Liam Twomey (Wexford, Fine Gael)
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Question 129: To ask the Minister for Social and Family Affairs the steps his Department is taking to bring unregulated areas of occupational pensions such as income continuance plans under the remit of a statutory investigatory body; and if he will make a statement on the matter. [31824/06]

Séamus Brennan (Dublin South, Fianna Fail)
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Income continuance plans provide cover to individuals in the event of long-term illness or disability which prohibits the person from following their own normal occupation. They generally work by paying a percentage of salary from the time they become ill. Payments cease when a person recovers or reaches normal retirement age.

Income Continuance Products are established and administered by undertakings authorised under the EC(Life Assurance) Framework Regulations, 1994. They are insurance products and so the competent authority for these products is the Financial Regulator.

Income Continuance Plans can be closely allied to occupational pension schemes but, in fact, are totally separate in their legal structure, status and operations. However, very often by virtue of their association with the occupational pension arrangements, misinterpretations arise.

The Pensions Board was asked to review, in consultation with the Department of Enterprise, Trade and Employment, the position and regulation of Income Continuance Plans. A report was undertaken by Watson Wyatt and Matheson Ormsby Prentice, solicitors, and was published on the Pensions Board website at the end of 2005.

The report found that there are some 238,000 people insured under income continuance plans, with 85% being arranged through employer sponsored or voluntary group schemes.

The report identified problems in two main areas. Firstly, it found that lack of adequate disclosure has been the most significant source of misunderstandings in relation to the interaction of income continuance plans and related pension plans. In order to overcome this it was suggested that the Department of Enterprise, Trade and Employment should introduce regulations to improve the flow of information to employees in relation to income continuance arrangements.

The second area of major concern identified in the report was the question of redress for individuals experiencing difficulties with the income continuance arrangements. Because the employer is normally the beneficial owner of the insurance policy underpinning the income continuance arrangements there is no access for the individual to the Financial Services Ombudsman, who is the authority with jurisdiction in relation to insurance arrangements.

The current position is that my Department, the Department of Finance and the Department of Enterprise Trade and Employment are working together to try and identify the gaps which exist in relation to the regulation of the schemes in question and to decide the best way of providing an avenue of redress for workers who are covered by employer sponsored income continuance plans.

The issues are quite complex because they span a number of areas, financial services, employment law, employment conditions and, in some cases, pensions. The views of the two Ombudsmen operating in this area – Financial Services Ombudsman and the Pensions Ombudsman – will be important in deciding the best way forward and they are being consulted.