It is widely recognised that the Pensions Act, 1990 was a milestone which safeguarded and protected workers' occupational pensions. It was important legislation and ensured that pension promises made to employees would be honoured. It has worked well and has been acclaimed and used by others outside this country in framing their pensions legislation to ensure that funds are neither abused nor misappropriated.
If the UK had similiar pension safeguards in place the Maxwell disaster would have been less likely to occur. We can see how important it is in current circumstances to ensure that the pension promises made to workers in the semi-State sector are honoured. In the case of Telecom Éireann, there is a major requirement on the Government to ensure that adequate funds are available to meet employees' pensions in the fullness of time. It highlights the fact that unless moneys are available to meet pensions the promises made to workers will not be honoured.
The Bill, which amends the 1990 Act, follows a detailed review of the operation of the Act carried out by the Pensions Board. I congratulate it on its work in the first five years of its operation. Great support was given by the industry and the professions involved in meeting the provisions of the Act. Many of the amendments are of a technical nature. Their purpose is to clarify, extend and strengthen the original provisions and remove anomalies identified in the intervening years.
Section 36 is particularly welcome in that it clarifies the position in the event of the chairman of the board having to be replaced. It also provides for two extra board members to represent the newly appointed trustees of schemes, one representing trade union members and one nominated by employer organisations. It is interesting that the Government is clarifying the position at this stage and ensuring in the event of the replacement of the chairman of the board the proper procedures are in place. Various Departments are ensuring legislation is up to date in that regard, and it is possible this provision has nothing to do with events involving the Minister for Transport, Energy and Communications, Deputy Lowry, and the Minister for Arts, Culture and the Gaeltacht, Deputy Higgins. As I understand it, the purpose is to clarify the arrangements for replacing a chairman of the Pensions Board. I presume the measure is to correct an anomaly and does not relate to the current chairman or to incidents that occurred in recent times.
The two extra board members are to be nominated by ICTU and IBEC with a view to representing the interests of trustees and they must be trustees of an occupational pension scheme. It is particularly important that trustees be represented. Trustees have been appointed and registered. The representative role of the two trustees nominated to the board is crucial. I would like the Minister to clarify that their function and duty is to employer members and worker members of schemes and that their role will be truly representative in practice.
Trustees are the principal custodians of members' interests in funds and assets and their formal representation on the board is especially welcome. I am nevertheless surprised the Minister did not avail of the opportunity to provide for a place on the board for a pensioner. He could have done so by appointing a pensioner who is also a trustee. A pensioner trustee would have a wealth of knowledge, life-long experience in the workplace, would have contributed to a pension fund and have the added experience of being a beneficiary of the fund. A pensioner would have a very strong interest in the security of the scheme and would provide a balance in the membership of the board. I will request my colleague, Deputy Joe Walsh, to put down an amendment to include a pensioner trustee in the membership of the board.
The impetus for this legislation came from people who found their pensions were not there for them when they retired but had been used, perhaps accidentally, on other projects which did not yield returns. In some cases the funds had been wiped out altogether. They were literally left in tears. Now that the scheme is up and running and we are including two trustees on the board it is time to include a pensioner in its membership. I suggest the Minister consider that matter for Committee Stage.
Another important change being made in section 34 is the provision for reporting by auditors, actuaries, trustees and others of any reasonable suspicion that funds have been misappropriated or that a fraud has been perpetrated. Special protection and privilege is provided to safeguard those who make such a report in good faith. In this regard the Minister said: "In introducing this provision I am going further than was recommended to me by the Pensions Board". He outlined why he felt he should go further and said the board felt his objective would best be achieved by encouragement rather than by compulsion. The board recommended a voluntary system, but the Minister considers that the best way to proceed is by compulsion. Time will tell whether the concerns of the board were relevant. I fully understand the Minister's concern to go a step further in safeguarding this area, but whether he is going beyond what is necessary we will not know.
This is a very much a specialist Bill which is very welcome, but it does not tackle the important issues and challenges facing workers and the pension industry. It tidies up a number of issues, it provides for reporting of fraud and misappropriation of funds, that trustees will be represented on the board and for the replacement of a chairman of the board. Other technicalities are also dealt with and that is welcome.
There are major issues facing the pension industry. The provision of adequate pensions is based on a two-tiered system, a basic pension provided by the State for PRSI contributors and a top-up occupational pension by the employer. There are currently three major problems in this area. First, the State's retirement and old age pensions are being systematically eroded by this Government. Increases in 1995 and 1996 are barely adequate to meet the low levels of inflation. Pensioners are not participating in the growth and the increasing wealth of the nation. Young people do not appreciate the importance of pensions until they reach the age of 35 and 40 but they should think about it for the future when their job security may not be as solid, even if their jobs are more challenging. My main concern is that with growth levels in GNP in excess of 5 per cent each year, pensioners received only 2.5 per cent and 3 per cent increases in the past two years. Pensioners are not getting a share in the growing national cake. Having built the nation with their sweat, intelligence, initiative and hard work they are now being denied any share in the benefits. Pensioners have been ignored twice in the past two budgets and I hope that will not be repeated next year.
The provision of occupational pensions by employers is changing substantially and there are many areas which need to be urgently addressed. Pension fund assets, estimated at £16 billion, have grown steadily in recent years; some 40 per cent of the funds are invested abroad. In future, those of us in Europe may receive our pensions in euros rather than punts but we will have to carefully monitor any developments affecting pensions within the EU. Any shift of control towards free movement of investment could have a damaging effect on the Irish economy. Most of these funds are currently managed from Ireland. People are now living longer and in many instances they are retiring earlier. Pressure is building on the funds to meet new demands. Employers are requesting greater flexibility and workers are becoming increasingly mobile. Employers fear their funds will not be able to meet the extra demands. Consequently, they are shifting to defined contribution schemes and away from defined benefits. The older pension funds provided for 50 per cent or up to 66 per cent of salary as the defined benefit for the pensioner. The new schemes fix the contribution but the pension will depend on the investment performance of the fund. Workers should be aware of this change and be advised of the long-term implications. In general, they suit employers more than employees; the investment risk shifts to the employees. These changes, which are occuring now, will require a close examination of all legislation affecting pensions to safeguard workers' interests in the future.
Existing pension schemes or rules do not cater adequately for the growing proportion of the workforce employed part-time, those redundant or those who want to take time out to care for children or people with disabilities. Employers increasingly need flexibility in the workforce. That is being provided but there is a need also for matching flexibility in the provision of pension support. It can be done if somebody cares.
Overall there is a need for a more radical reappraisal of the present provision and operation of pensions. Ireland, with its young population, has great potential for growth but if we are to achieve this growth and the jobs it will provide, we need investment. The present favourable economic climate and forecast augur well for greater pension fund investment at home. Many opportunities can be identified and the Government should give every encouragement to invest more of the pension funds here. We must be careful also not to discourage the development of pension provision through over-regulation. This crucial balance must be maintained if the best interests of the workers and their employers are to be maintained.
The Bill, while limited, is welcome. It is very technical. It provides for the replacement of chairmen and two additional board members to represent trustees, but it does not provide specifically for a pensioner trustee. Pensioners' interests are considerable and such a provision would be an addition to the Bill. It also provides for compulsory reporting of suspected fraud or misappropriation and for a whistle blowers scheme, but it does not tackle key issues such as State pensions and the need for pensioners on social welfare pensions to get a share of the growing national cake. It does not cover the shift to defined contribution schemes away from defined benefit schemes, an area which needs a great deal of attention. The growing proportion of the workforce employed part-time, who are redundant and who want time out must be considered in pension provision. Redundant workers are increasingly seeking greater security in their position and further backdating of their pensions. I welcome the Bill but I would like to see more work done in this area.
