David Cullinane (Waterford, Sinn Fein)
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537. To ask the Minister for Social Protection the process by which the Pensions Authority considers whether to make a direction to the trustees of a pension scheme to wind up a scheme. [41042/16]

Leo Varadkar (Dublin West, Fine Gael)
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Sections 50 and 50B of the Pensions Act, respectively, give the Authority the powers to direct trustees of defined benefit (DB) schemes to reduce benefits under a scheme or to wind up the scheme. These powers may be exercised by the Authority where a DB scheme fails to meet the statutory funding standard under the Act.

The Authority recognises the serious nature of these powers and the impact their exercise may have on members’ benefits, and, as a result, only takes such a serious step reluctantly. However, the Authority must ensure that the funding standard is adhered to and cannot permit persistent non-compliance in this area because an underfunded scheme is unlikely to be able to pay the benefits promised to scheme members without a sustainable recovery plan being put in place. In such a situation, younger members are at particular risk not only of getting less than full benefits but of losing the contributions they may be making into the scheme.

Regulations issued under Section 50 and Section 50B of the Pensions Act set out the information and notification requirements that must be carried out by scheme trustees before the Pensions Authority issues a direction under Section 50 or Section 50B of the Pensions Act.

Where the Authority proposes to issue a direction under Section 50 or 50B of the Act, all members (actives, deferred and pensioners) will be afforded the opportunity to make submissions to the Authority. Scheme members who have concerns about the funding status of their scheme should in the first instance contact the trustees of their scheme.

The Authority strongly encourages trustees of such schemes to accelerate their own efforts to find a solution to their funding deficit without Authority intervention.

I hope this clarifies the matter for the Deputy.

David Cullinane (Waterford, Sinn Fein)
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538. To ask the Minister for Social Protection the consequences for workers who pay into a pension scheme that has been directed to be wound up by the Pensions Authority. [41043/16]

Leo Varadkar (Dublin West, Fine Gael)
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Sections 50 and 50B of the Pensions Act, respectively, give the Pensions Authority the powers to direct trustees of defined benefit (DB) schemes to reduce benefits under a scheme or to wind up the scheme. These powers may be exercised by the Authority where a DB scheme fails to meet the statutory funding standard under the Act and where a sustainable funding proposal is not put in place.

The impact of the exercise of these powers on pension schemes and members’ benefits is considered carefully by the Authority in reaching any decision to direct the wind-up of a scheme. It is essential that schemes meet the funding standard so that benefits promised to scheme members can be made. If a sustainable recovery plan is not put in place then the benefits of members, particularly non-pensioner members, may be at risk and steps must be taken to prevent further erosion.

This distribution of the scheme assets by the trustees must be carried out in accordance with the priority order set out in the Pensions Act. Section 48 of the Pensions Act sets out the wind-up priority order in which the assets of a DB pension scheme are distributed in the event of the wind up of a scheme. The wind-up priority order was amended by the Social Welfare and Pensions (No.2) Act in 2013 to provide greater protections to active and deferred scheme members.

When a scheme is being wound up, trustees must transfer each member’s benefits into a new pension scheme; or purchase an approved assurance policy with a life assurance company on behalf of each member (a buy-out bond for active members and deferred members or an annuity for pensioners); or transfer each member’s benefits into a PRSA, subject to certain conditions.

It is important to note that the powers given to the Pensions Authority to reduce benefits or wind up a pension scheme are to protect pension scheme members whose schemes are not sustainable.

To date, the Pensions Authority has not used powers under Sections 50 and 50B to reduce benefits or wind up a pension scheme.

I hope this clarifies the matter for the Deputy.

David Cullinane (Waterford, Sinn Fein)
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539. To ask the Minister for Social Protection the safeguards for workers who pay into a pension scheme that has been directed to be wound up by the Pensions Authority. [41044/16]

Leo Varadkar (Dublin West, Fine Gael)
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I understand the importance of ensuring that safeguards are in place for scheme members where a pension scheme is being wound up as a result of a direction by the Pensions Authority.

The Pensions Authority has the power to issue a direction to the trustees of a defined benefit pension scheme to:

- restructure scheme benefits under section 50 of the Pensions Act or

- wind up a defined benefit pension scheme under section 50B of the Pensions Act.

The Pensions Authority would consider exercising these powers in situations where a scheme fails to comply with the scheme funding requirements (funding standard) as set out in Part IV of the Pensions Act.

To date the Pensions Authority has never had to use the powers available under the Pensions Act to direct the unilateral wind up of a pension scheme.

The Occupational Pension Schemes (Section 50 and 50B) Regulations 2014, [S.I. No. 392 of 2014] sets out the procedure to be followed when the Pensions Authority is considering making a direction under of the Pensions Act to restructure the benefits of a pension schemes or a direction to wind up a pension scheme under of the Pensions Act.

These Regulations set out the:

- Requirement on such persons as may be specified, to provide specified information to the Pensions Authority in its consideration of proposals to issue a direction under or of the Pensions Act.

- Requirement on the employer and the trustees of a pension scheme to notify scheme members, beneficiaries, the authorised trade union or any representative group of proposals by the Pensions Authority to issue a direction to restructure scheme benefits or to wind up a pension scheme.

- Provision for scheme members, beneficiaries, authorised trade unions or any representative group to make a submission to the Pensions Authority in respect of proposals by the Pensions Authority to issue a direction to restructure scheme benefits or to wind up a pension scheme.

This affords members or their representative groups an opportunity to make a submission to the Pensions Authority in relation to such proposals. They also have the right to appeal such a direction by the Pensions Authority to the High Court on a point of law.

Where a scheme is being wound up, the Pensions Act requires trustees to complete the wind-up without undue delay. The Act also set outs wind-up priority orders that depend on whether the scheme’s employer is solvent or insolvent at the date of the wind-up.

Section 48 of the Pensions Act sets out the wind-up priority order in which the assets of a defined benefit pension scheme are distributed in the event of the wind-up of a scheme. The wind-up priority order was amended by the Social Welfare and Pensions (No. 2) Act in 2013 to provide greater protections to active and deferred scheme members.

In cases where not all employer pension contributions have been made, trustees can claim under the Insolvency Payments Scheme. The purpose of the scheme, which operates under the Protection of Employees (Employers’ Insolvency) Act 1984, is to protect certain outstanding pay-related entitlements due to employees in the event of the insolvency of their employer. These entitlements include certain pension contributions.

Where a scheme is underfunded at the date of wind-up and the employer is also insolvent, a claim for additional funds from the Exchequer may be made to discharge the liabilities for benefits contained in section 48(1D) of the Pensions Act.

I hope this clarifies the matter for the Deputy.

David Cullinane (Waterford, Sinn Fein)
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540. To ask the Minister for Social Protection the consequences for a pension scheme that fails to submit a funding proposal under section 49 of the Pension Act. [41045/16]

Leo Varadkar (Dublin West, Fine Gael)
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The Pensions Act requires that trustees arrange for an actuary to carry out a valuation of a defined benefit (DB) pension scheme’s liabilities and assets at regular intervals and submit an actuarial valuation certificate to the Pensions Authority outlining the funding position of the scheme. The date of each scheme valuation must be not later than 3 years after the last date of the previous valuation for that scheme.

If the actuary certifies that the scheme has insufficient assets to satisfy the funding standard set out in the Act,the scheme's trustees must ensure that a funding proposal is prepared and sent to the Pensions Authority with the actuarial funding certificate. The funding proposal must set out measures which will ensure that the scheme could reasonably be expected to satisfy the funding standard at the date of the next actuarial funding certificate or other specified date.

It is essential that any underfunded scheme submits a funding proposal to the Pensions Authority in a timely manner.

Following approval of funding proposals, schemes report to the Pensions Authority on their compliance with such funding proposals on an annual basis .

Where a DB scheme fails to meet the statutory funding standard and fails to agree a funding proposal under section 49 of the Pension Act, Sections 50 and 50B of the Pensions Act, respectively, give the Pensions Authority the power to direct trustees of DB schemes to reduce benefits under a scheme or wind up the scheme.

To date, the Pensions Authority has never had to use Sections 50 and 50B to reduce benefits or wind up a pension scheme.

Under the Pensions Act trustees can be prosecuted or replaced by the High Court for failure to submit a funding proposal to the Authority.

I hope this clarifies the matter for the Deputy.

David Cullinane (Waterford, Sinn Fein)
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541. To ask the Minister for Social Protection if it is regular practice for a pension scheme not to issue a current investment programme for two years. [41046/16]

Leo Varadkar (Dublin West, Fine Gael)
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I recognise the importance of pension scheme trustees keeping their investment strategies under review.

Section 59(1B) of the Pensions Act requires trustees of a scheme, other than a small scheme, to:

(a) prepare and maintain a written statement of the investment policy principles applied to the resources of the ,

(b) review the statement at least every 3 years, and

(c) revise the statement at any time following any change in investment policy which is inconsistent with the statement.

Following on from this, the Occupational Pension Schemes (Investment) Regulations require that the trustees of all schemes with more than 100 active and deferred members must prepare a Statement of Investment Policy Principles (SIPP). The SIPP must contain information on, (a) Investment objectives, (b) Investment risk measurement method, (c) Risk management processes, and (d) Strategic asset allocation.

In guidance the Pensions Authority recommends that trustees review investment strategy at a minimum every three years, and sooner in the event of any major change to the circumstances of the scheme.

I hope this clarifies the matter for the Deputy.