Róisín Shortall (Dublin North West, Social Democrats)
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510. To ask the Minister for Employment Affairs and Social Protection the status of her Department's work to improve the security of investment for those contributing to defined benefit pension funds; her plans to legislate in this area; and if she will make a statement on the matter. [40424/17]

Regina Doherty (Meath East, Fine Gael)
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Internationally, as well as in Ireland, Defined Benefit (DB) schemes have been facing increased difficulties over the last two decades. This has been due to volatility in the stock markets, increasing liabilities arising from the demographic pressures of increasing life expectancy, low interest rates and regulatory requirements. Essentially the cost of providing benefits has increased at a rate that has not been covered by the level of the employer and employee contributions to pension schemes and the investment returns earned.

The ongoing decline of defined benefit schemes over the past two decades has seen the number of schemes subject to the funding standard decline from 2,031 in 2000 to approximately 650 such schemes as per figures provided by the Pensions Authority on 1 June 2017. Despite its decline, the DB sector is still a very important sector with assets under management of approximately €62 billion and membership comprised of 100,000 pensioners, 125,000 active members and 435,000 deferred members.

Generally speaking, where schemes have encountered funding difficulties, the process has been managed through dialogue between trustees, employers and members, where efforts are made to reach agreement regarding the steps to be taken. Under Irish law, responsibility rests with the employer and the trustees for ensuring that DB schemes are properly funded and managed.

The Pensions Authority requires that, in setting investment policy, the trustees of a DB scheme must have regard to the need to satisfy at regular intervals the minimum funding standard set down in the Pensions Act.

A number of steps have been taken in recent years to reduce the risks to pension scheme members caused by market volatility. The Social Welfare and Pensions Act 2012 require a DB scheme to hold additional funding in the form of a ‘risk reserve’ by 2023. The function of this ‘risk reserve’ is to provide some protection and long term stability for scheme members against future volatility in financial markets. Additionally, and in appropriate circumstances, the regulator may approve scheme funding proposals that provide for the recovery of their schemes funding over longer periods than was previously the case.

In addition, in order to provide increased investment options for pension schemes the Social Welfare and Pensions Act 2010 and 2011 introduced the option for trustees to purchase sovereign annuities. Pension schemes that purchase sovereign annuities, or the underlying bonds, benefit from a reduction in their liabilities under the funding standard. Buying sovereign annuities for the pensioners has the effect of reducing pensioner liabilities under the funding standard and provides additional funds for the other members of the scheme.

While noting the steps taken thus far, a key priority for the Government is to provide additional protections for scheme members’ pension benefits. It is essential that any new measures recognise the current pensions landscape in Ireland so that a balanced and proportionate approach is developed.

I intend to introduce a number of amendments to the Social Welfare, Pensions and Civil Registration Bill 2017 at Committee Stage which will, amongst other things, ensure that an employer cannot “walk away” at short notice from the pension scheme it is supporting and will seek to address situations where funding proposals are not agreed and put in place. The amendments will act to support existing provisions in the Pensions Act and will encourage employers to ensure that schemes are well funded and managed.

Finally, many of the provisions contained within the IORP II Directive (Institutions for Occupational Retirement Provision) will also support positive reform of the Irish occupational pension sector. The Directive provides for a range of new requirements concerning governance, management standards in schemes, safekeeping of assets, the need for clear and relevant information to members, the removal of obstacles to cross-border provision of pension services and the facilitation of cross border transfer of schemes. There are also provisions that will enhance the powers of the pension regulators for effective supervision of IORP.

Implementation of the Directive will require legislative changes and my officials, together with the Pensions Authority, are working on the transposition process to ensure that any necessary amendments to existing laws, regulations or administrative provisions will be made, or where necessary any new provisions are implemented, to give full effect to the Directive. Standards in relation to occupational pension schemes will be enhanced by the transposition of the IORP II directive.

I trust this clarifies the matter for the Deputy.