whereby many companies with defined benefit pension schemes are unilaterally changing the terms and conditions of those schemes to defined payment schemes; the number of companies who have informed his Department regarding these changes; if he has undertaken to ensure that employees affected by these changes to their pension schemes have been properly informed of the consequences of those changes; the action his Department has taken with the Department of Social and Family Affairs in relation to this matter; and if he will make a statement on the matter. [18206/06]

Séamus Brennan (Dublin South, Fianna Fail)
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Occupational pensions in Ireland are voluntary arrangements and, as such, the employer can change the terms of these arrangements. I am aware that there are many pressures on Defined Benefit schemes emanating from the need for employers to increase contributions to schemes, to meet the requirements of accounting standards (FRS17) and also the Funding Standard under the Pensions Act.

The latest figures from the Pensions Board show that as at the 31st of December 2005 there were 1,258 defined benefit schemes registered with the Pensions Board which were subject to the minimum funding standard. In 2005 the Board were notified of the winding-up of a total of 48 group defined benefit schemes. There is no requirement for employers or scheme sponsors to notify the Pensions Board where the nature of a scheme is changed, though a survey undertaken in 2003 suggested that the majority of defined benefit schemes remained open to new members. Defined contribution schemes transfer the investment risk to the employee and there are also concerns about the adequacy of contributions being made to such schemes.

As already indicated, the Funding Standard and new accounting requirements (FRS17), which makes pension costs very apparent on a firm's balance sheet, are put forward as the two main reasons for the drift from defined benefit provision to defined contribution schemes. In relation to the Funding Standard this attempts to draw a reasonable balance between the interests of employers, who must fund pension schemes, and the legitimate expectations of employees to be guaranteed their pension.

In 2003 my predecessor introduced short term measures designed to alleviate the funding crisis in pension schemes, which resulted from a major fall in equity values. The Pensions Board, on foot of a review of the Funding Standard completed in 2004, recommended retention of these provisions, which it found were largely successful. However, what has emerged clearly since these provisions were introduced is that the liability side of pension funds is also under severe pressure.

Improved longevity, lower interest rates and regulation are just some of the factors increasing these liabilities. In the Social Welfare and Pensions Act 2005, I provided that an extended funding period may also be granted in relation to difficulties which defined benefit schemes were experiencing on the liability side. I believe these measures, which were introduced after extensive consultation, achieve the required balance between member protection and encouraging continued defined benefit pension provision.

The Pensions Board, in consultation with key stakeholders, including officials from my Department, is continuing to review the funding standard for defined benefit schemes in the light of experience here and abroad over the last number of years, while also keeping in mind the original objective and intent of that standard. They will report to me later this year in this regard.

In relation to the provision of information to members of schemes affected by changes to their scheme, trustees must account to members for how their scheme is run by providing them with a wide range of personal and scheme information as required under Part 5 of the Pensions Act 1990 and regulations made under this Part. Members of schemes must be informed of any significant changes to the pension scheme. In addition to these Disclosure Regulations, and in compliance with a recent EU Directive, regulations have also been made in relation to how the resources of a scheme are invested. The disclosure of information in a timely manner enables scheme members to monitor their benefits and the financial soundness of their pension schemes.

The Board regards information disclosure and compliance with investment regulations as a very important governance requirement for pension schemes and takes steps to enforce this obligation where necessary. I will continue to monitor, in conjunction with the Board, trends in pension provision, the funding of schemes and the need of scheme members for ongoing information on the condition and status of their pension scheme.