Róisín Shortall (Dublin North West, Labour)
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Question 104: To ask the Minister for Finance if he has reviewed the pension arrangements of top management within the covered institutions as recommended by CIROC in its report in February 2009; and if he has addressed the specific issues raised in the CIROC report that the arrangements of making pension cash payments is unacceptable and that pension arrangements for senior executives should be at least broadly similar to those applicable to the generality of the staff in the institution. [17524/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Under the Credit Institutions (Financial Support) Scheme 2008 the remuneration packages of directors and executives, including total salary, bonuses, pension payments and any other benefits were subject to review by the Covered Institutions Remuneration Oversight Committee [CIROC] arising from the provisions of the Credit Institutions (Financial Support) Act, 2008. CIROC reported on 27 February 2009, recommending reductions in prevailing base salary, bonus and pension levels for Chief Executives, Chairs and ordinary board members that it considered to be, in many cases, markedly excessive.

The Government considered the CIROC recommendations in light of the further downturn in the wider economy, the prevailing financial position of the covered institutions and the fact that larger economies such as the United States and Germany had set lower caps on the salaries of Government aided financial institutions than those suggested by CIROC. In light of those considerations, the Government concluded that the CIROC recommendations regarding bonuses, pensions, long term incentive plans and board sub-committees were appropriate but that remuneration terms should be lower than those recommended by CIROC.

I wrote to the chairpersons of each of the covered institutions on foot of the publication of the CIROC report seeking immediate action from the Boards to review remuneration plans so that revised remuneration packages for everyone in their organisation respected the salary cap of €500,000 or amount recommended by CIROC which ever is the lesser.

It is a matter for the remuneration committees of the covered institutions to ensure that these recommendations are being adhered to; however it is possible that in some cases the remuneration committee is restricted because of contractual arrangements entered into with individual senior executives prior to the publication of the CIROC report. I have no legal power under the Scheme to force new agreements in such cases for the duration of the existing contracts. In general, the experience of the Department is that the recommendations of CIROC are being complied with and/or are being attended to satisfactorily on an ongoing basis. The Deputy will appreciate that the respective covered institutions operate in a commercial fashion. Subject to contractual considerations, they are expected, in the present economic circumstances, to take account of the necessary downward adjustment in remuneration levels affecting all sectors of the economy.

On the issue of "pension cash payments", the report of the Covered Institution Remuneration Oversight Committee (CIROC) stated that: "We have become aware of a practice in which cash allowances were paid to compensate for the effects of the "pensions cap" imposed by the Finance Act, 2006. Pension schemes should reflect public policy and tax law and it is unacceptable that arrangements should be put in place which would be inconsistent with the intent of the relevant legislation." I specifically informed the affected institutions that this practice should cease immediately. My understanding is that this has been complied in all but two of the covered institutions where some of the payments continue to be made because of pre-existing contractual arrangements.