Eoghan Murphy (Dublin South East, Fine Gael)
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171. To ask the Minister for Social Protection if it is her understanding that all the recommendations in the recent Government commissioned OECD report on the pension system here will be implemented, and whether or not she believes that the new pension changes regarding single and double insolvency issues need to be amended so that they are similar to those protections for pensioners and workers that currently exist in the UK. [54867/13]

Joan Burton (Dublin West, Labour)
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The sustainability of the pension system is a particular concern because of the demographic challenges Ireland faces, the associated increases in pension (and other age related) costs, and the deterioration in the public finances. This means that, in the future, the task of financing increased pension spending will fall to a diminishing share of the working population as demographic projections indicate the ratio of working age to older people will decrease from 5.3 to 1 at present to 2.1 to 1 by 2060. Life expectancy in Ireland is also increasing and whilst this is very welcome development, it also presents very real and obvious public policy challenges.

It was in this context and taking into account the impact of the economic downturn, that in 2012, discussions on long term pension policy identified the need for a focussed examination on the direction of policy to ensure a modern, sustainable, and adequate pension system. The OECD was commissioned by the Minister for Social Protection to review long term pension policy in Ireland. The particular aspects considered by the OECD included; the sustainability of the pension system in the light of demographic and investment challenges; the adequacy and coverage levels, in order to ensure adequate income in retirement with a particular focus on the lower and middle income group; the modernity of pension systems to ensure flexibility in the labour market and supporting mechanisms for longer working; equity within the pension system.

During the review process, the OECD engaged extensively with the full range of sectoral interests including the social partners, representatives from the pensions industry and older people and with Government departments. The OECD published its final review in April 2013.

In making its recommendations the OECD noted the that:

In considering these alternatives, it should be kept in mind that each of the national schemes and reforms discussed in this review was adopted in a specific national economic, social and political setting. There is no blueprint for reform which Ireland could take off-the-shelf and implement directly. Any solution has to fit the Irish situation.

In relation to the challenges facing underfunded Defined Benefit (DB) schemes, the package of measures I recently announced as part of the Social Welfare and Pensions Bill (No.2) 2013 addresses the situation where an underfunded DB pension scheme winds up in deficit or elects to restructure. It can arise at present that pensioners may receive all or almost all the pension fund and the members who have contributed but not retired receive considerably less than expected. These measures will ensure a more equal distribution of assets in an underfunded scheme when an insolvency/restructuring occurs.

The measures will apply only in a limited set of circumstances, meaning the potential number of schemes affected will be small. In those limited circumstances, the measures will ensure a fairer deal for employee and former employee members by increasing their future pension entitlements, while prioritising an occupational pension of up to €12,000 for existing pensioners in addition to their State pension entitlements.

The typical pensioner in such a scenario would have a State pension (contributory) of €12,000 in addition to their occupational pension, meaning they would therefore receive a retirement income of up to €24,000. Those pensioners receiving occupational benefits in excess of €12,000 will still retain a significant degree of prioritisation for receipt of benefits.

In the case of both a company and the scheme being insolvent, the Government will guarantee that existing pensions will be protected to a level of 50% with pensions of €12,000 or less being 100% protected. I am pleased that agreement has been reached with the Minister for Finance to use funds from the pension levy to meet any obligations on the State that may occur arising from such double insolvencies.

These measures meet Ireland's obligations under the EU Insolvency Directive to protect workers' entitlements. They also ensure greater fairness within DB scheme structures.