Dáil Éireann debate -
Wednesday, 8 Mar 2000

Vol. 516 No. 1

Adjournment Debate. - Irish Airlines Superannuation Scheme.

Mr. S. Ryan:

I am pleased to raise with the Minister what I can only classify as the scandal of the Aer Lingus and Aer Rianta pension scheme and to strongly recommend that this anomalous situation be rectified as a matter of urgency. I demand a review of this scheme in advance of any privatisation or part privatisation proposals from Government.

When first introduced the scheme was acknowledged to be one of the best in the country. Some 30 years later it is probably one of the worst in the public and commercial semi-State sectors. Today the Aer Lingus and Aer Rianta pension scheme has inadequate contribution income due to the low level of employer contribution, which is completely out of line with normal practice. Pensions are fixed on the basis of years of service and pay at the date of retirement with no guaran tee of any post retirement pension increases. Increases that may be awarded must be at the discretion of the trustees. There is not indexation of pensions and any increases must not exceed the increase in the consumer price index.

This scheme can be compared to those that prevail in the public and semi-State sectors. Throughout the public sector pensions are indexed to the salaries of existing employees. If staff get an increase in pay under a national pay agreement or if they get a special increase such as that secured by Army personnel, nurses, gardaí and firemen in the recent past, their pensioners get the same percentage increase.

That rule applies to all civil servants, local authority employees, health board employees, Army personnel and the Garda. In the ESB, Eircom, An Post, RTE and CIE salaried grades pension schemes guarantee that pensions will be kept in line with existing salaries. The Aer Lingus and Aer Rianta pension scheme is the exception. A further exception is that over the past 15 years pension increases for the various companies have increased by significant amounts. In that period, CIE salaried staff got a pension increase of 80.96%, RTE staff got one of 163%, Civil Service executive officers got one of 107%, national teachers got one of 106% and at the bottom of the scale Aer Lingus and Aer Rianta staff got one at 58.9%. Is it any wonder that pensioners of Aer Lingus and Aer Rianta who have made huge personal contributions over the years to ensure the future growth in development of both companies are angry and frustrated when they see themselves being treated in such a less favourable manner than pensioners in other comparable employments.

The purpose of any pension scheme should be to enable all participants to acquire an income that allows them to maintain their established standard of living on attainment of retirement age and in the case of dependents on the death of the income provider. This scheme fails the test and, accordingly, I strongly recommend that it be amended to provide for pensions indexed to wage increases, as is the practice throughout the public sector and which also obtains in private sector employment.

In reply to a parliamentary question I tabled on 9 February, the Minister confirmed that she had not yet received a report from the chairmen of Aer Lingus and Aer Rianta on the work of the task force on the pension scheme. I am deeply concerned at this as I firmly believe this excuse may be used by the Minister for not amending this anomalous and unacceptable pension scheme prior to her privatisation proposals for both companies being announced.

I seek a commitment from the Minister of State that this issue will be satisfactorily resolved before any privatisation proposals are brought before this House. It is a fact of life that employees generally do not become interested in their pension entitlements until they reach 45 to 50 years of age. In this case and at this time, it is imperative that all the staff and pensioners of Dublin, Cork and Shannon Airports take a stand on this issue.

Members of the Oireachtas are unhappy with their pension entitlements. However, unlike the staff of those three airports we, like most other groups in the public and semi-State sectors, are contributing to an index linked pension scheme. Why should the staff and pensioners of Aer Lingus and Aer Rianta be treated any less favourably? This is a true test as to how the Government treats its elderly who have contributed so much over the years to ensure the success of our economy.

Minister of State at the Department of Public Enterprise (Mr. Jacob):

I compliment Deputy Ryan on raising this important issue. The Irish airlines (general employees) superannuation scheme was originally established in 1954 to manage the pensions of all permanent staff in Aer Lingus and Aer Rianta. The scheme is a defined benefit scheme in which the employers match the contributions of employees. The object of the scheme is to provide pensions which are granted in accordance with the rules of the scheme for the benefit of the members and their dependants.

The rules of the scheme provide for a mechanism within which annual increases are awarded to pensioners. This comprises a percentage determined by the trustees based on the amount of the actuarial surplus of the fund and the rate of inflation. The increase is at the sole discretion of the trustees.

Members of the scheme pay a contribution calculated as a percentage of their salary. For staff recruited prior to 1970, this contribution is 6.375%, while for staff recruited after 1970 it is 5.1%. The companies, Aer Lingus and Aer Rianta, contribute a similar amount.

The scheme, while established on a defined benefit basis, has paid pension increases in line with CPI every year with the exception of a number of years in the 1980s where the rate of inflation was high and the increases were below the rate in question.

Since 1 April 1967, a member who retires at his normal retiring date or thereafter is paid a pension from the date of his retirement at the rate of one-sixtieth part of his final retiring salary for each year of pensionable service. The amount of any pension paid to a member at retirement is subject to a maximum of forty-sixtieths of final retiring salary.

The Minister for Public Enterprise is aware that some members of the scheme have expressed concern at the indexation arrangements attaching to their pension entitlements and other issues. The Minister is also aware that there is a wide range of complex issues involved in the scheme. Following receipt of representations from retired employees and unions representing employees in Aer Lingus and Aer Rianta, the Minister asked the chairmen of the companies to establish a task force to examine the concerns which have been expressed and to submit a report to her.

The task force, established in December 1999, is working to terms of reference drawn up by Aer Lingus and Aer Rianta. It comprises four members nominated by the representative groups. The chairman and one independent member were nominated by the companies and were accepted by the representative groups.

I understand the task force has concluded the extensive process of taking submissions, both written and oral, from interested groups and that it is currently having the issues and concerns costed as appropriate. Once this exercise is complete, the task force will document its findings and submit them to Aer Lingus and Aer Rianta who will then revert to the Minister. It would be inappropriate for the Minister to comment further in the matter in advance of receiving that report.