Pensions Bill, 1990: Committee Stage (Resumed) and Final Stages.

SECTION 27
Debate resumed on amendment No. 21:
In page 17, subsection (2), line 41, and in page 18, lines 1 to 3, to delete all words from and including "and who" down to the end of the section, and substitute the following:
"who is aged 25 or under, and who has at least five years qualifying service, shall be entitled to a benefit (in this Act referred to as a preserved benefit). In the other cases the qualifying period shall be reduced by one year for every year that the member is over 25, but the minimum qualifying period shall be two years.".
—(Deputy Byrne.)

I want to register my abhorrence at the use of the guillotine on this very important Bill. As the Minister himself has acknowledged it is an extremely complex and detailed Bill requiring as many as 14 pages of an explanatory memorandum. Time is clearly needed to tease out all the issues so that no mistakes will result from rushing through this Bill and we can be guaranteed a good Bill. It is not acceptable that we should guillotine such a complex Bill so that we can only cover the bare minimum on the sections.

It is important to bear in mind that this Bill is addressing the organising and regulating of £10 billion worth of funds in pension schemes, which are accumulating at the rate of £500 million per annum. We are talking about huge sums of money and there is no reason not to give it as much attention as it is entitled to in the Houses of Parliament. Having registered that objection, I will move on to the amendment.

It is interesting that Deputy Jacob, in a report of 31 May on this same Bill, said that far from being a watered down exercise, as suggested by me, this Bill was a model of the democratic procedure with which this House should feel very comfortable and satisfied. I see nothing democratic about a Bill only a small fraction of which will be debated and voted on in this House. Maybe Deputy Jacob will take the opportunity to eat his own words at a later stage.

The preservation of benefits is a very important part of the Bill. It is important that we recognise that when the National Pensions Board produced their report in 1987 they made certain recommendations. We have also to recognise that the recommendations they made were not decided overnight. There was a lot of serious discussion with various professionals right across the board from trade unions to pension scheme managers, to the financial institutions and they deliberated for quite a long time before they made their recommendations. It is, therefore, very unsatisfactory that the Minister should have produced such a watered down Bill.

Let me refresh the Minister's memory about what was actually said in 1987 by that very competent 20 person committee that comprised the National Pensions Board. My motion is in essence reiterating what they said at that time. At page 56 of their report, under section 5 (12) (c) they said that in the cases of members under age 25 at leaving the minimum qualifying service should be five years; for each year over 25 years of age the minimum qualifying period should be reduced by one year to a minimum of two years. For example, a member aged 28 or over at leaving should only require two years of qualifying service to qualify for preserved benefit.

I know the Minister will produce arguments to say that this would create knock of effects for the funding of the scheme if these recommendations were to be suddenly implemented but we are not asking for anything to be suddenly implemented. This report is three years old at least. The insurance and financial institutions knew about, and were party to the debate that has been going on for longer than three years. We are talking about adding a five year qualification period, two years of which would have to be two years after the date of the intended implementation, 1 January 1991. Three years have gone by since the report of the National Pensions Board was produced and we are talking about another two years after 1 January 1991 which brings us to five years, and I am not sure how long prior to the printing of this report these deliberations had gone on. It is safe to say that in a six year period the industry had had time to make any minor alterations that might have been needed in order to implement what was being recommended by the National Pensions Board.

It is interesting to look at what has happened in England. The National Pensions Board in their report said that in the UK they introduced compulsory preservation of pension rights in their 1973 Social Welfare Act. That is quite a while ago. That became effective in 1975. This made it compulsory for approved pensions schemes to provide preserved benefits calculated in accordance with the normal scheme formula for members who leave after completing five years service and are over 26 years of age — that was in 1973. Subsequently further legislation removed the age stipulation and the five year period has now been reduced to two years. All this had happened in England three to four years ago. I see no reason for not accepting this amendment to section 27. It clearly conforms with what was expressed by the National Pensions Board.

I would like to answer the point made by the Deputy about the Bill and how long it is being considered. The Bill is in the House since 29 May. We could go on for a long time discussing every minute point at very great length but Deputies will be aware of the urgency of getting the essence and the main elements of this Bill into legislation to protect the 600,000 workers who are depending on it.

I would like to point out first that, as Deputy Byrne rightly said, the report was published in 1987. Deputy Byrne is, therefore, quoting from a 1987 report. That report was made available to all the organisations involved and they have given their views on what the committee said. What we are talking about now is not just the original report but the thoroughly considered and quantified views of all the different groups and bodies concerned.

In the meantime, I decided to go ahead with the report relating to the self-employed. We implemented that and it is now up and running. We had the same sort of arguments here in relation to this. We could have been at this for another couple of years if people had had their way in the House when they wanted to discuss every angle ad nauseam. Deputies made their views clear when the Bill was published and when it came in here on Second Stage. I have taken these views on board and have put down amendments in accordance with them. Some of these are minor, technical amendments. There is more substance to some of the amendments which arose from the discussions which took place since the Bill was presented to the House and as a result of the views expressed by Deputies on Second Stage.

I am very happy that the Bill is going through before the summer recess. I would have been quite happy to spend all the time Deputies wish debating the points at great length but now that all the essentials are in place in the Bill and the views of Deputies in particular as well as outside bodies have been considered, it is important to get the Bill onto the Statute Book. As Deputies know, there is a long procedure in preparing all the detailed regulations so that the different aspects of the Bill can come into operation as quickly as possible. We have scheduled 1 January next for the implementation of major sections of the Bill but there are other elements which can come into force in advance of that time if all the preparations are made before then. I am certainly very happy there is agreement on all sides of the House to put the Bill through before the summer recess.

In relation to Deputy Byrne's amendment, one of the main objectives of the Bill is to provide for the preservation and protection of the pension rights of members who change jobs. The reality is — and this is why I have referred to the discussions which have taken place since 1987 — that 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 death, their surviving dependants, may end up with a very inadequate pension. This arises because up to now there has been no statutory obligation on schemes to make adequate provision for the preservation of members' pension entitlements. As a result, few schemes make such provision as employers are not normally concerned to preserve the pension rights of employees who leave their employment, perhaps, in order to go to work for a competitor. The lack of adequate provision in this regard is also a major obstacle in the way of employees who wish to improve their prospects by changing jobs. It is important that we remove such obstacles to the mobility of employees, both in the interests of the persons concerned and society as a whole, which clearly benefits from people being given every opportunity to develop their potential by moving to jobs which are more satisfying and rewarding.

I am particularly pleased, therefore, that with enactment of this Bill one of the major shortcomings of the existing occupational pensions arrangements will be removed. Section 27 provides that a person who has been a member of a scheme for at least five years, of which two years are after the appointed day, will have a statutory entitlement to have his pension entitlements preserved. These preservation rights will apply to future pension service, that is, service after 1 January 1991, which I intend will be the commencement date for this Part. I am particularly keen, as I stated in the debate on the Second Stage, that employers follow the lead given in the Bill and provide, in addition, for preservation in respect of past pension service, that is, service before January 1991, where this is the wish of members. A leading actuary has estimated that the additional cost of preserving pre-1991 pension rights, on the basis of the conditions set out in the Bill, may not amount to more than 0.5 per cent of pensionable salaries.

One of my aims in opting for the five years qualifying service condition is to facilitate arrangements being made for the preservation of pre-1991 pension rights. The five years condition is in line with current practice in public service schemes and in the best private sector schemes, which provide for preservation. It will be less costly to finance than the qualifying condition recommended by the National Pensions Baord and proposed by Deputy Byrne in amendment No. 21. Provision for that condition would result in members over age 28 qualifying for preservation after just two years membership of the scheme. This would mainly benefit new members of schemes who stayed in an employment for a very short period, but it could do so at the expense of existing scheme members of long standing. The cost of financing preservation based on the two years condition could be such that it would not be possible to finance the cost of providing for the preservation of pension rights in respect of pre-1991 service.

Accordingly, employees who are present have been members of schemes for ten, 15 or 20 years could end up paying more, either directly or indirectly, to finance preservation for new members staying in the employment for as little as two years, without in effect receiving any real benefit in return themselves. This would arise because lack of provision for the preservation of their pre-1991 pension rights on cost grounds could force them to remain with the same employer, as moving to another employment would result in their having to forego substantial pension entitlements.

I am confident that over the next few years most schemes will make provision for the preservation of pre-1991 pension rights, and the requirements laid down in this Bill will greatly facilitate this process. When this has been achieved the possibility of introducing more liberal requirements on the lines proposed in the report of the National Pensions Board and in Deputy Byrne's amendment can then be considered.

I might add, finally, in this regard that the question of making provision at EC level for the preservation of occupational pension entitlements for people who move to employments in other member states was one of the main topics I chose for discussion at the recent informal meeting of the Council of Ministers for Social Security. It was agreed at the meeting that priority be given to this matter in the run-up to 1992, as it is an essential element in facilitating freedom of movement of workers in the context of the single market. Occupational pension entitlements represent a significant proportion of the overall pension rights of many workers, particularly those on higher incomes. The EC Commission was asked to expedite work on the matter and it is acknowledged that the position paper prepared by the Irish Presidency and the exchange of views by Ministers which it occasioned will greatly assist the Commission in bringing forward proposals for appropriate measures at an early date.

Incidentally, the exchange of views also revealed that with the enactment of this Bill — copies of which were made available to Ministers at the meeting — Ireland will be well ahead of a number of member states in relation to preservation. For example, in Germany a person has to be a member of a scheme for at least ten years and have reached age 35 before entitlement to preservation of pension rights is acquired.

The Minister has answered some of the queries I wished to raise. He has opted for a longer period than that recommended by the board. I am anxious about this matter, and I know my anxiety is shared by some of our colleagues on the Press Gallery who are at present facing a very critical situation. Perhaps, at a time when their own security is in question, they feel there will not be sufficient protection for them. Perhaps they would prefer to see compulsory preservation retrospectively included rather than the way proposed here. Does the Minister's response indicate that those involved in the pension fund industry believe the finance necessary to comply with the shorter period would be better spent providing for retrospection? Has the Minister any information as to what percentage of the industry would be inclined to consider the issue of retrospection? Will it be just the pension schemes where relations are good?

First, all of us on this side of the House share the Minister's concern in ensuring the Bill is passed as speedily as possible. We have an obligation to our constituents who have made representations to us to correct anomalies. We have done a lot of work on amendments but now find we have a very limited time to debate them. That is nobody's fault but is due to what has happened in regard to other legislation. It is in our interests to debate this matter in as much detail as possible, and if we have not sufficient time to debate it here, which is quite likely, it will have to be continued in the other House.

In regard to this section, we have received extensive representations from the Irish Congress of Trade Unions and the Employment Equality Agency. There are anomalies as regards women in particular who, having achieved an important status in the workforce before leaving for family reasons, return perhaps at a lower grade. Will the Minister clarify whether pension will be based on income at the time of termination of employment or on the average income over the total working life of the woman? An anomaly could arise in this regard in the preservation of pensions vis-à-vis age group, and pensions for women, particularly. As Deputy Flaherty said, certain sections of the community have suffered because this legislation was not in place.

I agree that preservation is the priority but the five year period is the standard in the public service at present. I believe that is a very reasonable standard. I know of people who have been in the public service for many years who do not have any preservation and are in a much worse position. Anomalies still exist in this area but the five years provision is a reasonable norm. It is important to make the preservation a priority.

Deputy Ferris referred to the preservation and revaluation of pensions. Theoretically, on a statutory basis, the first period would have to be preserved and revalued in accordance with the statute and the second period would have to be taken separately. A company could, under their own terms, make other arrangements. This would depend on how healthy the fund is, how the trustees of the fund regard it and the terms of the fund. The basic statutory provision is for preservation and revaluation which are provided for here. The first pension could be preserved and revalued and the second could be a separate entitlement. However, some schemes could have terms which would allow otherwise.

If we had more time available to us I would press this amendment to a vote but I will not do so in the circumstances. The question of the pre-aid day preservation has been addressed by the National Pensions Board. They dealt with the implications of making compulsory preservation retrospective or applicable to a pre-aid day service. In view of the potential cost implications of the new requirements on schemes for which advanced financial provision would not have been made they decided that this should be avoided. They believe that this matter should be reviewed at a later date, for example, ten years after aid day, to assess whether the requirements should be extended to include pre-aid day service.

Can the Minister indicate whether it would be possible to include a provision for such a review in the legislation? The Minister said that these preservation rights will apply to pension service after 1 January 1991. Does he intend including a provision in the legislation for the carrying out of such a review at a later date to assess the implications of pre-aid day service?

I will be asking the National Pensions Board to make whatever arrangements can be made to cover the pre-aid day service. As I said, I am anxious to include such a provision in the Bill and, in fact, the five year condition facilitates this. As it was considered that the other arrangements were a bit complex, it was decided to apply the five year simpler arrangements across the board. I will certainly be raising this matter at an early stage so that preservation can be introduced as early as possible. I am anxious to get the board up and running so that they can address this problem.

Amendment, by leave, withdrawn.
Section 27 agreed to.
SECTION 28.

I move amendment No. 22:

In page 18, subsection (2) (b), lines 11 and 12, to delete "in that behalf provided under the scheme" and substitute "under subsection (5)".

This is a technical amendment. The option referred to in section 28 (2) (b) related to that provided for under section 28 (5). In the event of the death of a member with an entitlement to a preserved benefit before he or she reaches normal pensionable age a capital sum equal to the actuarial value of his or her preserved benefit shall be payable to his personal representative. However, where the rules of such a scheme provide for a dependant's pension in the event of the member's death while in service, the trustee may opt to provide an accrued preserved dependant's pension instead of the capital sum. This amendment will ensure that this will be possible.

Amendment agreed to.

Amendment No. 22a. I observe that amendment No. 25b is cognate. I suggest, therefore, that we discuss amendments Nos. 22a, and 25b together, by agreement.

I move amendment No. 22a:

In page 18, subsection (4), line 19, to delete "to his personal representative" and substitute "in accordance with the rules of the scheme".

The members of the Irish Association of Pension Funds and the association of pension lawyers believe that the definition of "personal representative" in the Bill is unduly restrictive and might cast some doubts on the current practice where it is possible for them to pay pensions to dependants. The definition of "personal representative" seems to refer only to the lawyer or estate of the person. This would prevent them from adopting the current practice of ensuring that the dependants can occasionaly be the beneficiaries. They believe that if the intention of this definition is to prevent the newly created statutory benefit from exceeding revenue maxima it is reasonable but that otherwise it would be better to state that the lump sum actuarial value of the preserved benefit should be paid in accordance with the rules of the scheme as this would allow maximum flexibility. The definition of personal representative in section 28 (4) is unduly restrictive in the context of current practice. Will the Minister clarify the definition of "personal representative"? Will it preclude the current practice of paying such funds to dependants, which is a desirable flexibility in the scheme?

The Deputy is proposing in her amendment that the capital sum payable in the event of an early leaver's death prior to retirement should be payable out of the funds in accordance with the normal scheme rules. The section, as drafted, provides that such a sum be payable to the personal representative of the deceased member. In practice the rules of a scheme normally provide for death benefits to be payable out of the fund to the member's dependants. The disposal of these benefits invariably involves the exercise of the trustees discretion in determining which dependants qualify to receive the payment. This will require the trustees to be fully briefed with regard to the deceased member's circumstances prior to his or her death. Such information can normally be obtained from either the employer or the member's co-workers who will be familiar with his or her circumstances. Generally speaking, therefore, there is no difficulty in disbursing these benefits. However, it is considered that practical difficulties could arise for the trustees if the capital sum provided under section 28 (4) and section 29 (3) were to be disposed of in a similar manner. For example, it could prove almost impossible for the trustees to determine the dependency of a member who had left the scheme for, say, ten or 20 years. It could result in a substantial proportion of the capital sum being used by the trustees to find out who the member's dependants are. Having considered the option, on balance the practical approach is to have the benefit paid to the personal representative rather than being dealt with by the trustees.

The Minister has obviously given us food for thought. He has decided that the current freedoms should not be continued but I am not convinced that his reasoning is essentially sound because there should be very valid reasons for making life more difficult and putting dependants into a straitjacket which might make the situation less responsive to their needs. Does this definition prevent the current practice of paying benefits to dependants?

To go via the representative is the more logical way to deal with this matter. As I said, there could be practical difficulties now that we are introducing this whole area of preservation and going back over a number of years. There are statutory entitlements involved now which was not the case previously. It was possible to make some sort of arrangement and there was always extra money coming in from one quarter or another because people were leaving schemes and, as the Deputy knows, lost considerably as a result. The arrangement to the personal representative could, in some cases, cause additional inconvenience for the personal representative but, in general, now that we are introducing statutory requirements, it is necessary.

I am concerned about the beneficiary, not the personal representative. If the net effect involves additional costs and slows the process by which dependants would get pensions sorted out. I need to be convinced that the reason for doing it is sound. We are, generally, regulating a voluntary area but we are trying to develop it, not to restrict it. We also hope that the pensions scheme will do a great deal more than the minimum requirements which we are establishing here. Has the Minister any final thoughts in this regard as I presume he has had representations from the bodies concerned?

From representations I received the view is clearly to go on this basis.

On the Minister's basis?

Yes, on the basis I proposed. I can understand that in some cases there could be a more convenient administration under the Deputy's proposed amendment but we could ask the board to look at it in terms of the operation, administration and arrangements under the guidelines in relation to the schemes.

The two major bodies who sent submissions to me raised concerns in relation to this area. As it is specifically defined in the legislation, if it goes through today the board will not have any flexibility to change it. I do not know whether the Minister has regulatory powers to change it in future if there is a problem. It is a fairly technical area but it is obviously less flexible than the current practice and could have a real impact on people's entitlements. I do not know what groups advised the Minister but the industries associated with the Irish Association of Pension Funds and the recently formed group of the Irish Association of Pension Lawyers both expressed concern. The only justification they could see for it was that the Minister was trying to prevent the newly created statutory benefit from exceeding revenue maxima. Unless the Minister was doing the job of the Minister for Finance, certainly in the context of improving the scheme for the recipients and — in the event of the death of a member, his dependants — he is disimproving the situation in relation to current practice.

One is a paternalistic system but this is a statutory requirement and we are advised by some of the major trustees that this is the preferable way. It is a matter of balance and deciding where the balance lies. I am happy that, in practical terms because of some of the difficulties that could arise otherwise, it is preferable to do it in the way outlined in the Bill.

What specifically is the Minister's fear — or the fear of those advising him — in relation to allowing the scheme to continue under the rules in current practice?

We are back to what I said at the beginning but really it is because of the new circumstances which have arisen, the entitlement to preservation of benefits, going from one job to another and carrying the preserved benefits. There is also the fact that arrangements will have to be made for someone who has left the job for ten, 20 or even 30 years. It is simple at present because there is no requirement to do that but it will not be simple when all the preserved benefits are involved, the movement between jobs and the passage of a number of years. That is essentially what changes the nature of the administration which would be involved. The most practical approach would be to have the benefit paid to the personal representative rather than having the matter dealt with by the trustees.

Has the Minister any powers of regulation under the section?

I will withdraw my amendment at present, but perhaps the issue can be raised by our spokesperson in the Seanad. We will confer a little further on it.

Amendment No. 22a, by leave, withdrawn.

We now come to amendment No. 23 in the name of the Minister. Amendments Nos. 23 to 27, inclusive, and 92 are cognate and I suggest, therefore, that we discuss these amendments together.

I move amendment No. 23:

In page 18, subsection (6), line 38, to delete "an additional benefit" and substitute "additional long service benefit".

These are simply drafting amendments being made on the advice of the parliamentary draftsman on consideration of the Bill over the time we have been looking at it. I recommend each of them to the House.

Amendment agreed to.

I move amendment No. 24:

In page 19, subsection (7), line 6, after "additional", to insert "long service".

Amendment agreed to.

I move amendment No. 25:

In page 19, subsection (7), line 14, after "additional", to insert "long service".

Amendment agreed to.
Section No. 28, as amended, agreed to.
SECTION 29.

I move amendment No. 25a:

In page 19, subsection (2), lines 22 and 23, to delete "the accumulated value on that date of the appropriate contributions" and substitute "the actuarial value of the net fund".

This is an important amendment because it hits at certain problems in pension schemes, for example, Deputy Seán Barrett intervened in the debate to illustrate a case in his area where a firm in liquidation were being purchased and the new buyer bought the pension fund. On discovering that the pension scheme was extremely healthy, he wound it up, paying the members the value of the frozen benefit at that time and collected a cool £200,000 profit, which was entirely legal, the amount over and above that required to provide for the benefits of the members.

It has been suggested to me that the definition in the section at present does not do what it intends to do; that an employer could exclude the build-up of the pension fund in respect of contributions paid; and that "the accumulated value ... of the appropriate contribution" is very narrow and that the "actuarial value of the net fund" would be a better definition and would ensure that anything earned by members' contributions would be retained for the benefit of the members concerned.

I am not clear that we have done anything to prevent the fly-by-night people interfering with pension schemes, which I know is not all that common, but nevertheless occurs. Once somebody has provided for the minimum requirements I am not sure that the additional value accumulated in the fund will be guaranteed for the benefit of members or that we have sufficient restrictions to deal with the disposal of assets, particularly when we do not have member trustees. In fact, the way in which trustees will be appointed has yet to be defined by the board.

While my definition may look rather technical, it may be more substantial than it seems and the lawyers dealing with this area have made the point that my definition is preferable.

Section 29 provides for the preservation of benefits in defined contribution schemes as distinct from defined benefit schemes. This section, dealing with defined contribution schemes, sets out how preserved benefits are to be calculated in such schemes. The preserved benefit in such a scheme will be the accumulated value of the appropriate contributions, that is contributions paid in respect of the member after the commencement of the Act.

Deputy Flaherty's amendment would delete the reference to "appropriate contributions" and substitute "the actuarial value of the net fund". This would mean that defined contributions schemes would have to have preserved benefits in respect of service prior to the commencement date. The whole thrust of the provisions relating to preservation in the Bill is to preserve benefits in respect of service after the commencement date.

As we previously discussed when dealing with preserved benefit schemes, we will be trying to make arrangements to have the past service covered at a future date and this is a matter which the board will be taking up right away. There will be considerable safeguards of the fund once the Bill is passed and the commencement dates come into operation. However, the Deputy raised a question about a fund where all the legal safeguards were observed but the extra money in the fund was creamed off. It would obviously require a preservation of the total benefits from before the commencement date to deal with this situation. I cannot accept the amendment because the Bill deals with preservation after the commencement date.

I do not understand why the general provisions of the Bill do not come into effect until 1991. It is possible that even within a two-year period the earnings on the contributions can realise more than the net contributions and that seems to be where the problem lies, and the Minister should take a further look at this whole question. In the interest of making progress, I will reconsider my position, but I think it is a very important issue and with regard to defined contributions it may be the way of achieving a desirable objective, that is that the return on moneys set aside for a pension scheme cannot be siphoned off by anybody else other than for the benefit of members of the scheme. It is possible at present to siphon off the return and I am concerned that after the enactment of this Bill it will still be possible to siphon off moneys over and above the minimum requirements. This amendment would prevent this in the case of a defined contribution scheme.

There are other aspects of the Bill which govern this, such as the winding-up provisions; the priority orders in winding-up; the quantification in relation to winding-up. However, there is no preservation before the commencement date at this stage, and that is a general feature of the Bill as the Deputy knows.

I am very concerned about this because it seems that it is open to the employer to seek to exclude the build-up of the fund in respect of the contributions paid. I think the exclusion post-1991 deals with it, but whether the two or five years will be applicable I do not know. However, I am very anxious to have this amendment accepted.

The other provision in the Bill provides that you cannot run away with the money.

Not any more.

Not any more. That is one of the reasons I want to have the board in operation urgently so that any member of a scheme who feels the fund is in danger will have the board immediately to pursue that matter on his or her behalf. One thing we discussed earlier was the difficulty of members of the schemes pursuing any issue because of the need for expertise and the expense involved. The board will be able to provide those for members of schemes immediately. That is one reason I want to see those provisions come into operation at the earliest possible date and in that regard the position would be well safeguarded.

Is the amendment withdrawn?

I would like to press this amendment.

Amendment put and declared lost.

I did not say "Níl" but I meant to say it. It is recorded that I oppose it.

Amendment No. 25b not moved.

I move amendment No. 26:

In page 19, subsection (5), line 38, after "additional", to insert "long service".

Amendment agreed to.

I move amendment No. 27:

In page 19, subsection (6), line 46, after "additional", to insert "long service".

Amendment agreed to.
Section 29, as amended, agreed to.
Sections 30 and 31 agreed to.
SECTION 32.

We come to amendment No. 28 in the name of Deputy Eric Byrne. Amendment No. 29 in the name of Deputy Ferris is an alternative. I am suggesting, therefore, that we discuss amendments Nos. 28 and 29 together, by agreement.

I move amendment No. 28:

In page 21, subsection (5) (b), line 11, to delete "4 per cent" and substitute "7 per cent".

I suppose the two amendments essentially follow the same flow and are the same. On this section, I would like to remind the Minister of something he said. He outlined in his speech his reason for not accepting the National Pensions Board's formula which at this stage is gospel according to the Opposition here. The Minister has his team of advisers and we have the National Pensions Board. We have great faith in the board.

The National Pensions Board were set up to advise me.

It is a pity the Minister will not listen to what they are saying. We are going to use their words to ask the Minister to amend this Bill. The Minister said that there are implications in accepting the National Pensions Board's recommendations. Let us hear what the board had to say and that will explain the reasons for our amendment.

The board looked at the English experience and reported to the effect that they believed any proposal which hopes to achieve a real and a meaningful improvement in this area, that is the re-valuation of preserved benefits, should incorporate a provision whereby preserved benefits are re-valued between the date of leaving and eventual retirement. That is a key element. We are living in an era of job insecurity. Some people are lucky enough to have a lifetime of full employment up to pension age but, unfortunately, a growing number are finding job insecurity a reality, as indicated by the increase of 5,000 in the dole figures last month. We must plan for their old age also, for pension rights and the value of pensions for men and women who might have only a quarter of a lifetime in gainful employment covered by occupational pension schemes and find themselves thrown on the streets, drawing the dole and growing steadily older. As they approach the pension age of 65 years what have these people to look forward to?

In this Bill, we have responsibility to try to guarantee in their old age that the years they worked and the money they paid into a pension scheme at least is preserved at a rate that will be of assistance to them in their old age. In the report I have referred to the board said that some of their members felt that the concept should be further extended to protect the real value of pensions even during payment. A person can retire and qualify for pension at 65 years of age and live, say, another 20 years to 85 and in that 20-year period the pension could be watered down to practically nothing. Therefore, it is right, the board argued, that the preserved benefit should be there also during the payment period. However, I am not pressing that point because there were complications. I would like the Minister to take on board that the board debated that aspect, accepted the principle and recognised it to be difficult to ensure re-valuation of preserved benefits during payment periods at this stage.

The report of the board goes on to say that in defined benefits schemes where benefits are related to final salary the preserved benefit for an early leaver should be revalued having regard to any increase in the consumer price index in the previous 12 month period on the following minimum basis. They say that where the increase in the CPI during this period is less than 4 per cent, preserved benefits should be re-valued by the full amount of such increase. Where the percentage increase is greater than 4 per cent but less than 10 per cent an additional increase of half the excess over 4 per cent should be provided. The maximum increase thus provided should be 7 per cent.

This is the combined wisdom of the board of whom the Minister is so proud, as we are on this side of the House. The Minister attempts to argue down the findings by saying that many of the interested parties he consulted felt that the board's formula for re-valuation was unduly high and would in any event give rise to very real, practical problems for pension schemes.

Whose word are we to take? Are we to take the word of a National Pensions Board or these many interested parties with whom the Minister consulted?

Earlier in his speech the Minister said that we were dealing with a complex task and that the drafting of the legislation had proved to be a much more complex and time-consuming task than those involved had anticipated. Then the Minister said that considerable technical assistance had been given to his officials by some of the top experts in this country on occupational pensions, people who are or who were members of the National Pensions Board. On the one hand the Minister said that he had advice from people who disagreed with the National Pensions Board and on the other the Minister has expressed appreciation for the contribution made by experts from the National Pensions Board. There is a contradiction here. The Minister in his speech suggested that the legislation was prepared mainly by officials of his Department with the assistance of former or present members of the National Pensions Board, and then he said that he was speaking to other experts. Who are these experts who have contradicated the research and serious work which has been done for years by the National Pensions Board? It has to be a small lobby group of interested employers.

This Bill has been watered down, as I said in my opening contribution, and in this instance it is clear that pressure has been put on the Minister by outside forces who are clearly not the members of the National Pensions Board who assisted in the preparation and drafting of the original Bill.

It is worth putting on the record that pensions investment funds are extremely healthy. I will leave it at that until I hear from the Minister and some of my own colleagues.

My amendment deals with the problems outlined by Deputy Byrne, but in a more restrictive way than does his amendment. To replace 4 per cent with 7 per cent and leave in "whichever is the lesser" would defeat the Deputy's argument. Congress in their submissions to us, having had regard to the submissions of the pensions board were of the view that the revaluation proposals in the Bill are less favourable than those put forward by the pensions board, and they recommend that preserve benefits should be revalued in line with the consumer price index up to 4 per cent, and where the consumer price index exceeds 4 per cent but is lower than 10 per cent they suggested an increase of half the excess of 4 per cent, allowing for a maximum of 7 per cent. Legal advice to congress and to me encouraged us to favour the formula set down by the pensions board because it provides a much more realistic revaluation and makes compulsory preservation much more acceptable to scheme members. That is why I have suggested my amendment. If we left in the words "whichever is the lesser" in the section without qualifying it as suggested by my amendment, 4 per cent or less will be paid. My amendment would mean that the payment would exceed 4 per cent if the CPI exceeded 4 per cent and there would be still a maximum on it. My formula is reasonable and I hope the Minister will take it on board.

Like my colleagues, on my first reading of the Bill I would have rushed to put down such an amendment. This Bill is supposed to be something of a balancing act and we are dealing with a voluntary sector. The funding requirements to meet the requirements of this Bill, particularly in relation to preservation, will not substantial demands on pension funds. In other legislation my colleagues on the left have rushed in to put certain amendments which had unseen consequences. Last week we had the Clinical Trials Bill back in here because the legislation had a very severe impact on people in that it had driven research out of the country. We must remember that we are dealing with a live industry.

The Clinical Trials Bill dealt with lives as well.

Yes, but we have driven the research out of the country. We must respond to what the industry can take. If pension funds cannot fund this requirement, the only way they can comply with the Bill is to reduce the benefit for members. I am concerned about the issue raised. It seems to be a straightforward issue, that if a preservation is to have any value it should be in line with inflation. As I researched for this Bill I was surprised to find that those involved in pension schemes felt that the proposal in the Bill was reasonable and that section 6 would give the Minister flexibility in a period of very high inflation, and that it also related to current inflation rates. At the time in 1987 when the board met there were higher inflation rates, and had the board ment in 1982, 1983 and 1984 there would have been different inflation rates. We have to have section 6 which allows the Minister to respond to varying situations. We must have flexibility. We must take into account what funds can take having regard to inflation. This issue has not been of major concern to me, having considered representations made to me and the points made by congress. The major issues that concerned me related to member trustees and the problems with disclosure. However, I would be interested to hear the Minister's reason for not going for straight indexation of preserved benefits.

I outlined earlier at some length in my comments on amendment No. 20 the general approach I have adopted in the Bill in relation to laying down statutory requirements for preservation. There is nothing against having an arrangement above the statutory requirement. I am opposed to requirements that are unnecessarily costly, particularly having regard to what is needed in relation to the preservation of the entitlements of the vast majority of scheme members, especially current members of schemes.

Deputy Ferris, in amendment No. 29, proposes in effect that provision be made for the revaluation formula recommended by the National Pensions Board. As I stated during Second Stage debate on the Bill many of the interested parties which I consulted felt that the board's formula for revaluation would give rise to real practical problems for pension schemes. It is not possible to make proper funding arrangements for benefits which are to be revalued in relation to a variable rate of inflation. We either fund for benefits at the lower limit and risk underfunding or fund for benefits at the higher limit which could lead to costly overfunding. Such overfunding could mean that money tied up in this way would not be available to finance the preservation of the pre-1991 pension rights of current members.

It would also not be possible for trustees to purchase a deferred annuity contract from insurance companies which would meet those requirements, as insurance companies are only geared to providing such contracts at fixed rates of inflation. Accordingly, to ensure that they met their statutory obligations in this regard schemes would have to purchase annuities at the maximum rate of 7 per cent in all cases. This would mean that in times of low inflation the pension rights of the early leavers concerned would be revalued at a considerably higher rate than those of members who remained in the scheme.

The overall effect of the revaluation formula, proposed by Deputy Ferris, could be to benefit new members of schemes at the expense of current members, many of whom are concerned to have provision made for preservation of pre-1991 pension rights.

Deputy Byrne with amendment No. 28 at least recognises the problem which making provision for a variable rate of inflation would give rise to for pension schemes. He has proposed that the ceiling be set at 7 per cent. However, at a time when inflation is running at 3.5 per cent — it may be lower this year — an upper limit of 7 per cent is far too high. As I have pointed out already it would result in early leavers at times of low inflation as at present and in respect of whom annuities were purchased, having their pension rights revalued at a higher rate than those of members who remained in the scheme.

The revaluation formula set out in section 32 is easy to administer and is aimed to fully match any increase in inflation up to 4 per cent. Provision is also made in subsection (6) to vary by regulations the 4 per cent ceiling if this is found to be necessary — this was referred to by Deputy Flaherty — as a result of a substantial increase in inflation. This situation will be kept under constant review by the new pensions board who will advise me as Minister if any such change in the ceiling is necessary.

I would also like to refer to the fact that in accordance with subsection (1) revaluation will not commence until five years after the appointed date, that is the year beginning January 1996. This is fully in line with the recommendations of the National Pensions Board in this regard, which was based on the need to give schemes time to make adequate funding arrangements for revaluation. I would like to explain exactly what this will involve. If a person leaves a scheme in the year 1993, the first year in which members will actually become eligible for preservation under the terms of the Bill, he will be entitled to have his pension rights in respect of the two year period 1991 to 1992 preserved, provided, of course, he has been a member of the scheme for a total of five years. Revaluation of this preserved benefit will commence just three years later — from 1 January 1996. If a person leaves the following year, in 1994, revaluation will commence two years later, and if he leaves in 1995, revaluation will commence just one year later. Revaluation will commence straight away for members leaving from 1 January 1996 onwards. Accordingly, the five years waiting period will not have a significant impact either in terms of the amount of pension involved or in terms of numbers affected. However, the National Pensions Board considered that this five years waiting period was essential from the point of view of funding and this has been confirmed by the representations I have received from pension experts in the period since the report was published.

In essence, we are debating whether the funds of pension schemes are sufficiently healthy to allow the Minister to accept my amendment. I do not agree with the Minister's figures. Will the Minister agree that in order to keep a pension fund healthy investment returns should at least match wage growth rates? If he agrees with that assessment then a more realistic target should be that in the long term investment return should exceed wage growth rates by at least two percentage points per annum. If we look at how healthy investment returns have been for the period 1983-89 we will to some extent explode the myth that somehow or other the funds are not available to permit the Minister to accept our amendment.

The removal of exchange controls in the last two years means that the future looks even brighter for investment returns. The effect of a sustained bull market, coupled with the removal of exchange controls, has meant a stready growth in the percentage of funds carried in equities and an increase in the spread of equity investment. Both are healthy indicators for the future growth in investment for pension funds as gilts have traditionally underperformed equities.

If one looks at the rate of return on investment and compares it with wage growth in the years 1983-89 one will see that the investment returns per annum on, for example, mixed management funds, between 1985-89 was 22 per cent. If one looks at the investment performance schemes in that same period one will see that they represent 21 per cent. The average industrial earnings in the same period equalled a 5 per cent increase. If one compares the investment return growth over and above wage growth with the mixed managed funds one will see that it represented a total of 14.4 per cent in excess over the period between 1983-89. The investment performance schemes in that period was 13.8 per cent over and above wage growth. It can be shown that in the five year period between 1985-89 the investment return growth over and above wage growth per annum was higher when compared with the period between 1983-89. It was running at 14.4 per cent between 1983-89 and at 17 per cent between 1985-89.

There is no doubt that there is an incredibly healthy fund of £10 billion out there and there is incredible growth potential for the future. That gives the lie to the statements about funding. It is extremely healthy and capable of absorbing the extra few bob involved in accepting our amendment. That amendment is exactly in line with the recommendation of the first report of the National Pensions Board. I cannot accept any argument against that recommendation and I feel so strongly about this issue that I will push my amendment to a division.

The formula I have suggested does not take from the section. It leaves the Minister all the options he wants. My amendment sought to change only one option, that relating to the 4 per cent. However, I included a proviso that the 4 per cent would be changed only if the CPI exceeded that figure. My amendment does not disturb the Minister's argument. I suggest that if the CPI exceeds this figure of 4 per cent this should be taken into account. I have also recommended a maximum compensation figure.

The provisions in the Bill relating to preservation and revaluation will only come into effect following a very long lead-in period, much longer than the one recommended by the board. The representatives of the pensions industry on the board think we are being extremely cautious. Therefore, our amendment is not out of line with what the pensions industry, who have a vested interest in this matter and who control between £6 billion and £10 billion of workers' money, have suggested. They think that we are being cautious in our approach and have suggested that we should strike a balance between being too cautious and being unrealistic. If the CPI exceeds the figure of 4 per cent this should be taken into account. I do not consider this amendment to be unreasonable and I am disappointed the Minister is not prepared to concede on the matter.

As I have mentioned, this matter can be taken into account under the provisions of section 6, but there is one other matter we need to bear in mind. The Deputies keep referring to a great fund of money which they insist exists but I should point out that while some funds may be described as very strong, others are not. One of the reasons for this is the absence of preservation. As I mentioned earlier, 90 per cent of those in schemes cash in and leave without preserving their benefits. This is of no benefit to a scheme as no money is left in the fund. I wish to achieve preservation.

This section will come into effect in 1996. The pensions board will have plenty of time between now and 1996 to examine the operation of schemes, the progress made on the preservation of pensions and to make recommendations, if adjustments need to be made. The percentage to be laid down will always be a matter for debate and discussion. I have mentioned the elements to be taken into account and nothing which has been said alters these. These will be considered in the light of experience.

Given that it is our objective to achieve preservation at the earliest possible date, the advice I have received is that we have adopted a reasonable and balanced approach. Let me make it quite clear to Deputy Byrne that a person will not be able to take money out of the fund. Therefore, he need not be unduly concerned about that matter. However, benefits have to be provided and improvements need to be made under such headings as equal treatment. Those issues also need to be considered. We have adopted a reasonable approach and it may be considered between now and 1996.

Question put: "That the figure and words proposed to be deleted stand".
The Committee divided: Tá, 74; Níl, 21.

  • Ahern, Bertie.
  • Ahern, Dermot.
  • Ahern, Michael.
  • Aylward, Liam.
  • Barrett, Michael.
  • Brady, Gerard.
  • Brady, Vincent.
  • Brennan, Mattie.
  • Briscoe, Ben.
  • Browne, John (Wexford).
  • Dennehy, John.
  • de Valera, Síle.
  • Ellis, John.
  • Fahey, Frank.
  • Fahey, Jackie.
  • Fitzgerald, Liam Joseph.
  • Fitzpatrick, Dermot.
  • Flood, Chris.
  • Flynn, Pádraig.
  • Geoghegan-Quinn, Máire.
  • Harney, Mary.
  • Haughey, Charles J.
  • Hillery, Brian.
  • Hilliard, Colm.
  • Hyland, Liam.
  • Jacob, Joe.
  • Kelly, Laurence.
  • Kenneally, Brendan.
  • Kirk, Séamus.
  • Kitt, Michael P.
  • Kitt, Tom.
  • Lawlor, Liam.
  • Lenihan, Brian.
  • Leonard, Jimmy.
  • Leyden, Terry.
  • Lyons, Denis.
  • McCreevy, Charlie.
  • Burke, Raphael P.
  • Calleary, Seán.
  • Callely, Ivor.
  • Clohessy, Peadar.
  • Connolly, Ger.
  • Cowen, Brian.
  • Cullimore, Séamus.
  • Daly, Brendan.
  • Davern, Noel.
  • Dempsey, Noel.
  • McDaid, Jim.
  • McEllistrim, Tom.
  • Morley, P.J.
  • Nolan, M.J.
  • O'Connell, John.
  • O'Dea, Willie.
  • O'Donoghue, John.
  • O'Hanlon, Rory.
  • O'Keeffe, Ned.
  • O'Kennedy, Michael.
  • O'Leary, John.
  • O'Malley, Desmond J.
  • O'Rourke, Mary.
  • O'Toole, Martin Joe.
  • Power, Seán.
  • Quill, Máirín.
  • Roche, Dick.
  • Smith, Michael.
  • Stafford, John.
  • Treacy, Seán.
  • Tunney, Jim.
  • Wallace, Dan.
  • Wallace, Mary.
  • Walsh, Joe.
  • Wilson, John P.
  • Woods, Michael.
  • Wyse, Pearse.

Níl

  • Bell, Michael.
  • Byrne, Eric.
  • Ferris, Michael.
  • Garland, Roger.
  • Gilmore, Eamon.
  • Gregory, Tony.
  • Higgins, Michael D.
  • Howlin, Brendan.
  • Kavanagh, Liam.
  • Kemmy, Jim.
  • McCartan, Pat.
  • Mac Giolla, Tomás.
  • O'Shea, Brian.
  • O'Sullivan, Toddy.
  • Quinn, Ruairí.
  • Rabbitte, Pat.
  • Ryan, Seán.
  • Sherlock, Joe.
  • Spring, Dick.
  • Stagg, Emmet.
  • Taylor, Mervyn.
Tellers: Tá, Deputies V. Brady and Clohessy; Níl, Deputies Byrne and Ferris.
Question declared carried.
Amendment declared lost.

I move amendment No. 29:

In page 21, subsection (5), line 12, after "lesser" to insert ": Provided where the percentage figure under paragraph (a) exceeds 4 per cent. but does not exceed 10 per cent. an increase of half the excess shall be prescribed to allow for a maximum increase of not less than 7 per cent.".

Amendment put and declared lost.
Section 32 agreed to.
NEW SECTION.

I move amendment No. 29a:

In page 21, before section 33, to insert the following new section:

"33. —All members on leaving employment shall be entitled to a written statement outlining—

(a) the amount of preserved benefits, both for the member and his or her dependants,

(b) the provision for increases of these benefits,

(c) the date or dates on which these benefits become payable and the procedure for claiming the benefit,

(d) the name and address of the scheme, its trustees and those persons responsible for the payment of benefits, and

(e) a clear description of all rights and options available at the time of leaving and subsequently accruing, including the amount of any transfer value.".

I was anxious that this amendment be included. It refers to entitlement to transfer payments. Whenever a person is leaving a scheme it is extremely important that both they, their dependant or dependants and the trustees of the scheme should know where they stand. This amendment is cogged directly from the report of the pensions board. It should be included in the Bill, rendering its provisions all the stronger, when everybody would be much clearer with regard to where they stand.

The Minister will be familiar with the problems encountered even between his Department and the Department of Finance, through the Revenue Commissioners, even in maintaining track of people's PRSI contributions; indeed we are aware that some £1 million of those have gone astray. We are talking about creating circumstances, within a private voluntary industry, in which persons with mobility of employment may move a number of times in the course of their careers and at pension age, will be endeavouring to put together or trace their general entitlements. That means they may have to go back and trace their annuities, preserved benefits in two or three employments. It is absolutely essential that they have easy access to their entitlements at that stage; that on leaving employment, on taking a transfer payment for one reason or another — at the various stages of that process — this written statement be made available to them. Indeed all such persons will benefit therefrom, particularly in the case of the death of a member when it will be the dependants, perhaps a wife, who will be endeavouring to ascertain what are her entitlements or those of the children. This will mean they will not have to go through a laborious procedure, writing to where they remember the deceased person had worked, perhaps ascertaining the name of a pension fund and writing to the trustees to ascertain their precise entitlements.

One of the key elements which will determine the success of this Bill will be access to information and the protection that will afford people. Perhaps this written statement will constitute the most vital information of all a member can carry with them, outlining what they have earned and their entitlements arising out of their membership of a scheme at any given time.

I have no disagreement with the point the Deputy is making. This is a matter for regulations; it is one of the matters that will be covered in the regulations. The amendment would require members leaving employment to be given a statement of their entitlements to preserved benefits. The issue is one of disclosure of information rather than preservation, as such. It is envisaged that statements of this kind would be among the pieces of information schemes would be required to make available.

I should say that section 53 (1) gives the Minister power to prescribe the types of information which schemes will be required to make available to members. Such items of information relating to early leavers will be included in the proposed regulations concerning disclosure. I know that this was an issue in respect of which the pensions board made a recommendation. I can assure the Deputy that it will be included in the regulations.

While section 5 deals with general disclosure of information in relation to the total funding of schemes, what we are talking about here is an individual leaving a scheme and transferring to another. It is in that context that I am endeavouring to ensure that a member would have a detailed written statement of their entitlements. The Minister is guaranteeing that that will be included?

Yes, I accept the point the Deputy is making in relation to this section, which has to do with the transfer of payments. It is my intention to cover that in the regulations.

Amendment, by leave, withdrawn.

I move amendment No. 30:

In page 21, subsection (2), lines 28 to 30, to delete from and including "equal to the actuarial value" down to the end of the subsection and substitute the following:

"equal—

(a) in the case of a defined benefit scheme, to the actuarial value of the preserved benefit on the date on which the relevant application under subsection (3) is received by the trustees, and

(b) in the case of a defined contribution scheme, to the accumulated value on that date of the appropriate contributions under the scheme in respect of the member:

Provided that where benefits under such a scheme are secured under one or more policies of assurance, the accumulated value of the appropriate contributions shall be the proportion of the proceeds of every such policy applicable to those contributions.".

This amendment is of a technical nature. It is necessary to draw a distinction in this section between a defined benefit scheme and a defined contribution scheme. In the case of a defined benefit scheme the transfer payment shall be equal to an amount calculated by the actuary of the scheme having regard to age, length of service and pensionable salary of the member. Therefore it will represent the actuarial value of the member's preserved benefit entitlement.

Amendment agreed to.

I move amendment No. 31:

In page 21, subsection (3), line 33, after "scheme", to insert "providing them with such information as they may reasonably require and".

This amendment simply places the onus on the member to provide the trustees with the necessary information to enable them to effect a transfer. This would include the names of the trustees of the scheme, of his new employer, the relevant Revenue reference, that sort of thing. Again, it is a fairly simple requirement.

This point was made to me also in relation to where the obligation should lie in that respect. Is the Minister satisfied that the member will have the information available to him? Requiring a member to have the information obviously will depend on the other side of the scheme providing him with certain information at an earlier stage. Therefore it will all be interdependent.

That is the reason for the words "reasonably require" being included. It is a safeguard from the point of view of the member, reading "providing them with such information as they may reasonably require".

Amendment agreed to.

We come to amendment No. 32 in the name of the Minister. I note that amendment No. 34 is related and that amendment No. 33a is an alternative to amendment No. 34. It is proposed, therefore, for discussion purposes, to take amendments Nos. 32, 33a and 34 together.

I move amendment No. 32:

In page 21, subsection (3), lines 36 to 40, to delete paragraph (b) and substitute the following:

"(b) in the making of one or more payments falling to be made under policies or contracts of assurance that are effected on behalf of the member with one or more undertakings (within the meaning of the Insurance Act, 1989) and that are approved of by the Revenue Commissioners under Chapter II of Part I of the Finance Act, 1972.".

This is partly a drafting amendment being made on the advice of the parliamentary draftsman's office. In addition, it provides that a transfer payment may be used to purchase policies of assurance as well as annuities. This would provide the member with more flexibility with regard to the payment of the benefit. In regard to the member who may wish, for example, to opt to have a portion of the benefit taken in a lump sum, if it was purchased strictly in the form of an annuity this option would not be available to him. It is basically to provide more options for the member.

Amendment agreed to.
Section 33, as amended, agreed to.
SECTION 34.

The next amendment to amendment No. 32a in the name of Deputy Flaherty. Amendments Nos. 33 and 35 are related. With the agreement of the House we will take amendments Nos. 32a, 33 and 35 together for discussion purposes. Is that agreed? Agreed.

I move amendment No. 32a:

In page 22, line 24, to delete "in such circumstances as may be prescribed" and substitute "where membership has not exceeded 8 years or where such preserved benefits apply to more than half of the scheme's members".

The power given to trustees in section 34 allows them to by-pass a number of the commitments in the Bill without the permission or consent of the member. Another one of our amendments refers also to the dependants and the spouse because it may be their entitlements that are being changed in their form without their permission. It is quite a significant power to give to the board that, instead of operating a reserved pension, they can purchase an annuity. It may have the same net value but if it is in the interests of the member I do not see why the member would not agree to it. I know the concern of the industry is that they could end up with a scheme that has more members with preserved benefits than active members at any one time, and that is a valid point. I believe, however, that there should be some limit on this power because it is possible that someone who has given 20 years service could, without his permission or, if he has died, without the permission of his dependants, have the form of his entitlement changed overnight. My suggestion is that this power be restricted along the lines of my amendment which is to delete "in such circumstances as may be prescribed" and substitute "where membership has not exceeded eight years or where such preserved benefits apply to more than half of the scheme's members". That may not be the best definition but it meets some of my reservations in relation to this. There should at least be an obligation to get consent where there has been membership of the scheme for at least eight years. Such members deserve more than that change in their situation should be implemented without consultation with them or their dependants.

My amendment is similar in intent to Deputy Flaherty's and some of the questions she has posed are questions I would like to pose also. It seems a rather strange but, in a sense, understandable, section. I would like to tease it out a little, if I may. My first question is in regard to the power to transfer without consent. Why would consent not be sought? There are dangers in the fact that somehow the trustees of a scheme can just transfer without the member possibly even knowing because, presumably, if the member's consent has not been sought the likelihood is that he will not know the transfer is to go ahead. Why would the trustees wish to transfer without consulting with the member?

The answer to that might be that the member is not in the country or has gone missing. How is it intended to keep records of the movements of over half a million workers in these schemes, especially those in relatively short-term employment for five, six or seven years who might be made redundant or be emigrating? The Minister will be aware of the suddenness with which many people, depending on their job security, take the decision that they have no option but to emigrate. Who will keep tabs on all of these people moving between Ireland, America and Europe and even from rural to urban areas? There will be a considerable movement of people and I would like to know what tabs are to be kept on these people. Take the example of a man or woman who is relatively young and has been either sacked or made redundant from a company in which they have contributed to a pension scheme and has left the country. What becomes of their pension? How is their preserved benefit to be kept in safe keeping for them? Rather than the trustees having the power to effect transfer payments, such a move should have to be agreed by the board. I cannot see any case the Minister might make against that. Surely, at the end of the day, the board should authorise these transfers of payments, particularly since the members themselves will not be contacted about them.

In relation to Deputy Byrne's point, the regulations to be made under section 34 will be made after consultation with the board and this should meet Deputy Byrne's concerns. This will apply mainly to small schemes. There will be an opportunity, for instance, to apply a limit to people who have left the scheme with fewer than five years service. This is what is done in the British scheme. The same provision is here, but for people with up to five years membership. That is the kind of thing for which we want to provide this power. I can assure the Deputy that this is something that will be done in consultation with the board and he need have no fears about what is in mind in that regard.

The section enables the trustees of an occupational pension scheme, in certain circumstances to be prescribed, to affect a transfer payment without the consent of the member. This provision is designed to reduce the workload on schemes administering an ever-increasing number of small preserved benefit entitlements — this is where the five year limit could apply. Otherwise, unless those leaving requested a transfer payment, records would have to be kept for most leavers. In employments with a high turnover of staff, records of leavers could exceed those in respect of stayers. It is proposed, therefore, that in the case of small preserved benefit entitlements — for example, of those with less than five years' service, the trustees would be free to transfer the liability to an approved annuity bond. Another example of the type of circumstance in which this power could be exercised by trustees would be in the event of a winding-up of a scheme. In such a case, the trustee could secure the members' entitlements through the purchase of appropriate annuities. The power is included to cover cases such as that. Are we discussing amendment No. 35 in conjunction with the other amendments?

Amendment No. 35 in my name is to provide, as in the case of section 33, that where the trustees of a scheme effect a transfer payment through the purchase of an insurance policy or an annuity bond, it will be discharged from all obligation to provide the member with a preserved benefit.

As regards young workers who may move from one job to another or emigrate, the last thing on their minds would be their pension rights. Will the board have access to the files of everybody who is eligible for some form of cover? Will they be the central data bank who hold everybody's name and address? We as politicians deal with cases of people who have worked in England. Much work has to be done as regards their entitlement. Will the board have all the information to which people will have access so they know what they are entitled to, especially in the case of transfer of payment without the consent of the member?

The more the Deputy says about this matter, the more he indicates the wisdom of having it dealt with in regulations. A lot of aspects need to be considered and it is intended that the regulations will deal with those. The board will have a register of all the schemes——

But not the members' names.

——but what they do beyond that will be a matter for themselves. They will have to consider cases such as the Deputy raised whereby people are coming and going. In simple terms, what happens is that a policy is taken out in the name of a member and that will be to his benefit. Obviously the guidelines will have to cover the manner in which such people are to be informed if there is a benefit accruing to them and whether the information is to be available on a long term basis.

Will it be the trustees who will preserve the information? I would argue that the board should retain——

I appreciate that but it is something that will have to be considered. The board will have an obligation to preserve information about all the schemes. If we agree to what the Deputy suggests it would mean a further workload for them, and that is something they would have to consider. There will be residual cases where the person receives his insurance policy, annuity or whatever and that is the end of the matter but there will also be cases such as the Deputy mentioned where people leave for one reason or another and may not know the benefit is there for them. Obviously that would have to be dealt with by way of regulations and in the administrative operation of the board.

That obviously indicates the desirability of including the previous amendment I proposed. There should be some way of keeping people informed of these matters. There are about 25,000 schemes, and I cannot understand how the board will have the names and addresses of all the people involved. Obviously there would be a certain obligation on the individual to retain his own records and, as the last amendment proposed, to make information available to the board. It is a two-way process. Where an annuity is purchased in the name of a person, as Deputy Byrne has said, this would usually be payable up to five years after the person leaves and that person may not be at the same address then as when he left the employment. Would there be an annual return on an annuity, and hence an annual communication from the investment company concerned? If so, the person would be able to keep in contact in that way.

That would depend on the nature of the insurance or the approved annuity bond. There would be different payment methods and different returns. In most cases when people leave, their whereabouts will be known but, as Deputy Byrne suggested, people may leave without leaving a forwarding address or a home address, and obviously there would be difficulties in such cases. The main thing is that a benefit will be preserved for them. We are getting into the administration——

A 60 year old would have to go on a treasure hunt.

Once we provide the powers, we will be able to deal with the difficulties by way of regulation.

Many complications may arise in this regard. Obviously it is important that there be regulations to deal with these matters. Is the decision to transfer payment without consent made shortly after the person leaves the employment? My concern is that if somebody leaves an employment or is sacked, his benefits may be transferred without his consent. The person should be informed on the day he leaves the employment as to whether the money is being transferred. This is quite a complex matter and will have to be teased out in the regulations.

The basic responsibility will lie with the scheme, and the board will supervise the scheme and its operations. In that way the board will be directly involved. The regulations will be laid before the House and Deputies can examine them in detail as they wish.

The Minister has indicated that I will be doing better under his amendment, so I will withdraw my amendment.

Amendment, by leave, withdrawn.
Amendment No. 33 not moved.

I move amendment No. 33a:

In page 22, to delete lines 26 to 29 and substitute the following:

"and with the consent of the member concerned, or his spouse or dependants, purchase from one or more insurance companies authorised under the Insurance Acts, 1909 to 1989, one or more annuities referred to in section 33 (3) (b).".

I understand it is still necessary to specify "his spouse or dependants, because it may be technically impossible for them to act in a way which they might.

This section is about the power to transfer a payment without the consent of the member, whereas section 33 gives power to transfer with the consent of a member. Section 34 deals with cases where there is no consent. Therefore we could not amend the section to say "with the consent of the member concerned", as this would have to apply to the earlier section.

If a member dies and the annuity or preserved benefit is being operated for the benefit of the spouse or child, should it not be specified that their consent is no longer necessary? Would a person be paid in that case?

In effect, the two consents would be the same or one would come from the other because if you have to get the member's consent you would have to get the dependant's consent. It is in the area where you need consent rather than where you do not need consent. In this section, we do not need consent but the Deputy is trying to ensure that the trustees must have the consent of the member concerned or his spouse or dependants when purchasing annuities from one or more insurance companies, but in this section, this will be happening without their consent. If a person dies, a lump sum or capital sum will be paid under the terms of the scheme and the spouse or dependants can do what they like with it.

Would they have a pension?

They may have a pension.

Would they have a preserved pension?

They would have either one or the other.

The Deputy unwittingly agreed earlier on when we were discussing amendment No. 32, that amendment No. 33a would be discussed with it, but we will assume that we have completed our discussion on amendment No. 33a.

Amendment, by leave, withdrawn.

I move amendment No. 34:

In page 22, lines 27 to 29, to delete "purchasing from one or more insurance companies, authorised under the Insurance Acts, 1909 to 1989, one or more annuities" and substitute "making one or more payments".

Amendment agreed to.

I move amendment No. 35:

In page 22, between lines 29 and 30, to insert the following subsection:

"(2) Where the trustees of a scheme have effected a transfer payment in accordance with subsection (1) they shall be discharged from any obligation to provide benefits to which the transfer payment relates.".

Amendment agreed to.
Section 34, as amended, agreed to.
NEW SECTION.

I sympathise with the Deputies in so far as coincidentally the numbers of the amendment have coincided with the number of the section and this may not help with the clarity of what we are doing. To add to the confusion, we have an amendment numbered a35a as well as amendment No. 35a, which is an alternative. With the agreement of the House it is proposed to take for discussion purposes, amendments Nos. a35a and 35a together. Is that agreed? Agreed.

On a point of order, Sir, as it is the first time I have come across an amendment numbered a35a, I wonder when this procedure becomes applicable?

It is because the amendment involves deleting the section. It is not an attempt at one-upmanship.

The Chair can tell you that light is light, but it cannot tell you why.

I thought you were transferring my annuity without my consent.

I move amendment No. a35a:

In page 22, before section 35, to insert the following new section:

35. —Any provision of a scheme——

(a) providing for the forfeiture of a preserved benefit, or

(b) enabling the employer of a member to exercise a lien on the member's preserved benefit, shall be disregarded for the purpose of this Part.".

A benefit for the employee must be payable for his life as a minimum period, except that the rules of a scheme may provide for forfeiture in exceptional circumstances, for example, if the pensioner becomes bankrupt or attempts to assign his pension. Section 35 of the Bill prohibits the forfeiture of any preserved benefit paid to a member. The rules of the scheme may also contain a rule which enables the employer to exercise a lien on the member's benefits when they become payable. Amendment No. 35a put forward by Deputy Flaherty provides that any such rule shall also not apply to a member's preserved benefit except where the debt to the employer arises out of a fraudulent act or theft by the member. However, my amendment, No. a35a goes further than Deputy Flaherty's amendment and provides that an employer shall in all circumstances be prohibited from exercising a lien on a member's preserved benefit.

The Minister's amendment deals with the problem of the definition and the question of an employer's lien on preserved benefit other than forfeiture. However, my amendment takes up an angle, which the Minister has obviously decided does not need to be dealt with, and that is where a member has engaged in fraud or theft from the scheme. I am told that this happens — I suppose they could pretend they were dead, but I do not know how they would defraud a pension scheme. However, where fraud or theft occurs, are the pension schemes being asked to preserve benefits that have been won fraudulently or illegally?

Disputes and arguments can arise whether a situation was fraudulent, although I know there can be cases where it is clear there was fraud or theft. However I am providing that in all circumstances an employer will be prohibited from exercising a lien on a member's preserved benefit. It is a pension entitlement and in the context of pension entitlements it is only right that we should make such a provision as a preserved entitlement which should not be open to be raided for any reasons. I would go along with the Deputy, and I accept her point, but I would go a little bit further.

I thought the Minister made two points. First, he has gone very far on one side, the definition, and second that as a general principle the pension should be preserved without interference. However, if the scheme itself has been defrauded by a member, or if a member has been involved in theft from the scheme, is it reasonable that such a member should be paid a benefit? I am not familiar with specific cases but I am told it has happened and at present the practice is that the other members of the pension scheme are not put at a loss by payment of benefit to a member who has stolen from or has defrauded the scheme.

I think the Deputy is trying to build a penalty into this section but we have provided for penalties of up to £10,000 or a term in jail for offences under this Bill. One of the problems is that it can be difficult to decide on fraud and theft and it would be better to leave the scheme and the pension clearly separate. The trustees could have difficulty in deciding on whether there was a theft as distinct from their duty to provide the preserved benefit for the individual.

I will not press amendment No. 35a to a vote but perhaps the Minister will consider my suggestion before the Bill is debated in the Seanad. I am talking about preservation and self-protection for the scheme and it is not reasonable for the scheme to have to pay out money to someone who has stolen from it. I do not know how often this happens and perhaps the Minister can give me more information on it.

Amendment agreed to.
Section 35 deleted.
Amendment No. 35a not moved.
Section 36 agreed to.
SECTION 37.

I move amendment No. 36:

In page 23, lines 19 to 24, to delete subsection (2) and substitute the following:

"(2) Any question as to——

(a) whether any provision of this Part (including the application of any provision as modified by regulations), any regulations made thereunder or the Second Schedule conflicts with any rule of a scheme, or

(b) whether a scheme is a defined benefit scheme or a defined contribution scheme for the purposes of this Part, shall be determined by the Board on application to it in writing in that behalf by a person specified in subsection (3).".

Amendment agreed to.
Amendments Nos. 37 and 38 not moved.
Section 37, as amended, agreed to.
Section 38 agreed to.
SECTION 39.

I move amendment No. 39:

In page 24, line 20, after "purposes", to insert "of section 44 (4);".

This is a minor textual amendment which proposes the insertion of the words "of section 44 (4)", which were omitted during the course of the printing of the Bill, in section 39.

Amendment agreed to.
Section 39, as amended, agreed to.
Sections 40 to 44, inclusive, agreed to.
SECTION 45.

I move amendment No. 40:

In page 26, line 42, to delete "which" and substitute "as".

Amendment agreed to.

I move amendment No. 41:

In page 26, after line 43, to insert the following subsection:

"(2) In determining the benefits to be paid on the winding-up of a relevant scheme, the actuary shall, in addition to complying with section 47, have regard to such financial or other assumptions as he considers to be appropriate.".

This amendment proposes the insertion of a new subsection (2) in section 45 and is a technical amendment. It provides that in the event of the winding-up of a scheme an actuary shall, when determining the benefits to be payable out of the fund in accordance with the priority set down in section 47, be able to make assumptions about certain matters, such as the anticipated increases in inflation where increases in pensions and payment are provided under the rules of the scheme. Section 45, as currently drafted, allows the actuary to have regard only to financial and other assumptions when completing an actuarial funding certificate.

Amendment agreed to.
Question proposed: "That section 45, as amended, stand part of the Bill".

The Minister referred to the winding-up of schemes. It is very annoying that because we have to conclude the debate in five minutes we will not be able to discuss a number of sections in detail. This would have been of immense benefit to us. There has been a great deal of movement in relation to equal treatment and what I consider to be the heart of the Bill, that is the disclosure of information in relation to schemes. I referred earlier to schemes which are funded over and above the minimum requirements and what happens to them. Have those schemes been protected for members in the context of this legislation? Obviously it is highly desirable to do so as it will be still technically possible for a person to take over a scheme, wind it up and run off with the excess funds. This type of situation has not been adequately provided for in the Bill.

This type of situation is covered by the section on funding standards. The Bill lays down the minimum funding requirements, that is, sufficient assets must be held within the fund to provide minimum benefits in the event of the winding-up of a scheme. This means that the current and future pension service rights of current members must be fully funded. A ten-year period is being allowed to bring the level of funding in respect of certain past service rights of current members up to 100 per cent.

I think Deputy Flaherty is unnecessarily worried about these matters. In the case of a defined contribution scheme or defined benefit scheme the benefits are clear-cut and will have to be paid at a certain level. Deputy Flaherty referred to a situation where there is extra money in a fund and what will be done with it. This money will belong to the fund. There will be many different factors involved and the main thing will be to know how the fund is, how it is provided for, the money in it and the obligations on the fund.

There are minimum requirements but the surpluses have not been regulated for. Perhaps this is due to an oversight and I ask the Minister to address it before the Bill is debated in the Seanad. These surpluses could ideally be used to improve benefits. A case similar to the one outlined in the House by Deputy Barrett could arise after the implementation of this Bill where somebody could legally walk away with the surplus money in a fund.

I can assure the Deputy that that will not happen after the implementation of the Bill. The Deputy referred to the later sections of the Bill which we will not be able to debate in full. I hope Deputies will recognise that I have gone a long way in meeting the points put forward by them. I would have welcomed the opportunity to debate in more detail the amendments I have put down and to say why I was doing certain things. I can assure the Deputies that I have made very adequate, suitable and practical arrangements for equal treatment in the amendments I have put down. The powers now being given to the Minister are in response to the points which were made by the Deputies. For example, I have taken action in the Barber case by including an amendment in the Bill. Power will be given to the Minister under this Bill to deal with the position of widowers, etc. I said on Second Stage that I would deal with this issue in another way and I have taken the power, by way of regulation in the Bill, to deal with it. When the Deputies have had an opportunity to consider my amendments they will see that I have responded to their views in that regard.

Question put and agreed to.

We acknowledge that the Minister has acceded to some of our amendments, particularly in the area of equality. However, others which we did not reach are very significant and, before Committee Stage in the Seanad, I ask the Minister to seriously consider the points made on all sides of the House, the submission by the Employment Equality Agency and Congress. We have run out of time.

We have run out of time; nevertheless I will allow a final word from Deputy Byrne, and then I will call Deputy Barnes.

It is disgraceful that we do not have time to discuss outstanding amendments although it is ironical that we were able to discuss section 46 which deals with investment. We recognise that the long holiday is coming up but that civil servants will be working on the Bill. When the Bill is passed in the Seanad, will the Minister introduce, as soon as possible, the huge number of regulations which are anticipated? It is unsatisfactory, with so much work left undone in this area, that we have not had time to discuss it in detail.

I will not allow the Deputy to express dissatisfaction or regret in this area——

That is what the guillotine does.

It was agreed that the question would be put at 1.30 p.m. but I will allow Deputy Barnes to speak.

I appreciate the time you are allowing. I welcome what has been included by the Minister in Part VII but we regret that it was not discussed as it is one of the most important areas for amendment in the Bill. On sections 68, I ask the Minister to give special consideration to amendment No. 65a to include part-time employees. If it is not possible to include it in this Bill will it be included in the Bill dealing with part-time workers? It is very important to include part-time workers.

As Deputy Barnes said, it is unsatisfactory that we have not been able to look at the section dealing with equal treatment. I am also very concerned about the section dealing with exemptions possible under disclosure which is at the heart of this Bill. Because the debate has been guillotined we must record our objections to the passing of this Stage.

The finish of this Stage is by agreement of the House. I should like to thank the Deputies for their very constructive approach and co-operation during the debate on this Bill. It is complex and historic legislation and Deputies must agree that I recognised their views and included amendments to cover them. I am very concerned about part-time workers. The pensions board are looking into their conditions, and there is also a separate study within the Department on part-time workers.

Question put: "That the amendments set down by the Minister for Social Welfare on Committee Stage, if not disposed of, are hereby agreed to in Committee; in respect of each of the sections undisposed of that the section or, as appropriate, the section as amended, is hereby agreed to in Committee; that the First, Second and Third Schedules, as amended, and the Title are hereby agreed to in Committee; that the Bill, as amended, is hereby reported to the House; that the amendments set down by the Minister for Social Welfare to the Bill on Report Stage are hereby made to the Bill; that Fourth Stage is hereby completed and that the Bill is hereby passed".

On a point of clarification, the Labour Party are not opposing this Bill just now. We think it would be improper to oppose the Bill. We objected to the guillotine, but the Bill has been much improved.

The Dáil divided: Tá, 72; Níl, 40.

  • Ahern, Bertie.
  • Ahern, Dermot.
  • Ahern, Michael.
  • Aylward, Liam.
  • Barrett, Michael.
  • Brady, Gerard.
  • Brady, Vincent.
  • Brennan, Mattie.
  • Briscoe, Ben.
  • Browne, John (Wexford).
  • de Valera, Síle.
  • Ellis, John.
  • Fahey, Frank.
  • Fahey, Jackie.
  • Fitzgerald, Liam Joseph.
  • Fitzpatrick, Dermot.
  • Flood, Chris.
  • Flynn, Pádraig.
  • Geoghegan-Quinn, Máire.
  • Harney, Mary.
  • Haughey, Charles J.
  • Hillery, Brian.
  • Hilliard, Colm.
  • Hyland, Liam.
  • Jacob, Joe.
  • Kelly, Laurence.
  • Kenneally, Brendan.
  • Kirk, Séamus.
  • Kitt, Michael P.
  • Kitt, Tom.
  • Lawlor, Liam.
  • Lenihan, Brian.
  • Leonard, Jimmy.
  • Leyden, Terry.
  • Lyons, Denis.
  • McCreevy, Charlie.
  • Burke, Raphael P.
  • Callely, Ivor.
  • Clohessy, Peadar.
  • Connolly, Ger.
  • Cowen, Brian.
  • Cullimore, Séamus.
  • Daly, Brendan.
  • Davern, Noel.
  • Dempsey, Noel.
  • Dennehy, John.
  • McDaid, Jim.
  • McEllistrim, Tom.
  • Morley, P.J.
  • Nolan, M.J.
  • O'Connell, John.
  • O'Dea, Willie.
  • O'Donoghue, John.
  • O'Hanlon, Rory.
  • O'Keeffe, Ned.
  • O'Kennedy, Michael.
  • O'Leary, John.
  • O'Malley, Desmond J.
  • O'Toole, Martin Joe.
  • Power, Seán.
  • Quill, Máirín.
  • Roche, Dick.
  • Smith, Michael.
  • Stafford, John.
  • Treacy, Seán.
  • Tunney, Jim.
  • Wallace, Dan.
  • Wallace, Mary.
  • Walsh, Joe.
  • Wilson, John P.
  • Woods, Michael.
  • Wyse, Pearse.

Níl

  • Ahearn, Therese.
  • Allen, Bernard.
  • Barnes, Monica.
  • Barry, Peter.
  • Belton, Louis J.
  • Boylan, Andrew.
  • Bradford, Paul.
  • Browne, John (Carlow-Kilkenny).
  • Bruton, John.
  • Bruton, Richard.
  • Carey, Donal.
  • Connor, John.
  • Cosgrave, Michael Joe.
  • Cotter, Bill.
  • Creed, Michael.
  • Deasy, Austin.
  • Deenihan, Jimmy.
  • Doyle, Joe.
  • Dukes, Alan.
  • Durkan, Bernard.
  • Finucane, Michael.
  • FitzGerald, Garret.
  • Flaherty, Mary.
  • Flanagan, Charles.
  • Higgins, Jim.
  • Hogan, Philip.
  • Kenny, Enda.
  • Lee, Pat.
  • McCormack, Pádraic.
  • McGrath, Paul.
  • Mitchell, Jim.
  • Nealon, Ted.
  • Noonan, Michael. (Limerick East).
  • O'Keeffe, Jim.
  • Owen, Nora.
  • Reynolds, Gerry.
  • Shatter, Alan.
  • Taylor-Quinn, Madeleine.
  • Timmins, Godfrey.
  • Yates, Ivan.
Tellers: Tá, Deputies V. Brady and Clohessy; Níl, Deputies J. Higgins and Boylan.
Question declared carried.

Would it be in order to record my gratitude to the Minister? He did not give as much time to the Bill as is being given to the Broadcasting Bill, but I thank him for his willingness to listen to my point of view and that of my party.

The views of Deputies were very constructive.

I have already recorded my appreciation of the Minister.

Sitting suspended at 1.50 p.m. and resumed at 2.30 p.m.