Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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9. To ask the Minister for Social Protection why she applied a negative re-evaluation of deferred defined pensions; if she has assessed the impact this will have on pensions paid to deferred defined benefit pensioners; and if she will make a statement on the matter. [8709/16]

Joan Burton (Dublin West, Labour)
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The Pensions Act 1990 provides for all matters relating to occupational pensions, including the protection of members of pension schemes and providing for balance between the paying members, deferred members and drawing members (pensioners) of a pension scheme.

Under the provisions of the Pensions Act, the Minister for Social Protection must make Regulations specifying the percentage which will determine the amount by which preserved pension benefit is to be increased or decreased in the revaluation year. Making these Regulations is a legislative requirement and an obligation on the Minister and there is no discretion not to set the percentage where there has been a change in the level of consumer prices during the year. Under these provisions, the Occupational Pension Schemes (Revaluation) Regulations, 2016 were laid before the Houses of the Oireachtas on the 8th of this month.

A person who leaves employment, and who has been a member of their former employer’s defined benefit pension scheme, may choose to either leave their accrued pension rights in the scheme of their former employer or transfer their rights to another vehicle which can accrue pension rights. Where the person chooses to leave their pension rights in the scheme of their former employer, they are regarded as “deferred” members of the scheme and legislation safeguards their rights in the scheme. Part of this protection is ensuring that their pension value is ‘preserved’ and revalued annually to keep pace with changes in the annual rate of Consumer Price Inflation. This maintains the spending power of these pension entitlements to a reasonable level. Deferred members are no longer contributing to the scheme and are not working for the employer. They may be in other employment and contributing to the scheme of the new employer.

The Social Welfare and Pensions Act 2012 provided for a change to amend the imbalanced situation where static or decreasing wage rates impacted on employees’ potential pension benefits but not on the value of deferred members’ pensions. The anomaly had arisen because the annual revaluation for deferred scheme members was limited to a lower floor of 0%. This floor was removed, and the revaluation of deferred members’ benefits now tracks both negative and positive changes in the annual rate of the Consumer Price Index. 2015 is the first time the revaluation percentage has been negative, resulting in an adjustment of -0.3% to deferred member’s prospective pension benefits. However, it is worth noting that since 2009, the overall change in the revaluation percentage for deferred members has been positive at 4.5%.

The revaluation percentage does not remove funding from pension schemes but rather provides for a fair distribution of available resources. It is not a levy and no income is received by the State as a result of the revaluation percentage changing.

It may be noted that the regulations cater for minimum standards. Scheme trustees, should the scheme rules allow it, are not precluded from applying revaluation rates that would be more beneficial to members where the scheme has the capacity to do so. For example, trustees may decide not to apply the negative revaluation for 2015.

It should also be noted that these measures will not have any impact on former scheme members where the scheme has already wound up.