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Dáil Éireann debate -
Tuesday, 29 May 1990

Vol. 399 No. 3

Pensions Bill, 1990: Second Stage.

I move: "That the Bill be now read a Second Time."

This Pensions Bill is the most important piece of legislation concerning occupational pensions to come before this House since the foundation of the State. Its purpose is to regulate occupational pension schemes, ensure that they are properly administered and that, above all, the pension rights of members and their dependants are adequately safeguarded. I plan to achieve this by setting down minimum standards in key areas and by providing a framework for the regulation and supervision of schemes. I wish to ensure that members can change jobs without forfeiting their pension rights; schemes are properly funded; employers deliver on the promises made to the employees; and members have full access to all information about the running of their schemes and the security of their pensions. The Bill also provides for equal treatment for men and women in relation to the scope and conditions of access to schemes, benefit rights and contribution levels.

The operation of occupational schemes to date has been governed mainly by 19th century trust law. This is the first time since the foundation of the State that comprehensive legislation to regulate the operation of these schemes has been introduced. The provisions of this Bill are in line with best international practice. Its enactment will put Ireland in the forefront internationally with regard to the regulation of occupational pension schemes.

The introduction of this Bill, therefore, marks a milestone in the history of the development of an overall system to provide for adequate and secure pension cover for our citizens.

At the outset I would like to review the developments which have taken place in relation to pensions and to highlight the important role of occupational schemes in the evolution of our national pensions system. The first priority of the State has been to ensure that the old, the widowed and the permanently incapacitated have an adequate basic income.

Initially this was provided solely by way of schemes of social assistance. Since then a comprehensive social insurance pensions system has been developed. This involved the introduction in 1935 of the widows and orphans contributory pensions; in 1961 the old age contributory pension and in 1970 retirement and invalidity pensions. Compulsory social insurance has been progressively extended to the various categories in the labour force. The most recent major development in this regard was the extension by me of social insurance pensions to the self-employed in 1988.

The basic weekly rates of pensions have been increased substantially in real terms, particularly over the past decade. In addition many pensioners qualify for free travel and allowances for electricity, telephone rental, TV licence, fuel and the living alone allowance. At present some 375,000 persons are dependent totally or to a significant degree on a weekly social welfare pension, or 473,000, if dependants are included. The overall cost of providing social welfare pensions will amount this year to some £1.25 billion, or 45 per cent of total social welfare expenditure of some £2.76 billion.

For much of our history old age, widowhood and permanent incapacity brought with them poverty, deprivation and dependency. The progress that has been made in developing the overall social welfare pensions system has meant that a reasonable, basic level of pension is now available. This was borne out by a recent ESRI survey on poverty which showed that the elderly, in particular, were no longer a high risk group.

To ensure that all citizens have a basic level of social welfare pension, the State has relied on occupational pension schemes to provide workers with a supplementary pension related to their pre-retirement income. These occupational pensions are normally provided as part of their terms of employment for employees in the non-commercial public sector. A comprehensive system of tax reliefs has been introduced to encourage the development of occupational schemes in the private and commercial semi-State sectors. The present tax treatment of occupational pension schemes is based on the provisions of the Finance Act, 1972. The objectives of such tax reliefs are two-fold. First, they promote formal arrangements for the provision of retirement pensions and for dependants in the event of death. These are designed to assist employees in maintaining the standard of living to which they had been accustomed while in employment. Secondly, they encourage national savings by the accumulation of pension funds.

This approach has been very successful. There are over 25,000 occupational pension schemes in existence in Ireland today. Some 550,000 employees or roughly two-thirds of the total number in employment are members of supplementary schemes. Pension schemes have also become a major vehicle in the national economy for savings and investment. There are no comprehensive returns of statistical and financial data for the pensions industry.

However, on the basis of the most recent estimates the assets of pension funds currently amount to some £10,000 million. Annual contribution income is in excess of £500 million while new investment income is of the order of £600 million. Benefit payments out of these schemes are estimated to be in excess of £250 million per annum.

I mentioned earlier the major part which the system of tax reliefs has played, and is continuing to play, in the development of occupational pension schemes. The cost of these reliefs in terms of revenue foregone is considerable. The National Pensions Board in their report on the tax treatment of pension schemes estimated that the cost of tax relief on contributions in 1989 would be £203 million. Tax relief on the investment income of pensions in 1989 was estimated at £162 million. However, these tax reliefs are in effect an investment in the future. They facilitate the provision of pensions which will result in employees during retirement and after death, their surviving dependants, being considerably less dependent on State funded services. This leaves the State with more resources to devote to those who have to rely mainly on State schemes for pensions and other essential services. In addition, of course, once the pensions become payable they are subject to income tax in the normal way.

Occupational pension schemes now have a major role in this country in the provision of pensions. This can be seen in the numbers covered, the value of pensions provided and the significant contribution being made by the State through the system of tax reliefs to the growth and development of privately funded occupational pension schemes. Acccordingly, it is in the interests of all concerned, not least the State, that a comprehensive and effective system for the regulation of occupational pension schemes is in place to ensure that members' pension rights are adequately safeguarded.

To assist Deputies in understanding the need for the regulatory system provided for in this Bill, I would like to describe briefly the nature of occupational pension schemes and the regulatory environment in which they currently operate.

Occupational pension schemes in the semi-State and private sectors are usually financed by setting aside funds during the working lifetime of the employees. These funds are normally placed in the control of trustees who hold and invest the funds under the terms of a trust deed. By creating a trust fund in this way the pension scheme becomes a legal entity separate from the employer's business. Schemes must be set up in this way in order to be exempt from income tax and capital gains tax in accordance with the Finance Act, 1972. Some schemes, notably public service schemes, operate on a pay-as-you-go basis meeting the cost of current benefits out of current revenue in much the same way as salaries and wages of current employees. Such schemes are referred to as unfunded schemes.

Pension schemes can be divided into two basic types — defined benefit schemes and defined contribution schemes. In a defined benefit scheme the member's benefits are defined by reference to the member's salary or wage, an index, or a fixed amount. The cost of those benefits is borne either entirely by the employer — a non-contributory scheme — or by a combination of contributions by the employees themselves and the employer — a contributory scheme. Benefits on retirement at normal retirement age are typically a stated percentage of the member's pensionable salary, which may be salary at, or perhaps averaged to, retirement. The amount payable may be reduced to take account of pension entitlements acquired under statutory social insurance.

A defined contribution scheme is one in which the contributions to be set aside each year by the employer and, if contributory, by the employee in respect of each member are defined. The benefits payable under such schemes are not normally defined but are determined by reference to the amount of the defined contributions and the investment return earned on them.

I mentioned earlier that the development of occupational pension schemes has been strongly influenced over the years by tax reliefs. The requirements for tax approval have largely determined the extent to which the schemes are currently regulated. The retirement benefits district of the Revenue Commissioners is responsible for the approval of pension schemes under the Finance Act, 1972. Their supervision, however, is mainly limited to ensuring that tax exemptions are restricted to bona fide pension schemes and that the benefits paid and the contributions set aside to fund the promises made are not excessive, i.e. that the pension schemes are not being used for tax avoidance purposes.

Pension schemes with benefits provided out of separate funds are also invariably set up as trusts in order to qualify for tax reliefs. The administration of such schemes is subject to the general body of law relating to trusts and to the specific terms of the deeds under which they are established. The interests of the members are thus protected under trust law in two respects: the trust fund belongs in equity to the members to the extent that the assets are required to provide benefits for them and/or their dependants; the trustees are answerable to the members for any losses due to fraud or other breaches of trust and are obliged to disclose information about the general state of a pension scheme, if asked to do so by the members or beneficiaries.

If members of the scheme have reason to believe that their scheme is being mismanaged, they may sue through the courts for breach of trust or for an order removing the trustees. They may also seek to have their rights to information enforced through the courts, if necessary, in accordance with trust law.

There are a number of major shortcomings in the present system. The main body of the statute law in relation to trusts is contained in the Trustee Act, 1893 which was not passed with pension schemes in mind. The general nature of this law is such that it can be very difficult to assess if the trustees are performing properly and in accordance with trust law. If members of the scheme have reason to believe that their scheme is not being administered in accordance with the provisions of the trust deed or is being mismanaged, the redress currently is through the courts by suing for breach of trust or for an order removing the trustees. Members also have a right to information on their schemes under trust law, but legal proceedings may also be required ultimately to obtain redress in this area. The likelihood of long delays and the uncertainty as to the outcome, given the vagueness of trust law, will generally act as a major deterrent to members taking legal proceedings to enforce their rights, particularly given the substantial legal costs that could be involved. Even if successful action were taken against the trustees, it is doubtful if such action would redress the problems since in most such cases it is unlikely that there will be adequate funds available to the trustees. This would arise because of the insolvency of the employer, underpayment of employers' contributions, or poor investment performance of the fund, or by a combination of such factors. For evidence of this I need only refer to a number of unfortunate situations which have arisen over recent years. These were well publicised in the national media and concerned schemes where following the liquidation of the company, the assets were found to be deficient in terms of the members' justified expectations.

Another major shortcoming concerns the provision made for members of pension schemes who change jobs. The arrangements made to preserve the pension entitlements of early leavers where they move to another employment or to provide them with a transfer payment to the scheme of their new employer have been regarded as inadequate. Few schemes maintain the real value of preserved pensions. As a result, 90 per cent of pension scheme members who change jobs settle for a refund of their contributions, which in many cases is well below the value of the pension entitlements they have foregone. In addition, of course, the persons concerned at retirement or in the event of their premature death, their surviving dependants, may end up with a very inadequate pension.

It was against this background that the National Pensions Board was established in 1986 to report to the Minister for Social Welfare on the priorities for the regulation of occupational pension schemes and the general development of pensions for the future. Thus began a process which has culminated in the publication of this Bill. The first report of the Pensions Board made a series of detailed recommendations for the regulation of occupational pensions. I then asked for and received the views of the various interested parties on the recommendations made and in the light of the report and views received I prepared my proposals for Government. These were submitted in May 1989 and Government approval obtained for the drafting of legislation on the basis of these proposals.

In May 1989 also the board submitted its fourth report which dealt with the implementation of the principle of equal treatment for men and women in occupational pension schemes. That report provided me with sound guidance in drawing up the proposals for legislation in this area, which also form an important part of the Bill.

The drafting of the legislation proved to be a much more complex and time-consuming task than any of those involved had anticipated. Considerable technical assistance was given to my officials in this task by some of the top experts on occupational pensions in this country who are, or had been, members of the National Pensions Board. I would like to put on the record of this House my appreciation of the contribution made in the course of this whole process by these experts, and indeed by all the members of the National Pensions Board, who gave freely and unstintingly of their time and considerable expertise. I would also like to place on record my appreciation of the work done on this legislation by the officials in my Department.

This Bill, therefore, is the product of a process involving wide consultation and the harnessing of the considerable goodwill and expertise of all the various interests associated with occupational pensions in this country. As such it is, I believe, a model as to how Government can work with the various interested parties in the achievement of objectives which are for the benefit of all.

In formulating my proposals, I have been careful to strike a balance between on the one hand providing adequate safeguards for the protection of members' pension rights and, on the other hand, ensuring that the continued development of pension schemes is not put at risk by overregulation. I believe that I have succeeded in striking the right balance in this regard. I would now like to give a broad outline of the main objectives which I wish to achieve with this Bill.

The primary objective is the establishment of a legal framework and a system for the supervision of occupational schemes, which will ensure that schemes are properly administered and that there are adequate safeguards for the pension rights of scheme members and their dependants.

This will be achieved by setting down clear statutory requirements regarding the disclosure of information to scheme members and other interested parties; setting out the duties and responsibilities of trustees, and providing that trustees who fail to comply with the requirements will be guilty of an offence and subject to substantial fines or, as a last resort, can be removed; and establishing a statutory pensions board to monitor and supervise compliance with the new requirements.

My next objective is to provide for the compulsory preservation of occupational pension entitlements and for their revaluation, in the case of members who change employments. As an alternative to preserved benefits, a member will have the option of having a transfer payment made to the scheme of his new employer or of purchasing an annuity from an approved life office.

My third objective is to ensure that the pension promises made in the case of defined benefit schemes are backed by adequate and secure scheme assets. Accordingly, the Bill provides for minimum funding standards which will require trustees to arrange for actuarial valuations every three and a half years, in order to establish that the assets of the fund are adequate to meet the pension promises made. To increase further the protection of members' pension rights in this regard, provision has also been made to enable me as Minister to provide, by way of regulations, that any self-investment or concentration of investments over a prescribed percentage shall not be taken into account by the actuary for the purposes of complying with the minimum funding standards.

A fourth objective is to provide for the progressive implementation of equal treatment for men and women in relation to occupational benefit schemes in line with the requirements of EC Directive 86/378/EEC on this matter. I also intend to take into account the recent judgment of the European Court of Justice of 17 May in the Barber case in relation to equal retirement ages. I will explain this in more detail later.

I would like at this stage to refer to the issue of member trustees. This has received a lot of attention in recent weeks. The Bill as currently drafted does not make provision for the appointment of member trustees. I would like to briefly outline the background to this issue.

The National Pensions Board agreed that the participation of members in the appointment of trustees is a desirable objective but differed in their view as to whether it should be a statutory requirement — a majority being in favour while a minority considered that it should be encouraged only through voluntary agreement between employers and members. Given the reservations expressed on the issue the board considered that progress towards the fulfilment of the objective should be gradual rather than immediate. For this reason the board recommended that statutory provisions in this regard should not come into operation until a period of three years has elapsed following the date of the enactment of the Pensions Act.

I agree with the National Pensions Board regarding the desirability of member participation in the appointment of trustees, particularly as it would improve the interest in and commitment of members to their scheme. However, I have to take into account the serious reservations of employers regarding statutory requirements in this area and, in particular, their view that such requirements could be an inhibiting factor in the extension of occupational pension schemes to employments where they do not already exist.

Accordingly, it is my intention to ask the new statutory board, as a priority, to take whatever steps are needed to encourage employers to appoint member trustees on a voluntary basis by, in particular, allaying fears in relation to such appointments employers may have. This would be very much in line with the functions of the new board as laid down in section 10 of the Bill regarding the issuing of guidelines, codes of practice and the setting of standards generally in relation to the duties and responsibilities of trustees. I would envisage that after a three year period the board would then report to me on the issue and advise me as Minister on the extent to which the right of members to participate in the appointment of trustees requires a statutory basis.

It was my intention initially to wait until then to make whatever statutory provision would be necessary. However, having consulted with the various interested parties I have decided that it would be more appropriate to make special provision in the Bill giving me powers as Minister for Social Welfare to prescribe by way of regulations for member participation in the appointment of trustees. This will ensure that when the three year period has elapsed there will be no delay in making the necessary provision. I will, therefore, be circulating the text of an appropriate amendment to the Bill before Committee Stage to provide for this.

I am determined to ensure that as far as possible the whole question of member participation in the appointment of trustees is dealt with in a way that will give members an effective and meaningful role in the administration of what are, after all, schemes designed for them. At the same time I want to ensure that legal requirements in this regard do not hinder the extension of occupational pension schemes to employments where they do not already exist.

As the explanatory memorandum circulated with the Bill is a comprehensive one, I do not propose to give a detailed account of the contents of the Bill. I will instead give a general overview of the main provisions of each of the seven parts with particular reference to those areas which are of major importance.

Part I of the Bill contains the usual general provisions and calls for few remarks except in relation to section 3. This section provides for offences and penalties for contravention of the provisions in the Bill. It also provides that a prosecution for an offence may be instituted by the new Statutory Pensions Board to be established under Part II. This is a very important provision. At present virtually all pension schemes are subject to the safeguards of trust law. However, as I mentioned earlier those rights can only be enforced by members instituting proceedings in the High Court, if they are prepared to meet the risks of litigation. Under the Bill it will now be possible for an aggrieved member to request the pensions board to take an action on his/her behalf against defaulting trustees or employers, rather than rely on his/her own resources. From the members' point of view this is a significant development as it affords them a readily accessible means of redress.

Part II of the Bill provides for the establishment of a new statutory board An Bord Pinsean — The Pensions Board. Section 10 sets out the general functions of the board. The primary functions of this new body will be to supervise the implementation of the new legislation. It will also have an advisory role to the Minister for Social Welfare on pension matters generally and on apppropriate standards for occupational pension schemes. The new board will be broadly representative of the main interests in pensions schemes, namely the trade unions, employers, the pensions industry and the Government. I believe that the composition of the board will enable them to be effective in performing the tasks set for them.

To fulfil their role it is essential that the board have the necessary powers and resources available to them. Sections 15 and 16 enable the board to appoint a chief executive and to employ their own staff. Section 18 provides the new board with the necessary powers to carry out inspections of a pension scheme's books and records and to obtain all the relevant information relating to the affairs of a scheme.

Section 25 provides for the imposition of fees on pension schemes. I would like to emphasise that the purpose of these fees, which were recommended by the National Pensions Board, is to meet the administrative expenses of the new board. The scale of the fees and the basis for their determination will be set down in regulations under this section. The level of the proposed fees will be determined by me in consultation with the members of the new board.

The success of this legislation in safeguarding the rights of pension scheme members is crucially dependent on the board operating with the maximum efficiency. I believe that this can be best achieved by having the administrative expenses financed by the occupational pension schemes. They will have a direct and ongoing interest in the successful and cost-effective operation of the board. In addition, given the scale of the tax reliefs available to occupational schemes, I do not consider that taxpayers should also be asked to finance the cost of the regulatory system for the protection of members' pension rights.

I referred earlier to the fact that one of the major shortcomings in the present arrangements for occupational pension schemes is that few private sector schemes make adequate provision to protect the pension entitlements of those who change jobs, particularly in relation to maintaining the real value of these entitlements. As a result many members who leave to take up other employment settle for a refund of their contributions. This results in the pension entitlements they have acquired on reaching retirement being considerably less than their periods as members of pension schemes should have conferred. Lack of protection of pension entitlements on leaving can also be a major barrier to mobility between employments, particularly in the case of persons aged from mid-30 upwards. At this stage people are much more conscious of pension cover and of their responsibilities for dependants. It is essential today to have adequate pension cover in view of the fact that people are living much longer in old age and the rising costs of maintaining a decent standard of living after retirement. Today's 30-year-olds must plan realistically for some 15 years of retirement and possibly more. The average will be 15 years and I should like to state that people will need to make provision for those years.

Having examined the present arrangements, and their shortcomings, I have decided that the best way forward would be to introduce a proper system of preservation of pension rights with an option to transfer the equivalent value of members' entitlement to another suitable scheme. Accordingly, Part III of the Bill contains the necessary provision for the protection of members' pension rights in the event of their leaving a scheme before normal retirement age.

Section 27 of the Bill provides for a statutory entitlement to preserved benefit in respect of service after the commencement date in the case of a member who leaves a pension scheme before retirement age, provided he/she satisfies the following minimum qualifying service requirements. He must have at least five years qualifying service of which at least two years fall after the commencement date. The requirements in this regard are simple to operate and are broadly in line with current practice.

Sections 28 and 29 deal with the levels of benefit to be preserved. A distinction is made in the Bill between benefits provided under defined benefit schemes and those under defined contribution schemes. In the case of the former, schemes will be obliged to preserve an appropriate part of any benefit earned for service after the commencement date. In the latter case the amount of preserved benefit shall be equal to the actuarial value of the contributions accumulated on behalf of the member at the date of payment in respect of such service.

Under section 31 refunds of members' contributions will no longer be permitted for periods of service in respect of which members are entitled to preserved benefits. This is essential, since to do otherwise would not result in any improvement in the existing situation. These provisions also apply to any additional voluntary contributions made by the member.

I wish to emphasise that the preservation requirements only apply to service after the appointed day. This means that members will still be entitled to opt for a refund of contributions paid in respect of periods up to that date, January 1991. Moreover, refunds of contributions will also be payable in respect of periods after that date, in cases where members do not fulfil the qualifying service requirements for preservation, for example less than five years in the scheme.

A number of pension scheme members who intend leaving full-time employment early, for example, on marriage or to look after their children on a full-time basis, have planned to opt for a refund of their contributions to help finance house purchase or other expenses associated with setting up a home. They have expressed concern that this may no longer be possible. I wish to take this opportunity to assure them that contributions paid to date will not be affected by the provision concerning preservation.

A system of compulsory preservation on its own would do little to solve the problem of the "early leaver". Any proposal which hopes to achieve a real and meaningful improvement in this area must incorporate a provision whereby preserved benefits are revalued between the date of leaving and eventual retirement. Otherwise, the preserved pension loses value in real terms. Section 32, therefore, makes provision for a minimum revaluation of preserved benefits from a date five years after the commencement date or the date of leaving, if later, up to retirement age.

The minimum annual rate of revaluation proposed in the Bill is the lesser of the increase in the consumer price index or 4 per cent per annum. The National Pensions Board had proposed in addition that where the rate of inflation is greater that 4 per cent but less than 10 per cent an additional increase of half the excess over 4 per cent should be provided, thus giving a maximum increase of 7 per cent. Many of the interested parties which I consulted felt that the board's formula for revaluation was unduly high and would in any event give rise to very real practical problems for pension schemes. For example, trustees of a scheme may wish to purchase a deferred annuity contract for an early leaver to be revalued in accordance with the requirements laid down in legislation. However, insurance companies are only geared to providing such contracts at fixed rates of revaluation. There are no contracts available on the market which will automatically revalue in relation to a variable rate of inflation. It would also cause difficulties for schemes in their effort to satisfy the proposed new minimum funding requirements under Part IV.

I believe that the proposed revaluation formula set out in section 32 is a reasonable compromise. It is easier to administer and is aimed to fully match any increase in inflation up to 4 per cent. Provision is made in the section to vary by regulations the 4 per cent ceiling if this is found necessary.

I would like to stress that this proposed rate will be the statutory minimum requirement. If schemes can afford to do better, then there is nothing in the Bill precluding them from doing so.

Section 33 of the Bill gives a member of a funded scheme who builds up an entitlement to a preserved benefit the right to take a transfer payment as an alternative to his preserved benefit entitlement. The transfer payment shall be the equivalent to the actuarial value of the member's preserved benefit including an appropriate element for revaluation. A member may choose to have the transfer payment made to the scheme of his new employer or used to purchase a deferred annuity contract from a life office.

Section 36 enables the Minister to make regulations excluding from the application of the proposed preservation requirements schemes already having a comparable system of preservation and revaluation for early leavers under their own rules. It is my intention to exclude public sector schemes who operate the public service transfer network from these requirements. Such schemes cater for those employed in the Civil Service and the broader public service, including the vast majority of semi-State companies. Persons who leave such schemes before normal retirement are entitled to preserved benefits which are more generous than those provided for under this Bill. Revaluation of preserved benefit entitlements under such schemes is linked to salary increases which are normally more favourable than the formula linked to increases in consumer prices as proposed in the Bill. It is not proposed, therefore, to change the basis of revaluation for such schemes in order to comply with the new requirements. There is also in existence an extensive transfer network whereby full credit for past service is provided to employees moving within public sector organisations.

Many current scheme members who intend to remain in full-time employment but may wish at some future date to change jobs have expressed concern that no provision has been made requiring preservation in respect of periods prior to the commencement date. I wish to stress in this regard that the National Pensions Board estimated that the cost of preservation in respect of future service on the basis of the conditions they recommended would approximate at most to 1 per cent of pensionable salaries and would be substantially less in the case of schemes with a relatively low level of membership turnover. The overall cost of preservation on the basis of the conditions set out in the Bill is likely to be marginally less, given the fact that the conditions are somewhat more restrictive than those recommended by the pensions board. Moreover, one of our leading actuaries has estimated that the additional cost of extending the preservation provisions to the past service of existing scheme members may not amount to more than 0.5 per cent of pensionable salaries. In view of these considerations I urge employers to follow the lead given in the Bill and to provide for preservation in respect of past service rights where this is the wish of members. It is not my intention at this stage to make this mandatory but I will be keeping the situation under review.

Trustees and sponsoring employers will have a variety of options open to them to meet the costs of preservation. Some schemes will have no difficulty in meeting these costs given the favourable rates of investment return in recent years. Others could increase the contributions from employers and employees or both. Non-contributory schemes could be changed to contributory ones or changes could be introduced in the scheme's benefit structure by, for example, taking social welfare benefits fully into account or changing the benefit formula.

I would now like to turn to Part IV of the Bill which provides for the introduction of a funding standard. The main objective of the new funding requirements is to prevent employers from making pension promises which they are unlikely to be able to afford, and to enhance the security of the promises already made.

Section 40 provides that the new minimum standard shall apply to all defined benefit schemes. Scheme trustees will be required to submit to the pension board at regular intervals actuarial funding certificates prepared by the actuary to the scheme. These certificates will certify whether the standard is being adhered to.

An initial actuarial funding certificate will be required within a period of three years after the commencement date. I propose that this commencement date will also be 1 January 1991. This certificate must state that sufficient assets exist within the scheme to cover 100 per cent of the liabilities relating to pensions in the course of payment, additional voluntary contributions made, transfer value entitlements and the benefits which have accrued in respect of post commencement date service. The latter benefits are those which must be compulsorily preserved in respect of future service under Part III (including appropriate provision for revaluation). It will also need to certify the degree of solvency achieved in respect of accrued benefits relating to service prior to the commencement date.

Subsequent actuarial funding certificates must be submitted every three and a half years after the effective date of the previous certificate. Certificates which have an effective date not more than ten years after the commencement date will, in effect, be required to certify that the solvency level of the scheme has not deteriorated in the meantime below the level initially certified.

After a transition period of ten years every defined benefit scheme will be required to have reached a funding standard which will enable it to fully discharge the accrued benefit expectations of its members. Accordingly, certificates which have an effective date more than ten years after the commencement date will need to certify that total assets at that date are at least sufficient to secure 100 per cent of all the liabilities of the scheme. These are transitional phasing arrangements to make it feasible to meet the new statutory requirements.

The proposed funding standard provided under section 43 differs from that recommended by the National Pensions Board, in that full protection is given to the entitlements of current pensioners. From the beginning schemes must certify that there are adequate assets in the fund to provide for the benefits of current pensioners in respect of service prior to the commencement date as well as service after that date. In the event of wind up, provision is also made for the first priority to be given to current pensioners. Under the board's original proposals circumstances could be envisaged whereby these benefits could be put at risk in the event of a winding up in order to fully secure other benefits provided under the scheme. I am glad to say that under the provisions of the Bill benefits paid to pensioners are to be given maximum protection and must be fully funded at all times.

The funding standard will not add to the overall cost of benefit provision — no augmentation of benefits levels are imposed and by definition no additional financial commitments arise. They will, however, have an impact on the pace of funding for many schemes because of the need to accelerate contribution payments to conform with the solvency targets. The effect on existing contribution levels will depend on the funding policy currently adopted for each scheme. The general impression within the pensions industry is that the funding policies adopted by the majority of schemes are such that compliance with the proposed new standards should not give rise to any significant extra costs.

It is interesting to note that the accounting bodies have recently taken an interest in this area and have recognised the importance of pension liabilities within company accounts. They have recently published a statement of standard accounting practice No. 24 dealing with disclosure of pension costs in the accounts of employers. The provisions of SSAP 24 — as it is called — apply in full to Irish registered companies which are quoted on the UK and Dublin Stock Exchanges for accounting periods commencing on or after 1 July 1988. Non-quoted Irish companies will be obliged to implement in full the financial provisions of the standard during the accountancy period which commences on or after 1 January 1993.

SSAP 24 adopts as its basic objective that the costs of pensions should be charged against an employer's profits on a systematic and rational basis over the period during which the employer derives benefit from the employee's service. This requires the actuarial assessment of an annual pension cost for a defined benefit scheme which is expected to remain substantially level over a period of time.

SSAP 24 does, of course, deal only with the recognition of pension costs in company accounts and does not have any direct effect on the funding programme which the employer adopts for his pension scheme. Nevertheless, it seems inevitable that, in most instances, the SSAP 24 pension costs will be reflected in actual contribution payments to the pension scheme. The SSAP 24 provisions, therefore, require the adoption of funding policies for pension schemes which are fully in line with the requirements of the Pensions Bill.

Part V of the Bill deals with the disclosure of information in relation to pension schemes. It is often said that occupational pension rights are the biggest investment an employee holds; worth far more than any investment he controls personally including even his home. It is only right, therefore, that full information is available to the individual about this major asset. Indeed, the view has been expressed that many of the difficulties experienced to date in relation to pension schemes result from a lack of information on the part of the scheme members.

I have already referred to the serious deficiencies in the legal protection afforded the members in this regard and to the fact that one of the main objectives of this Bill is to provide members with effective and comprehensive rights to obtain full and necessary information in relation to their pension scheme. There are two broad requirements provided for in this area. First, the trustees must obtain specified financial and actuarial information on the scheme under their control. Secondly, the members must be provided with adequate information to enable them satisfy themselves about the running of the scheme, its financial soundness and the security of their benefit entitlements.

Sections 53 to 57 set out the general disclosure requirements and provide that the more detailed requirements be covered by regulations. Some commentators have expressed disappointment at the lack of detail concerning the new requirements and the difficulty of assessing their effects on individual pension schemes. I was very much guided by the National Pensions Board in this regard which recognised that the requirements in this area, by their very nature, would be fairly detailed and may not be appropriate for primary legislation given that their application to particular types of schemes would have to be kept under constant review. The board recommended that the more general requirements should be set out in the Act with provision for the more detailed requirements to be included in regulations. In drafting the Bill I have adopted this approach. It is my intention, as soon as the Bill is enacted, to publish the more detailed requirements in regulations.

During the course of our consultations on the board's proposals, it became clear that there is widespread agreement on the need for full disclosure of information along the lines recommended by the board. Therefore, I intend to waste no time in bringing these into effect. For the benefit of Deputies I would like to set out clearly what these requirements entail. Different requirements will need to be set for different types of schemes. For example, the essential information only will be required from unfunded schemes. There will be reduced requirements for defined contribution schemes and schemes with fewer than 50 members.

Section 55 requires trustees of schemes to obtain at periodic intervals actuarial valuations and audited accounts. In the case of defined benefit schemes an actuarial valuation must be carried out every three and a half years. This is in line with current good practice. The actuarial funding certificate to be prepared for the purposes of the new funding standard will be completed at the same time as the actuarial valuation. The valuation must be carried out by a qualified actuary and must be made available for inspection by members and their trade union representatives.

It shall also be a requirement for schemes to produce annual audited accounts prepared by a qualified auditor — surprisingly, there is no current legal requirement for pension schemes to have an independent audit of their accounts. The objective of the accounts shall be to give employers and scheme members a true and fair view of the nature and magnitude of the financial transactions of the scheme for the scheme year and the nature and disposition of its net assets at the accounting date. Therefore, the audited accounts will outline the financial assets and liabilities of the pension scheme and the way in which the trustees have discharged their stewardship responsibilities during the period. Unfunded schemes, death benefit schemes and frozen schemes will be exempt from these requirements.

In recent years there have also been developments in accountancy practice, relating to pensions accounting and disclosure. A Statement of Recommended Practice — SORPI — on pension scheme accounts was issued in May 1986 by the Accounting Standards Committee. This statement represents the accountancy profession's guidance on current best practice on the form and content of such accounts. Although it is not mandatory, pensions schemes are encouraged to follow it. Our detailed requirements in this area which I propose to outline in regulations will be similar to these professional guidelines. Accordingly, schemes which already follow the guidelines should have little difficulty in complying with the regulations. In fact it will be a requirement for the accounts to contain a statement that they have been prepared in compliance with the professional guidelines and, if not, to provide an indication of material departures from this.

Section 54 requires trustees to provide an annual report in respect of each scheme year after the commencement date. This report shall normally consist of: a report by the trustees; an investment report; the audited accounts and a copy of the latest actuarial funding certificate.

The report by the trustees shall include basic information in relation to the scheme such as: (a) the names of trustees and any other persons or organisations acting for the scheme such as actuaries, auditors, solicitors, and investment managers; (b) a statement of the number of members, pensioners and persons with preserved benefits; (c) a statement of any amendments to the scheme over the past year; (d) details of any increases in pensions granted during the year or of any ex gratia payments made and (e) a review of the financial development of the scheme and likely anticipated future developments.

The investment report shall include a statement of the investment policies pursued during the year and any material changes in these policies during the year or in comparison with the previous year. A comment on the investment performance of the fund shall also be made.

As I mentioned earlier, there will be reduced requirements for defined contribution schemes and smaller schemes with fewer than 50 members. As recommended by the board, these will be less onerous than the full details I have just outlined. In place of the full requirements for annual trustee reports and annual audited accounts such schemes shall have the option of issuing a shortened report prepared by either an independent accountant or the insurance company managing the scheme. This report shall include the following information: (a) a general statement indicating the basis on which contributions to the scheme are calculated; (b) a statement indicating how the assets are invested including the extent of any self-investment or concentration of investment; (c) confirmation that the contributions paid in the relevant period represented the amount due as set out in (a) above or, alternatively, a note of the amount received where this is different from that due; and (d) in the case of "small" defined benefit schemes, a copy of the most recent actuarial funding certificate.

I would like also to refer to section 53 which is an important provision in itself. While sections 54 and 55 impose obligations on trustees to produce annual reports and other financial documents, section 53 places a general requirement on them to disclose these to members, prospective members, their spouses and trade unions representing the members together with a comprehensive range of additional information. This additional information shall include: details about the constitution and rules of the scheme; certain basic information about the scheme and details about an individual's benefit entitlements and options under the scheme.

Some concern has been expressed about the cost of implementing these disclosure requirements, in particular the administrative costs. I do not consider that the costs involved will be significant in terms of the resources of many schemes. Many schemes already provide their members with comprehensive information. Those which follow good practice will find that they have little or no extra burden to bear as a result of the legislation. Moreover, the option of shortened reports for smaller sized schemes will go a long way towards mitigating any extra costs for such schemes.

Combined with the new minimum funding requirements in Part IV, I believe that these new measures will greatly enhance the security of members' pension rights. It will improve the rights of members to access to information on the level of funding of pension schemes and thus the extend to which future benefits are secured. Members will be much more aware of their rights under the schemes and the basis on which their pension expectations are founded. It will also enable them to satisfy themselves that schemes are being run in their best interests.

Part VI of the Bill contains a number of specific provisions affecting trustees of pension schemes. I have already referred to the absence of any specific statutory provision covering the duties of pension scheme trustees. Such duties are subject to general trust law and to the trust deed of the pension scheme. The only general obligation on trustees is to look after and manage the trust assets and to use them to make provision for the beneficiaries. It can therefore be difficult to assess if the trustees are performing properly in accordance with trust law. Furthermore, if members believe that their scheme is being mismanaged, the only redress currently is through the courts by suing the trustees for breach of trust or for an order removing the trustees. Such a case would normally be heard by a Chancery judge of the High Court and the substantial costs involved would normally make it prohibitive for members to contemplate such action.

The Bill deals with both these shortcomings. First, it clearly defines the duties and responsibilities of pensions scheme trustees and, secondly, it provides an appropriate means of redress for the individual member. Section 58 outlines the main duties of trustees as follows: (a) to ensure that the contributions due to the scheme are paid into the fund and are properly invested; (b) to ensure that the benefits of the scheme are paid as they become due; and (c) to ensure that proper membership and financial records are kept.

Section 3 of the Bill, to which I referred earlier, provides that trustees who fail to comply with the new requirements will be guilty of an offence which shall be punishable by a system of fines. Section 61 in this part of the Bill provides that the High Court may order the replacement of the trustees, if following a request made to it by the pensions board, it considers that such action is necessary in the interests of the members of the scheme.

It is envisaged that a member's remedy for non-compliance with the new requirements would initially take the form of an approach to the trustees either directly or through his trade union or staff representative. If this approach or informal contact does not produce the desired result the member, or his/her trade union, could make a complaint to the board which would then investigate the allegation on the member's behalf. It is hoped that the involvement of the pensions board would normally be sufficient to achieve the required action. If this course of action fails to provide satisfaction the board would then use its power to take legal proceedings on behalf of the member against the defaulting trustees or any other culpable person.

Part VII of the Bill represents an important step in providing equal treatment for men and women in occupational benefit schemes. It implements in full the requirements of EC Directive 86/378/EC on this issue. The main schemes covered are occupational pension and sick pay schemes and long-term disability schemes. Optional benefits, single member schemes and personal schemes are excluded in line with the provisions of the EC Directive in this regard.

The provisions in the Bill will override any differences in the treatment of men and women in occupational schemes in relation to: eligibility for membership; the obligation to contribute; levels of contributions payable by members and employers; and benefit rights. There are special safeguards for those absent from work by reason of maternity or for family reasons.

I wish to state that I am fully committed to the elimination of all discrimination between men and women in occupational social security schemes. In line with the approach being adopted at EC level in this regard, I consider that there is a need for schemes to have transitional periods before full compliance with the principle of equal treatment is required. This is necessary to enable employers and/or trustees to meet in a planned way any extra costs arising from the implementation of the principle of equal treatment and to ensure that the entitlements already acquired by existing members, both men and women, are protected. This approach was also recommended by the National Pensions Board in its fourth report.

Accordingly, in line with the timescale laid down in the EC Directive, schemes will have up to 1 January 1993 to comply in full with the equal treatment provisions in the Bill. Discrimination in contracts of employment and collective agreements must also be removed by that date. The deadline is extended to 30 July 1999 in the case of employee's contributions, where the rates differ by reference to the use of different actuarial factors for men and women. The Directive also permits member states to defer compulsory application of the principle of equal treatment for pensionable age and survivor's benefits, at the latest until a further Directive requires equality in this area. This is also reflected in the Bill.

The 1985 ESRI survey on occupational pension schemes showed that in only 13 per cent of schemes was the retirement age for women lower than for men. These schemes would invariably be longer established schemes. In virtually all new schemes and in the case of new entrants to existing schemes, equal retirement ages are normally provided for. Inequality in this respect does not occur therefore, in the vast majority of schemes in this country. This is mainly due to the fact that there is equality in this regard under the basic social welfare schemes which have a major influence on the way occupational schemes are designed.

Equality of treatment in this area could involve having an equal retirement age at either the later age which normally applies to men or at the earlier age which normally applies to women. On grounds of cost it is likely that schemes would equalise at the later age. The National Pensions Board stated in its Fourth Report that this is a reasonable and practical means of achieving equality of treatment, particularly having regard to the financial implications.

The net effect of equal treatment in this regard in the vast majority of cases, therefore, would be to worsen the position of women who can now retire at the earlier age, with no corresponding advantage being given to men. For these reasons I decided that equal treatment in this area should not be made mandatory until this was provided for in the next EC Directive. I expected that transitional arrangements would be provided for in that Directive which would protect the position of women who are currently eligible to retire at the earlier age.

I considered that it would be important that Irish legislation be fully in line with the requirements of the next EC Directive in this area. Otherwise the Irish women concerned could be worse off than their counterparts in the other EC countries, if the provisions of the Directive were more favourable to them than Irish legislation. Alternatively, the schemes might have to alter their rules further, if Irish legislation in this area did not fully comply with the provisions of the next Directive and, as a consequence, had to be changed to provide for such compliance.

Since the publication of the Bill, however, the European Court of Justice in its recent judgment of 17 May in the Barber case appears to have ruled in effect that compliance with Article 119 of the Treaty of Rome requires equal treatment in relation to retirement ages under occupational schemes. The court also ruled that Article 119 of the Treaty may not be relied on to claim entitlement to a pension in line with its judgment in this case, prior to the actual date of the judgment, except in the case of workers or those claiming under them who have before that date initiated legal proceedings or raised an equivalent claim under the applicable national law.

I am at present having this judgment examined within my Department. Prima facie, it would appear that with effect from 17 May, the date of the judgment, differences in the treatment of men and women in relation to retirement ages under occupational schemes are contrary to Article 119 of the Treaty. If, having examined the matter, I am satisfied that this, in fact, is the case, I will bring forward an amendment on Committee Stage to bring the appropriate provisions in the Bill into line with the court judgment. I want to avoid the situation where the provisions of this Bill when enacted would be contrary to the jurisprudence of the European Court of Justice.

The EC Directive also permits member states to postpone compulsory application of the principle of equal treatment in relation to survivor's pensions. The National Pensions Board in their report made specific recommendations for the progressive implementation of equal treatment in these schemes. I have found their recommendations broadly acceptable. However, for similar reasons to those I have outlined in relation to retirement ages, I decided that the compulsory application of equal treatment in relation to survivor's pensions should be dealt with in the context of the next EC Directive dealing with this matter.

The cost of providing for equal treatment in this area was also an important consideration. The National Pensions Board estimated that it could give rise to an increase in pension costs varying from 3.4 per cent to 15.8 per cent, depending on the male-female composition of the workforce. Requiring schemes to meet these extra costs at the same time as they will have to meet the extra costs of complying with the other provisions of the Pensions Bill would be difficult to justify, especially when EC member states are permitted to defer compulsory application of equal treatment in this area under the terms of the Directive. It could also lead to a reduction in pension cover for survivor's pensions, where schemes could not fully meet the extra costs involved. This would adversely affect women engaged full-time on home duties, who are totally dependent on the widow's pension in the event of the death of their husband.

My intention is to provide for equal treatment in this area in accordance with the terms of the next Directive and within the timescale it lays down. The recommendations of the National Pensions Board will be fully taken into account in establishing the Irish position on the terms of the proposed Directive in relation to this issue. However, I intend to keep the situation in this regard under review. If within two years there does not appear to be any immediate prospect of the next Directive being adopted by the Council of Ministers, I will at that stage bring forward proposals for the compulsory application of equal treatment in relation to survivor's pensions, in which full account will be taken of the recommendations of the National Pensions Board.

I would now like to refer to a number of provisions of this part which may be of interest to Deputies. Section 63 defines the term "occupational benefit scheme". This definition includes occupational schemes other than occupational pension schemes such as occupational sick pay schemes and long-term disability benefit schemes. Section 67 outlines specific exemptions from the principle of equal treatment. The most notable of these are those which I have referred to — pensionable ages and survivor's benefits. Section 69 of the Bill deals with the implementation of the principle of equal treatment. It provides that where any rule of a scheme does not comply with the principle it will be overridden by this part of the Bill and the more favourable treatment provided to persons of the one sex shall be provided to persons of the other sex. Trustees of schemes or where appropriate the employer shall be obliged to take the necessary steps to ensure compliance.

Sections 73 to 78 deal with the resolution of disputes in regard to equal treatment. In this connection a clear distinction is made in sections 73 and 74 between those concerning occupational pension schemes and those involving other types of occupations benefit schemes. In the case of pension schemes it is proposed that disputes between members and trustees-employers will be determined by the proposed new pensions board along the same lines as those applicable to the other requirements contained in the Bill. Failure by any party to comply with the principle will be an offence under section 3. It is proposed that disputes concerning other occupational schemes will be dealt with by equality officers and the Labour Court on the same basis as for equality of treatment in the employment field. The procedures for the resolution of such disputes are set out in sections 75 to 77 and are similar to those contained in existing equality legislation, that is the Employment Equality Act, 1977, and the Anti-Discrimination (Pay) Act, 1974.

I trust the House has found my explanation of the objectives of the Bill and of its major provisions useful and helpful. Due to its length I regret that I was unable to go into more detail but in my reply to the debate I will try to respond to any points or queries raised by Deputies.

As I said at the outset, this is a major and historic piece of legislation. I believe that it strikes the right balance between the need to provide for adequate safeguards for members' rights and expectations under pension schemes and the avoidance of over regulation of such schemes, which could jeopardise their further development.

We have managed to balance a large number of adverse factors. I believe the Bill is very well balanced. I feel privileged to bring this historic legislation before the House because for generations to come workers will be glad to acknowledge the value of the legislation we are enacting in 1990.

Before concluding, a Cheann Comhairle, I welcome Deputy Flaherty on her return to this House after the recent birth of another son and I congratulate her on that event.

I thank the Minister for his good wishes, but may I also congratulate him on the birth of major legislation. We are all glad to see this Bill in this House.

I hope we will improve the Bill in its passage through the House so that we will have major legislation on the Statute Book that will regulate and order matters in a way that will encourage the development of the pensions industry. I share the Minister's concern that we should keep this broad objective in mind during the passing of the Bill. It will be a balancing act between providing rights and privileges while ensuring that the industry, which is voluntary and delicate, will grow and that we assist its growth. At the same time we hope to establish well policed standards of management of the schemes outlined in the Bill.

The Minister is to be congratulated for bringing this Bill before the House, but perhaps because of his haste some of the matters that we had hoped he might have dealt with have been excluded. We, in Fine Gael, welcome the provisions of the Bill regarding minimum funding, disclosure of information, the establishment of the Pensions' Board and especially the provisions for the preservation and transfer of pension rights. I think perhaps that is the single most innovative and creative measure in the Bill. It will change the face of retirement for many people in the future. There is no doubt that on becoming law, this Bill will change things for the better in the long term, because it will ensure full occupational pensions for far greater numbers by allowing the pensions paid in different employments to be preserved or transferred. However, Fine Gael believe that the Minister has made a major error, indeed towards the end of his script, he acknowledges this in his reference to the results of the recent court cases, but it was clear to us from having met with representatives of the industry that they were deeply concerned at the confusion in the area of equal pay, and equal treatment in pension schemes. They felt there was an impossible burden on trustees to manage schemes without having the legal position clarified, in view of the confusion not only at EC level with Directives but as to whether pensions as remuneration are covered by the Anti-Discrimination (Pay) Act and that unequal treatment is illegal under existing Irish law. The Bill continues that confusion and I believe that in the Minister's haste to bring this Bill before the House — indeed we were pressing him to have it — he failed to tackle these issues.

The Minister has indicated that the parliamentary draftsmen are again working on this Bill and I hope that on Committee Stage or certainly by Report Stage he will have a fresh look at this. We in Fine Gael are convinced that it was a major error not to adopt in full the National Pension Board's proposals, and I will deal with that in more detail later. It is regrettable that the Minister has not adopted, at least in principle in the long-term, the proposal for member trustees — again, I will deal with this in greater detail shortly. It is vitally important to clarify the legal uncertainties enshrined in the Bill, particularly in the area of equality of treatment.

I will repeat my overall aim that we hope this Bill will be simple, effective and cost effective. We believe it is vital to ensure that there is a framework to encourage the provision of pensions and to discourage employers from worsening pension schemes to comply with the Bill. The Minister referred to this in his speech. I hope when we come to consider this matter in detail we will all be responsive to it. I have been involved with other legislation in this House where we argued similar cases and the legislation had a deleterious effect on the industry concerned and the practice of the particular occupation. I refer in particular to the Clinical Trials Bill where warnings to the Minister of inadequate provisions in a certain area have proved to be well founded. Desirable clinical testing in this country has been set back severely as a result of the way in which that Bill was drafted. We have to be very conscious we are dealing with a live body, as it were, and that the way we act can have an influence on it. I hope that we in Fine Gael will keep that very much in mind when contributing.

We are concerned at the level of exemption proposed in the Bill. I hope that in reply to Second Stage the Minister will indicate his thinking in relation to different sections. I will point out the areas in more detail as I go through the Bill. The Bill is a welcome development in pension law, replacing the Trustee Act, 1893, and altering significantly the Perpetual Funds (Registration) Act, 1933. The success of the Bill is due in no small way to the establishment of the National Pensions Board who thrashed out many of the issues involved. The net product of that proposal indicates that this model of preparing complex legislation should be followed with other specialised legislation.

On 1 March Fine Gael published a statement calling on the Minister to introduce legislation. We sought mandatory disclosure of information to scheme members, minimum funding standards, actuarial valuations and annual reports and accounts, all of which appear in the Bill. We sought to ensure that the National Pensions Board would have power to act promptly and also full transferability and the preservation of pension rights which, to a large degree, are included in the Bill. We sought maximum simplicity and minimum bureaucracy, also a feature of the Bill. We sought comprehensive equality of treatment in all schemes and provision for member trustees, neither of which are included in the Bill. The Minister indicated he is committed to these matters in principle and I hope we can convince him, by our arguments, to deal with them. I am sure my colleagues on the left will support these issues.

I would like to thank the representatives of the industry and indeed the unions and employers not just for their involvement in the pensions board but also for their assistance in briefing me for this Bill. I found them very open and helpful and very willing to talk about the complexity of the Bill and their views in relation to it.

There has been a lot of anxiety due to the fact that in the past five or six years there have been two or three very high profile examples of a serious collapse of pension schemes which highlighted the gross inadequacy of protection for members of pension schemes. I am glad those incidents were the exception rather than the rule. As the Minister has said, 98 per cent of all schemes are well run. Perhaps 90 per cent operate to the highest standard, even in advance of this Bill. We are trying to provide minimum standards and absolute rights for workers.

We have witnessed the collapse of the H. Williams pension fund and the Castle-comer Castlebrand collapse. I know certain journalists in the gallery are concerned about this matter because in the past some of their colleagues had occasion to go to court to obtain a right to information about their pension schemes. There has been a delicate situation in the journalistic world, which is a fairly volatile world but not quite as volatile as ours. Perhaps those people have reason to regret that this Bill will not be in position in advance of the 1991 estimated start-up date. There is no doubt that the vast bulk of the industry operates to the highest standard. As the Minister indicated, in the past year they have introduced new accounting standards and are implementing many of the funding provisions in advance of this Bill. Many of the schemes, particularly in relation to equality, have already been set up in preparation for this Bill. The people involved are probably surprised to find the Bill expects less of them than they expect of themselves.

I would like to deal initially with the two areas of conflict, that is the issue of member trustees and of equal treatment. The National Pensions Board recommended that we should adopt fully the principle of equal treatment in pension schemes. The Minister opted instead for the proposals of the last EC Directive on this matter, which allowed significant derogations. While the Minister has provided for equal treatment in the areas of access and benefit, he has not provided for it in the areas of survivor benefit or age of retirement. This has led to problems and since the publication of the Bill he has had to refer to the European judgment.

The industry is very concerned with the unclear legal position of trustees in making decisions. They felt the Bill should have adopted the stance of the National Pensions Board report which clarified this area and which moved with the times. On the one hand the Minister is establishing the principle of equal treatment and saying that any action opposed to that principle is illegal while, on the other hand, he is continuing to enshrine different ages of retirement and different treatment of survivors.

It is clear from the case the Minister referred to that at present men may seek equal treatment to women and may win a case to allow them access to benefits from the age of 60, on parity with women. If a pension scheme was set up to provide for that, the cost would be enormous — far greater than if we provided for women's pensions from the age of 65, certainly for future beneficiaries, or perhaps for an agreed pension age for different schemes. There are a series of approaches to this matter and we will be making a number of proposals on Committee Stage. Alternatively, I hope the Minister, with the advantage of the advice available to him, will come up with some proposals which we can support.

The issue of survivor benefits for women is not a huge one because it is a fact that women live longer than men. There is not a serious problem as regards cost in this area. There would be a saving if the pension age was 65, which would probably be the most appropriate age as regards equal treatment because it is also the age for receipt of the State retirement pension. As I have said, most pension schemes already provide for equal treatment and many of the schemes for men already provide for a retirement age earlier than 65 years. The Minister could go further in this regard and I hope he will do so. I share the Minister's view that requiring different contribution levels for men and women is valid in view of the fact that their life expectancy rates vary and also could be justified in the context of the EC Directive. The other differences are not equally justified. Essentially, the Bill's provision on equal treatment implements the EC Directive in its most limited form and avails of the significant derogation permitted in the directive. This falls short of the comprehensive suggestions contained in the report of the National Pensions Board. We, in Fine Gael, would prefer to see full implementation of the equal treatment principle subject to the specific differences contained in the actuarial tables which are valid on objective grounds, other than sex, of life expectancy — which is the relevant issue. I hope the Minister will review that issue.

On the issue of member trustees Deputy J. Bruton as spokesperson on Industry in the past, produced a document for Fine Gael setting out our view on industrial democracy. It is a fundamental Fine Gael view that the more you share responsibility and authority within an industry the more unity there will be resulting in greater success and development. Naturally we would take that point through to the area of pensions.

Initially, in Ireland we are very slow to adopt new procedures. I accept that the Minister has a very strong body of opinion to deal with regarding employers. There is a section of employers who are deeply concerned about the idea of giving this as of right to workers. The Minister likes to see himself as a leader of opinion — as we all do — and not a follower. I hope in the course of this debate he may be able to do what he said he wishes to do as quickly as he can, and perhaps we could bring the industry with us.

If we are to establish the principle of worker trustees in the Bill, perhaps we should allow a longer timescale of, say, five years or ten years in which it would be implemented. The FIE expressed their fears about this to me and to the Minister publicly. They believe it interferes with an area which up to now had been voluntary. I would not have a great deal of sympathy with that fear. There are many industries that have had worker trustees for a long time and they worked extremely well. What I accept as valid is their view that where there has been no tradition of this co-operation, and where there has been no shared experience in the development of a pensions scheme, to give that right overnight to a set of employees may not lead to the most harmonious development of a co-operative approach, or even a realistic approach, to the development of a pension scheme.

I suggest we adopt a more extended period than that suggested by the pensions board of, say, five years or eight years when pension schemes would have the experience of sharing information over a number of years, of studying the reports, of developing knowledge and of realising — this appears to be the concern of employers — that it would become an industrial relations battlefield, which is something nobody wishes to see. The pensions board and the industry are concerned about that and I hope the employees would be similarly concerned. I can see that it might cause concern if it becomes one of these rights that some of the most macho shop stewards might be heading towards and they could find themselves out of place. We can get to know the system better by extending the courtship period of five to eight years during which time they could share the information more fully and study the reports. The workers would begin to realise that they did not need a macho individual looking after their interests, but what they needed was somebody with particular skills and knowledge in the mathematics area who was willing to give the time to study enormously boring reports on investments, unless they had ambitions to be another JR. Essentially, it would be a very mundane hard working activity with very little glamour associated with it.

In time it would be possible to appoint member trustees to achieve our desired objective in an atmosphere where a shared view would be developed. So far, where member trustees have existed it has been on a voluntary basis, on the basis of a developing tradition in an industry, and invariably it has been successful. That is the single greatest reassurance we could give employers. The challenge should be to provide leadership in this area and we should not be slow to do so.

In Britain, they have faced the issue of equal treatment; in fact, they have gone further, perhaps, than is sensible in so far as they do not allow any actuarial distinctions between men and women. They have provided for full equal treatment in the context of the maximum interpretation of all EC legislation. We should not be out of step with our partners in Europe on this issue even though the law has allowed it. I know the law has outstripped the directive. I am aware the Minister is anticipating the new directive and he will have to make changes in the future; if he does not deal with equality and member trustees he is leaving it open to make changes in the future. He should move at least as far as the National Pensions Board's recommendations. If he adopted that approach he would have a lot less to do in a future Bill.

The legal uncertainty is caused by both EC and national legislation. Where there is any conflict, EC law supersedes. Article 119 of the Treaty of Rome requiring equal pay for equal work is the Article of most concern. It is very difficult for trustees to operate in an atmosphere of legal uncertainty. It is essential that that issue be dealt with. It also would be immensely valuable, and would be a great improvement, if the issue of member trustees was also taken on board.

I will now turn to the sections of the Bill with which I am in broad agreement and, perhaps, make some general points on other areas and issues which I would like the Minister to clarify when he replies to the debate. Part I deals with preliminary and general provisions of the Bill while Part II deals with the establishment of the pensions board. In Part I, there will be an interest in some of the definitions. Some areas are very complex and it is hard for lay people to come to terms with "defined contribution scheme", "defined benefit scheme", "long service benefit" and "funded scheme". Those are issues which we will examine, and would be more appropriate to a Committee Stage debate. Much of this legislation will be implemented by regulations and again we will have our standard debate on the positive and negative regulations. It is vital to have some indication of the Minister's thinking in relation to the regulations under the sections as we advance through the Bill.

That is mainly for technical reasons.

The Minister has proved that to us before. The industry has been most concerned about the sections in Part I dealing with expenses. The expenses may be paid by the Minister out of the funds of the Oireachtas but section 25 also provides that they may be charged to individual funds by way of levy to the board. There is concern in the industry in relation to this because it is open-ended. Consider the experience of schemes in other countries where boards are in operation. We have a certain advantage here where we operate in a better situation than that of many of our European colleagues who are faced with state schemes which to them are a problem from the point of view of future funding. We should be grateful for the general healthy state of our occupational pension schemes and we should not overburden them.

I would like to know whether the Minister intends to put the whole burden of the cost of the establishment, staffing and general work of the pensions board on the industry. What is his thinking here? He has given himself a provision to pay it out of Exchequer funding. Britain has an enormous board who employ a large number of people and are fully funded by the state. The Canadian experience is of very large, highly policed boards. It would be of great interest to the industry to know the Minister's thinking in this area, to ensure that a very costly bureaucratic additional burden is not imposed as a result of the new demands under this legislation. There is concern that the cost will be open-ended and virtually a blank cheque particularly in the light of experience in other countries. The Minister might clarify that in his reply to this Stage.

Part II provides for the establishment of a pensions board. This is a very welcome development. There may be those who think an advisory board might be better because of maximum participation of the industry, but it seems to me that a statutory board represents the only logical way to go about it. We welcome the functions as envisaged and there is a possibility of giving them additional functions. There is concern in regard to the chief executive's relationship with the board. The Irish Association of Pension Funds are concerned that the chief executive of the board should have sufficient independence and clearly delegated functions to ensure that we will not have critical situations awaiting meetings of boards etc. before they are adequately responded to. I ask the Minister to comment on this.

Another issue is the question of costs in relation to the establishment of the board. There has been some representation with regard to membership but by and large the membership as proposed seems to be reasonable. Very large boards can become unworkable. I am interested in the fact that the Minister is going to establish this board which probably will be composed largely of people who were on the previous board, and he is going to refer back to them some of the problems on which they have already given him advice. Will he take their advice next time? It seems he has not taken their advice on this occasion. Most of the provisions of this Part are fairly standard, but there is concern about the open-ended nature of the funding arrangement.

Part III is, I suppose, the heart of the Bill and is very welcome. It raises issues for some workers and it brings a major change into the operation of and the approach to pension schemes. Many people looked on their pension scheme as a means of savings they might call upon at any time, and there was concern about this among workers. Much of that concern has been allayed by the fact that it will not be retrospective and contributions made up to the passing of the Bill will continue to be cashable and will not be, as the workers tend to refer to it, frozen but will have future application. In principle, we support the Minister's approach to the pensions board in this area.

We could consider some of the detail. No age start-up point is suggested here. There may be some argument for having an age below which the provision does not operate, perhaps at an early stage of employment where there is maximum mobility, perhaps up to 30 years of age. That seems reasonable and from that age one can provide reasonably for one's retirement because there are sufficient years to make a decent provision. Has the Minister given thought to that? It might be the answer to some of the concerns about this issue. It is important to protect certain people against themselves particularly when they wish to cash their pensions and where they have had long service. We hear even of people at 50 cashing their pensions and, as has been said, handing back so much because they themselves provided a tiny portion and the proportion is often close to 2 : 1 being provided by the employer and effectively they are handing away an enormous sum of money, thus leaving themselves open to the need for State provision ultimately. Therefore, they need protection against themselves and on behalf of the State. If they get back only a fraction of what they have earned they are effectivley saving for the employer at all stages. At the early stages of the scheme one might not feel too concerned about that, but for people who have been paying for decades it is close to tragedy and a great folly unlesss it is done in some absolute crisis when such action might seem valid at the time of the cashing in.

In relation to years of service, the Minister differs in his proposals from the National Pensions Board in that he has opted for the full five years in each case rather than the reducing years for those over a certain age. Will he explain why he has opted for that lesser provision? In Britain the legislation has been in place for some time and there they have brought the years from which one can qualify down from five to two. Does that not indicate that he might come back to this issue very quickly? I ask the Minister to give some consideration to adopting the strict recommendations of the board in that regard.

In the context of transfer benefits and the revaluation of preserved benefits, there have been some differences in the Minister's approach and that of the pensions board. The Minister's proposal is somewhat the less generous. I have had a view from the industry that this is about what the industry can bear. Perhaps it is a reasonable proposal. In the general approach to the Bill the Minister may have got it about right but I would like to hear more details of his reason for moving away from the board's recommendation in that area given that in the board we had broad representation of viewpoints in the area as a whole.

The section as framed is not very clear as to when revaluations will take place and whether they will take place at the same time. That point has probably been made directly to the Minister by representatives of the industry and I expect he will respond on Committee Stage. While the Minister is allowing for improvement in the scale of benefit by indicating that improvement in the amount of benefit should not have a restrospective effect, the industry says the Bill does not deal with improvement in the quality of benefits. It is not clear whether there will be retrospection in respect of the quality of benefits. It would involve sudden increases in liabilities for schemes if this point were not clarified.

There is also concern in relation to section 35. The current practice in regard to pension schemes is that where a person has defrauded the board or owes money it can be recovered. Section 35 seems to give an absolute right to the full transfer value of a preserved pension, regardless of that sort of thing. The Minister might address that valid point.

We broadly support the funding proposals, which are very much in line with the proposals of the board. Over a period of time they will bring about a radical transformation of pension schemes. Current practice varies greatly and it is open to schemes to make provision as they see fit. Self-regulation of the industry has led to great improvements and the operation of new accounting practices. The biggest problem in the past was that while an employer could make a promise there was no legal requirement on him to fund that promise. That remains the position until this legislation becomes law. Persons can have an expectation about a pension but there is no legal obligation on the employer to make ample provision. Many firms do not make such provision. For example, American companies in their tax break period often do not make provision for pensions during that ten years. After the ten years they will make full provision. There will be major changes for companies like that and they will be required to phase in the new system. Companies may last for 12 or 14 years but some may not. The Bill will regularise this area and establish minimum standards. In conjunction with the disclosure of information, this will provide greater protection for members and trustees who have been educated. It will also provide a general standard for all pension schemes, including those which may be run less favourably for members.

Part V deals with disclosure of information. The success of this part of the Bill will perhaps decide its effectivenes. There is a lot of interest in trusteeship but there will have to be a good deal of education for members and trustees if they are to take advantage of the information. The area is very complex, as those of us who have had to study it in the past few months are aware. We have not had to look at actuarial valuations and investment portfolios, which will be the day-to-day work of trustees.

If this Bill is to achieve its objective, it is important that employers, employees and trade unions appreciate its potential. Many trade unions are already educating their members in respect of pension schemes and employers have been sending their employees on training courses. It is important that this process should accelerate. The only reference in the Bill relates to the requirement to train trustees. I hope a substantial number of member trustees will be trained as a result of this Bill, so that they will not be dependent on the paternalism or good will of a company. We in this country have a strange fear of worker democracy which is somewhat akin to that of Margaret Thatcher, although she has her own particular angle which is not easily categorised. Our fear of worker democracy is very much out of step with the feelings of our European colleagues who take it for granted. The kind of debate engendered here about member trustees would be unthinkable in other parts of Europe. We have to push the matter further along the road in the context of this Bill.

The impact of this Bill will depend on members or trustee members studying and understanding the information which will be available on an annual basis. If this does not happen there will be no increase in protection. People must be vigilant and must police things themselves. If the National Pensions Board were to police every scheme on an annual basis enormous resources would be required. There are 25,000 schemes, all of which will be registered with the National Pensions Board. One can only imagine the level for staff required to assess these schemes individually. Of course that would be the wrong approach. It will be a matter of dealing with queries and problems that arise.

The Minister might indicate exactly how the board will operate. It will be important for members and member trustees to be in a position to spot problems and call on the board if necessary to use the substantial powers given in this Bill. If this is not all in place we could have major changes on paper which would not make a great deal of difference and we would still have the crooks and the rogues and maybe just people making unwise or careless decisions. If people are not still to be open to the consequences of disasters caused by them and suffer huge personal losses, the powers in this Bill must be given substance by people getting involved, getting trained and informing themselves.

The provisions in relation to trustees, apart from the issue of member trustees, are very welcome. Sections 61 and 62 of the Bill allow for the Pension Board to deal with situations such as the H. Williams case where the members themselves had to sue the trustees in an attempt to have them sacked and replaced. That is to be welcomed because it deals with an issue that was identified as a problem following recent unfortunate experiences. It represents a significant improvement on the present situation in terms of protecting members against negligent, non-existent and non-performing trustees.

I have dealt substantially with the equal treatment area. I indicated that there were problems with both European and Irish law. Most of our own pension schemes here have changed. The pension scheme in this House changed, luckily, very soon after I arrived in the House, to take into account the Anti-Discrimination (Pay) Act and ensure that there was equal treatment. It is unfortunate that having responded in that way for ourselves we have not enshrined that principle in the Bill. I hope we will see progress on that. I am concerned that the Bill declares unequal treatment illegal but does not enshrine the principle I just spoke of.

There are a couple of other minor issues that I think it is useful to raise with the Minister so as to get his response and possibly have them incorporated in the Bill. One is the issue of costs and whether proposals adopted in Britain to reduce costs should be adopted here. Could the Minister be involved in any way in assisting industry-wide pension schemes or in the pooling of arrangements for providing pensions which would facilitate movement within industries? This exists substantially within the public sector.

The Minister dealt rather globally with the fact that the public sector schemes are excluded from many of the provisions of the Bill. I am concerned that arrangements for transferability in the public sector are not as good as what is being provided in this Bill. I would like the Minister to respond to that in some detail before we cheerfully exclude all those sectors from the provisions of the Bill.

In regard to disclosure of information, I wonder if all of those areas are adequately provided with information as required. Before we exclude all those sectors, I would like to have a closer look and be a little more reassured. Only in the last few days I had correspondence from one of our own Front Bench Members relating to a person who, had he transferred from the area he was in to a certain area, his pension would have been fully transferable, but if he transferred to another area it would not. We should look at that sort of situation a little more closely before we say that there is no need to apply the provisions of this Bill to any sector of the public service. If the principle of cashing in on pensions is established in the private sector, should we not also be maintaining similar principles in the public sector? I have not had time to look comprehensively at the area of transferring or cashing pensions but I would like to come back to it again in more detail later since it seems that the Minister is proposing to exclude most of the public sector pension schemes from many of the provisions of the Bill.

Eagle Star made a useful point in relation to the self-employed, although it is largely a tax treatment point. They are excluded from some of the provisions of the Bill. However, we are producing a major Pensions Bill and we should ensure that we are adequately dealing with the issue of the self-employed.

There is also concern about the speed with which this Bill is moving through the House. It is not that I have any objection to that, but we should be assured that we will have time to seek variations and clarifications and to allow the industry to come to terms with what is proposed.

The industry has been at it now for some years.

After long delays we finally have the legislation and the industry are concerned about having to make financial provisions for it by 1991. It is all happening very rapidly. If the new board are established and there is sufficient consultation with them, these problems can be got over, provided the Minister listens to the board more intently than he listened to the last board, because much of the detail of the Bill will be worked out in regulations. If the industry are sufficiently involved the problems can be overcome.

I will conclude by broadly welcoming major portions of the Bill. I regret that the Minister has moved away from the recommendations of the National Pensions Board of bringing together all the groups and anticipating the problems in advance. In moving away from those recommendations the Minister has, in Fine Gael's view, moved away from having the kind of Bill that we could have wholeheartedly supported. The Minister indicated a willingness to look at one of the areas. In relation to the other area he has told us that his heart is in the right place and that it was a question of timing. We would like to move a bit faster on that. Then there are the multifarious areas of detail that we will look at on Committee Stage. Subject to the reservations I mentioned, we will support Second Stage of the Bill and we will look at the amendments at a later stage.

At the outset I want to say that the Labour Party welcome the Bill as a step towards the provision of a comprehensive pension entitlement for everybody at work in Ireland. It is a major legislative step, involving a Bill with 80 sections, and three schedules accompanied by 47 pages of ministerial introduction and 14 pages of explanatory memorandum. This puts it in the area of complex legislation, to say the least. We have been calling for the introduction of these provisions for many years and for that reason we welcome the Bill. I was pleased to hear from the Minister that it is his intention to introduce a number of amendments on Committee Stage. Indeed, while the Labour Party will support the Bill on Second Stage we will be seeking the Minister's support for a number of amendments to strengthen the Bill.

The Bill deals with the preservation of benefits, minimum funding standards, disclosure of information in relation to schemes, trustees of schemes and the important concept of equal treatment for men and women in occupational pension schemes. In his lengthy speech the Minister referred to the need for equal treatment. He told us that while he would like to introduce everything on an equal footing immediately he must await further directives from the Community and I am glad he will be in a position to introduce regulations to take account of further directives.

While I welcome the Bill it is important to point out that it falls a long way short of providing an adequate level of pension entitlement to people at work. For instance, the Bill covers only certain categories of employees. It does not cover the self-employed, farmers or several other categories and it will not do anything to improve the lot of many elderly people at present living on very inadequate incomes. The Bill does not make it compulsory for all employers to establish occupational schemes and, therefore, it will not extend the coverage of such schemes across the board.

The Bill is deficient in many respects, particularly in regard to the self-employed who at present depend on non-contributory means-tested pensions. That means that many of them exist in poor circumstances and must subject themselves to the odium of means-testing. The introduction of self PRSI is a step in the right direction but even those in that category, particularly widowed farmers who have disclosed income tax numbers and proved that they are not subject to income tax, have not received any response from the relevant authority, whether it is the Department of Social Welfare or the Revenue Commissioners. Those people should be brought into the net so that they can benefit under the ten year period of contributions clause.

The pension arrangements for the self-employed, and those in non-pensionable employment, are covered in section 23 (5) (a) and (6) of the Income Tax Act, 1967. There have been many disputes with the Revenue Commissioners in aggregating the amount of qualifying premiums. Basically, they are tax benefits in that they are written off as expenditure but, as the Minister said, those tax incentives to the self-employed amount to investments in the future.

We are concerned that in addition to the sections dealing with the self-employed — I am referring to small business people because those owning large concerns are able to look after themselves — we should deal with the poor people in our community, particularly the elderly people who are living on inadequate incomes. It is our hope that on Committee Stage we will take account of those problems. It is only to be expected that a Bill which took such a long time to prepare should have some deficiencies but, with co-operation from all sides, we will iron them out on Committee Stage. I have no doubt that when the Bill leaves this House it will have been greatly improved.

For many years the Labour Party's policy was that there should be a single national pensions scheme providing an adequate standard of living for all our citizens aged 65 years and over. Deputies will recall that it was the late Deputy Frank Cluskey who was the first Minister to reduce the pension age, from 70 to 66 years and I hope it will fall further. I note the Minister's remark that people who are 30 years of age now could look forward to at least 15 years retirement with good health. We have always advocated that citizens aged 65 years and over should be paid an adequate pension. There are approximately 500,000 people of pensionable age in Ireland and that represents a substantial proportion of the population. The number is increasing annually. Life for many elderly people is often characterised by inadequate income, poor housing conditions, increasing loneliness and isolation.

The spending patterns of elderly people are characteristically often marked by a much higher proportion of expenditure on necessities like food, fuel and housing and are higher than the rest of the community. It ought to be one of the main characteristics of our society that elderly people should be entitled to live their lives with the same dignity as any other citizen, without the need for institutional care and in an atmosphere of comfort and security. Our elderly people have earned their right to a retirement free from financial worry and hardship. An adequate income is the most basic requirement if elderly people are to have normal and happy lives.

The first priority of any society must be to substantially increase the basic level of pension. There must be a commitment to maintaining the subsequent relationship betwen the basic pension and other incomes and consumer prices, whichever gives rise to the larger increases. That concern for the right to dignity of the elderly has never been a marked characteristic of our society, Christian though our society proclaims itself to be. Many politicians operate on the principle that the voting patterns of old people are fixed and that, therefore, their needs can be disregarded whenever choices have to be made. In the past few years in particular the elderly have suffered disproportionately from cutbacks in social welfare — a feature of the policies of the Government and their predecessors — and cutbacks in health. We have had the closure of long-stay hospital beds, day care facilities and sub-acute hospitals. In many hospitals day care centre facilities have been extended arising from the premature closure of sub-acute hospitals. It is the old people who suffer from the loss of services. We have had cutbacks in the transport and ambulance services and that has made life intolerable for our old people. We have extended free travel to people but we have removed the services that would enable them to avail of it. Bus Éireann express buses stop in towns and in a number of villages but generally speaking, people living in rural Ireland who qualify for free transport cannot use those buses.

We all know of instances of old people who suffer because they are alone and frightened and who do not have the £10 to visit the out-patients' department of a hospital or the transport to bring them there even if they qualified for free care. It often arises from the pride of that generation who will not admit they are suffering hardship and who often neglect themselves. There have been cutbacks in the free fuel scheme and a shortening of the period during which an allowance is made for heating. Earlier today we discussed how the weather affected the heating period for which an allowance is given. The Minister confirmed today that he would not accede to a request to extend those periods. Cutbacks right across the board have affected the quality of life of old people and we must have regard to this when we are discussing legislation which proposes the establishment of a pensions board.

One of the meanest cutbacks in recent times has been in the library service, one which many old people depend on and benefit from. There has been an assault on the rights and dignity of elderly people over the last number of years and this Bill does little or nothing to redress the imbalance. The Bill is intended to cater for and to protect the rights of people of pensionable age in future. In debating this Bill we should recognise the harm done to our elderly people over the last few years.

Some aspects of the Bill are welcome but it should go a great deal further. For instance, the Bill proposes the establishment of a National Pensions Board on a statutory basis. To some extent, this is an extension of the board established by former Labour Party Minister, Deputy Desmond, when he was Minister for Health and Social Welfare from 1983 to 1987. It is important that the board should be established on a permanent basis.

One of the terms of reference of the board is to advise the Minister on pension matters and standards for schemes. I hope the Minister's first instruction to the board will be to carry out an in-depth survey of the schemes in operation at present with a view to drawing up a report regarding the minimum standards that should be applied. We all know of occupational pension schemes where benefits have been good because the scheme was placed on a secure footing by proper financial planning and management. There are also schemes which provide derisory benefits and which have been underfunded to the point of collapse because the enterprise with which they were associated got into trouble. Thankfully, these cases were brought to the notice of the public by the media. The legislation in regard to employers' and employees' insolvency, which was retrospective to 1985, although it addressed itself to many areas of workers' rights did not properly address their right to pension funding. The collapse of certain firms brought home to all the disadvantages of not having proper control or supervision over the various schemes operated by some private sector employers. I am glad that the Government addressed some of the consequences of these collapses and I hope the Minister will ask the board to look at some of the existing schemes to ensure that they are properly run.

Some of these schemes operate within the public service although the vast majority are in the private sector. In the forestry area of the public service contributory pensions for workers were index-linked to social welfare payments on retirement. As the social welfare pension increased in various budgets or Social Welfare Bills, the payment from the forestry service was reduced accordingly. However, that anomaly was addressed some years ago but it is an example of the inadequate schemes which had been in operation. It is very unusual for the benefits in a private sector scheme to be index-linked so that the people who pay throughout their working lives can be fully protected from the ravages of inflation following their retirement. Many private sector schemes offer only fixed pensions which are gradually whittled away until they become virtually worthless. I hope that the new National Pensions Board will highlight the need for properly funded and managed schemes which will provide a realistic level of benefit to enable people to retire with dignity after a lifetime of work and contributing to the scheme.

In the long term the community must face up to the need for a national pensions plan. I recall two Green Papers published on the subject, one dealt with a national income-related scheme and was published in October 1976; the other dealt with social insurance for the self-employed and was published in January 1978. Both these Green Papers raised the possibility of a single unified pensions plan to cover everybody. They clearly recognised that such a plan would be expensive and would become even more expensive as the number of old people became larger, but it is impossible to put a price tag on a dignified and secure retirement. Workers will have regard to this in the payment of contributions and those with responsibility in the area of social welfare — like the Minister — will also recognise that people have a right to dignity and security in retirement.

I hope that in time this Bill will be seen as a stopgap but also as a stepping stone on the road to universal coverage by means of proper pension arrangements for the whole community. Some steps have already been taken. A few moments ago I referred to the extension of PRSI to the self-employed. This is a most important step and will remove some of the anomalies in the existing scheme which meant that people, through a legal mechanism, could qualify for a social welfare pension and still enjoy all the perks of their normal standard of living. This practice was unacceptable to the sectors paying for these benefits through PRSI contributions for most of their working lives.

In the short term the extension of PRSI to the self-employed was seen as a means of providing revenue to the Exchequer. However, the Exchequer will have to face up to its responsibilities in return for the contributions received. In overall terms the provision of proper pension arrangements must be seen as an instrument in combating poverty.

Many of us tend to regard poverty as an urban problem, more typically associated with low-income, large families. While it is true to say that a great deal of the hard, grinding poverty — a reality in this country — is associated with that type of family, I can assure the Minister that it is not confined to the urban community or to large families. Poverty is to be found also in isolated country farms in rural areas, in the homes of many couples who have retired from small businesses. People in many of these isolated rural areas do not even have the privilege of running water, bathroom or toilet facilities, some — even nowadays — being without electricity; they still use candles, paraffin oil lamps, the old iron in the fire, the cake on the griddle. That is the type of scene still prevailing in County Tipperary, the Golden Vale and the land of honey.

Many such farms and businesses never generated sufficient resources in order to provide for old age. Many people have been forced to work long beyond an age others would accept as appropriate for retirement. Such people had never been in a position to save sufficient money to provide comfort in their retirement while retaining enough to live in any degree of comfort during their working lives. It is an indictment of all of us that many people in rural areas work seven days a week for long hours into a great age. I know they are happy in their work but nonetheless they are unable to generate sufficient to provide for themselves in their old age when they become a burden on the State services which have been decimated by cutbacks, particularly in the health area.

We will never come to grips with this aspect of poverty without a national pensions scheme, funded and managed properly with considerable input on the part of the State. It is for that reason principally we welcome the introduction of this Bill, recognising that the State has a major role to play in this area, particularly that of looking after its older citizens who have given a lifetime of service in order to generate a living for all of us.

I will now deal briefly with some of the provisions of the Bill and make some general points. The first Part of the Bill deals with the establishment of a pensions board. It is our belief that the Minister should reserve at least three places on that board for nomination by the Irish Congress of Trade Unions. I note it is the intention that members of the board will be representative of interests involved in occupational pension schemes. Surely nobody has more experience of their operation than the people who pay into such schemes week after week? I contend that their representatives should be guaranteed a significant input into the operations of the proposed pensions board. In addition, I should like to see this pensions board have the powers and functions of an ombudsman, in particular that they would have power to report their findings to the Houses of the Oireachtas, issue reports on wider or individual schemes or in relation to particular aspects of schemes which may concern them. Above all, we must be absolutely satisfied that the pensions board will be allocated sufficient staff to undertake the duties assigned to them. Deputy Flaherty correctly drew attention to the tremendous task involved. In setting up the pensions board it is our hope that the Minister will ensure they are allocated sufficient funding and staff to carry out the role assigned them under the provisions of this Bill.

The standard funding provisions of this Bill are absolutely vital, ensuring that actuarial certificates are supplied to the board, to enable them to ascertain whether individual schemes satisfy those proposed funding standards at any given time. If these new rules or standards are observed the pensions board will be inundated with actuarial certificates. They will have to be properly equipped by way of staff and resources if they are to adequately monitor the operations of these standards. The most rigorous provisions will not have a satisfactory effect if the pensions board are unable to keep abreast of the information being provided to them or, equally, if they are unable to chase employers who may be slow, if not recalcitrant, in providing such information.

Parts V and VI of the Bill deal with disclosure of information in relation to occupational pension schemes, trustees of such schemes and their duties. A major weakness of such schemes is that nowhere is it stipulated who should be a trustee of such a scheme. I contend that at least one-third of the trustees of all schemes should be directly accountable to and representative of workers in enterprises operating such occupational pension schemes. I can understand some employers reservations about that concept. It is the view of the Labour Party that this direct accountability to workers' representatives — who are, after all, the main contributors to and beneficiaries of such schemes — is essential. Such accountability must be the responsibility of employees' representatives, leading to a better understanding of companies' finances and of difficulties that might arise in the case of some companies wanting to operate such a scheme. We will be tabling amendments on Committee Stage with the objective of ensuring that a significant number of trustees of occupational pension schemes are so representative. It is our view that people at work not only have a right to be involved in the management of their pension schemes but also that the State and employers have a duty to ensure that everybody is properly involved and represented. If we begin on that basis — in the composition of the pensions board and trustees — we will be on the right road to achieving harmony in this area, thereby obviating any industrial disputes or concern about adequacy of funding in the future.

I want to enter a caveat in relation to the provision for equal treatment of men and women in occupational pension schemes. We have had experience of equal treatment in the past, experience of the manner in which inadequate application of an important principle can cause significant damage. There are two ways in which to secure equal treatment for men and women in occupational pension schemes. The first is to equalise the benefits of schemes downwards; that is one option, which is what happened to some extent when equal treatment of social welfare benefits was introduced. We discovered then that many men's positions were worsened in order to bring them into line with the position obtaining in regard to many women. The provisions of this Bill should render any such equalisation explicit. When replying I should like confirmation from the Minister that all equalisation will be aimed at improving women's benefits rather than deteriorating benefits for men, so that the net effect will be equalisation upward rather than downward, as happened previously.

We welcome the provisions of this Bill in so far as they go. We will be supporting its Second Reading and hope to strengthen it by way of amendment on Committee Stage. We do not view it as the complete answer to the alleviation of poverty among elderly, retired people. Neither do we view it as an assurance, in itself, that elderly people will always be treated with the dignity they deserve. Nonetheless we view it as a step forward in the protection of working people and the preservation of their future right to an adequate income on retirement.

In introducing the Bill the Minister recognised its complex nature. Indeed he has a distinct advantage over other Members in that he has available to him a team of civil servants who can write his speeches, undertake research and furnish him with back-up information.

I am only trying to be helpful, Deputy.

Being a Minister has its benefits. At the same time I wish to identify the difficulties that those of us in Opposition encounter.

He has a good pension, too.

I wish to join with the Minister in congratulating the National Pensions Board for the brilliant work they have done and I intend to quote liberally from their recommendations. Perhaps when we develop democracy along the proper path civil servants will also advise us of the implications of legislation to come before the House.

This is a complex Bill and I congratulate the National Pensions Board for the extremely good work they have done in highlighting the need for a Bill such as this. The figures produced by the Minister show that there are 25,000 occupational pension schemes in existence in Ireland today. It is quite astounding that they are not co-ordinated, regulated or policed to the degree suggested in this Bill. At present 550,000 employees, roughly two thirds of the total number in employment, are members of supplementary schemes and it is mind boggling that only now legislation to control and guide these schemes is being introduced. According to my notes a sum of £6,000 million is involved but the Minister has indicated that the amount involved is £4,000 million higher, making a total of £10,000 million in circulation under the control of pension schemes, with annual income in excess of £500 million. These are interesting figures. They highlight the need to introduce legislation. They highlight also the inactivity of previous Governments in this area.

Having said this, The Workers' Party welcome the Pensions Bill, 1990, as we recognise the need for a statutory body to supervise and establish standards for occupational pension schemes. Far too many workers have found themselves, through no fault of their own, pensionless as a result of the misappropriation or mismanagement, of pension funds by boards of trustees. Many workers on leaving employment often experience difficulty in preserving or transferring their benefit to new employment but an attempt is made in the Bill to rectify this problem. None of us wishes to see a repeat of the case involving the employees of the H. Williams group who had their pensions stopped when the company went into liquidation in November 1987. Nor would any of us wish to see any other group of workers undertake the costly court procedures undertaken by these very same pensioners in seeking their entitlements and also the removal of the board of trustees and their replacement with a board more acceptable to them.

As I said, there is much in the Bill to recommend it. It broadly adheres to the recommendations contained in the First and Fourth Reports of the National Pensions Board. However, the Bill also has its weaknesses and is in need of strengthening. Sections of the Bill need to be amended but we will have an opportunity on Committee Stage to explore the thinking behind the Bill and to debate the amendments The Workers' Party intend submitting.

One of the issues to be addressed is the question of the right of workers to elect to the boards of trustees their own nominees to represent their interests. The Minister will no doubt be aware that the issue of the member trustees was addressed in the First Report of the National Pensions Board. The board pointed out at paragraph 3.21, that currently members of pension schemes have no legal right to participate in the appointment of trustees unless this is expressly provided for in the trust deed. They went on to highlight that only a small number of schemes make provision for member participation in the appointment of trustees and said it is argued that the lack of a right for members to participate is a further shortcoming of the present system and that the National Pensions Board, therefore, recognise the shortcomings of the system and argue in favour of representation for workers on boards of trustees.

The Minister will also be aware that a majority of board members recommended that there should be a statutory right to worker trusteeships in schemes with more than 50 members where at least 50 per cent of the membership are in favour of this. In such cases they argued that there should be an equal number of member trustees and company trustees with the chairperson being nominated by the employer. The Minister, unless he is intimidated by the employers, now has the opportunity to accept amendments which would give workers the right to nominate and elect representatives to boards of trustees.

I am sure the Minister is aware of the concern being expressed by the Irish Congress of Trade Unions who feel that the omission of any provision for member participation in the appointment of trustees is a fundamental flaw in the Bill and that this must be rectified. I am sure the Minister is also aware of the statement of the joint president of SIPTU who has stated that the Bill represents a gross betrayal and breach of faith with the trade union movement in not allowing workers to nominate trustees to the boards.

We are now into the era of national agreements and programmes for national recovery and we are told, regularly that the Minister for Labour and the Government constantly listen to what the trade union movement have to say, constantly hear words of praise for Congress and see the amalgamation of trade unions being encouraged. The Government have also welcomed the formation of SIPTU and other amalgamations. However I ask the Minister to give due consideration to the strong words used by the Irish Congress of Trade Unions and the largest union in the country, SIPTU, and to take on board the amendments which will be submitted by The Workers' Party in an effort to facilitate and accommodate their reservations.

I ask the Minister to indicate if he is happy in not giving workers a statutory function or say in the way in which pension funds worth £10 million or more are used. The Minister would have to agree that workers, being the main contributors to pension schemes, should have a say, as trustees, in the way in which the funds are managed. I find it very difficult to accept the argument that workers, who are the main contributors by way of their weekly deductions, usually at source, should not be given such a statutory right under this Bill.

Let me now refer to the composition of the National Pensions Board. My argument on the question of worker participation may be expanded to cover the argument that there is insufficient worker and trade union representation on the board as proposed by the Minister, when one considers that the representation of one in eight — or 12.5 per cent, which is very low — is even lower than the existing trade union representation of three in 20, or 15 per cent, on the National Pensions Board. There is no reason the Government should not give full recognition to the rights of workers and their representatives through the trade union movement.

There are two major contributors to pensions, the employers and the employees, who are ultimately responsible for amassing £10,000 million in pension funds. The Minister will have to give the trade union movement and the work force due recognition as major and integrated elements in the debate on pensions. The pensions industry, on the other hand which is quite likely to be represented by actuaries or accountants, has two representatives, and the actuarial and accountancy profession will be represented on the board; in other words, half the board will consist of pensions professionals, civil servants will account for a quarter of the membership while employers and employees will have representation of one eighth each. I am not making the case for the employers — who are certainly powerful enough to argue their own case — but since the two major contributors are the employers and the employees, it would seem that they are insufficiently represented on the board.

Section 3 provides for the penalties for offences. I cannot accept that a maximum fine of £1,000 under section 3 (3) is a sufficient deterrent for those who wilfully obstruct or refuse to provide information. The least the Minister could do is to consider having the fine of £1,000 indexed, as I feel fines are far too low to act as a real deterrent; in fact they will lose their value unless indexed.

The Minister might wish to take on board suggestions for improvements to the method he proposes for calculating the criteria for the revaluation of preserved benefits. As the Minister knows, there is a five year lead in period, of which at least two years occur after the commencement date of the enactment of this Bill, but I think this will lead to anomalies. If this part of the Bill were to become operative on — as the Minister has said in his speech — 1 January 1990, then only people leaving their employment on or after 1 January 1993 will be entitled to have their benefits preserved and those leaving after 1 January 1996 will be entitled to have their benefits revalued in the following years. I know this is a complex area but I want to put on record that these anomalies are likely to exist and the section will need to be tightened up. People leaving after 1 January 1993 will be entitled to have their benefits preserved but they will not have them revalued.

Another aspect of the section which deals with revaluations is that there must be at least a year between the time a person leaves their employment and revaluation applies. This would mean that somebody who was unlucky enough to leave one month after the annual revaluation date will not have their preserved benefits revalued until one year and 11 months later, whereas a person who leaves the day before the revaluation date will only have one year and one day to wait to have their benefits revalued.

Section 34 enables the trustees of an occupational pension scheme to transfer payments without the consent of the member and this leaves me a little confused. Would the Minister say what circumstances could give rise to such action or why a member's consent would not be sought in the first place? The National Pensions Board did not recommend that the trustees would have powers to make transfers rather than to preserve benefits without the consent of the members concerned. Many employees, and indeed some employers, have used or abused pension schemes for short-term financial gain. For example, employers have often used the pension schemes as a way of enticing workers to leave their employment by boosting the redundancy payments, thus facilitating workforce reductions.

Debate adjourned.