Written answers

Thursday, 7 May 2009

Department of Social and Family Affairs

Pension Provisions

5:00 pm

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 111: To ask the Minister for Social and Family Affairs if her attention has been drawn to the fact that some workers in a company (details supplied) have been cut off from their pensions by the trustees of the pension fund; and if she plans initiatives to extend the pension protection recently announced to this company. [18372/09]

Photo of Mary HanafinMary Hanafin (Dún Laoghaire, Fianna Fail)
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Defined benefit (DB) pension schemes such as the scheme to which the Deputy refers are required to comply with the Funding Standard provisions set out in the Pensions Act. This requires DB pension schemes to maintain sufficient assets to enable them discharge all accrued liabilities. Where schemes do not satisfy the Funding Standard, the sponsors/trustees must submit a funding proposal to the Pensions Board to restore full funding within an agreed timescale (minimum of 3 years).

Where a DB scheme winds-up, the order in which the liabilities of the scheme are discharged is also determined by the provisions of the Pensions Act. Up to now, this meant that the future increases in benefits due to retired members were discharged before the accrued benefits of active and deferred members (i.e. current and former employees who have not yet reached normal retirement age).

As the Deputy is aware, just last week I brought forward legislation to alter these priorities to effect a more equitable distribution of assets on the wind-up of an underfunded scheme. While those already in receipt of a pension from the scheme and those who had reached normal retirement age at the date of the winding up of the scheme will not see their pensions reduced under the new priority order, the changes to the Pensions Act will see that benefits to active and deferred scheme members will be discharged before any post-retirement benefits are calculated.

Although the amount of pension that individual members will receive on the wind-up of a scheme is dependent on the resources available, my Department does not keep details of individual pension schemes. However, I am not aware of any situation where a person will be completely cut off from their pension. On the contrary, last week's changes to the priority order will ensure that those scheme members who have not yet reached normal retirement age at the date of wind-up will receive a more equitable slice of the assets of the scheme.

The new Pensions Insolvency Payments Scheme (PIPS), also announced by the Government last week, will support the pension schemes that have wound up due to the insolvency of their sponsoring employer. PIPS will work by allowing pension fund trustees to purchase pension payments from the State at a cheaper rate than by going to the market, thereby ensuring more fund resources are left to defray the liabilities of those active and deferred members who have not yet reached retirement age.

Although there are no plans to extend PIPS to support the underfunded pensions of employers who are not insolvent, the Government is very conscious of the pressures on both sponsoring employers and pension scheme trustees, arising from the very significant losses incurred by pension funds over the last 18 months. We are anxious to ensure, in so far as we can, that those involved have sufficient time and space to fully assess the implications of the current difficulties for their schemes and the remedial action they can take. The Government is continuing to consider a number of options in relation to the ongoing security of pensions. Any decisions in this regard will be made in the context of the National Pensions Framework which will be finalised shortly.

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