Written Answers. - Pension Funds.
315 Mr. R. Bruton asked the Minister for Public Enterprise if she has included, in her review of pension rights within Aer Lingus and Aer Rianta, the issue of impact of the co-ordinated pension scheme in diminishing the rights of pensioners from the Aer Lingus and Aer Rianta pension funds in accord as the Government increases the rate of contributory old age pension; and the proposals she has to remove this anomaly. [19744/00]
316 Mr. N. Ahern asked the Minister for Public Enterprise if he will give an update on the task force report set up to examine the pensions paid to retired staff of Aer Rianta and Aer Lingus; when pension improvements can be expected; if there are large surpluses in the pension fund in view of the fact staff paid the same contributions as other State and semi-State employees and receive less pensions; the ramifications for the pension fund of any privatisation/IPO of either organisation; if a subsidy from the State to the pensions fund will be required; and if the co-ordination element of the scheme, whereby the pension reduces when old age pension is paid, can be explained and withdrawn. [20037/00]
I propose to take Questions Nos. 315 and 316 together.
The task force established by the chairmen of Aer Lingus and Aer Rianta at my request to examine concerns about the Irish airlines (general employees) superannuation scheme sub mitted a report to the chairmen at the end of May 2000. The task force report summarised the main concerns and views about the pension scheme made by various representative associations in submissions and presentations and an independent actuary costed the various proposals received. Following receipt of the task force report, Aer Lingus and Aer Rianta commissioned separate reviews of the report.
As far as Aer Rianta is concerned, the company propose to establish a new scheme in due course in accordance with section 32 of the Air Navigation and Transport (Amendment) Act, 1998, and the company is giving consideration to this matter.
Aer Lingus as a result of their review and having regard to the structure and terms of the existing scheme and the Government's decision in relation to the IPO, decided that the most appropriate course of action was to set about establishing a separate pension scheme for relevant Aer Lingus staff. The existing scheme is a multi-employer scheme and is not an appropriate one in the context of the proposed flotation. In the light of these circumstances, the airline has been discussing the terms of a proposed new pension scheme with employee representatives. The company has also recently outlined their proposals to the Retired Aviation Staff Association.
Appropriate enabling provisions to allow Aer Lingus to establish the proposed new pension scheme are contained in the Aer Lingus Bill, 2000, which will be shortly considered by the House. Under those provisions, it is proposed that existing Aer Lingus employees will transfer to the proposed new pension scheme while Aer Lingus pensioners will have the option of either remaining in the existing scheme or alternatively joining the proposed new scheme.
Aer Lingus management has proposed that in the new scheme, pensions will increase in line with the annual Consumer Price Index provided that it does not exceed 5%. It is also proposed that the new scheme will provide improved benefits in areas such as guaranteed pension payments periods and death-in-service benefits. The company do not propose to provide for pension increases in line with salary movements for ongoing cost reasons and as it would also necessitate a substantial capital injection. It is not proposed to remove integration/co-ordination with social welfare benefits. Aer Lingus advise that the overall terms of the proposed new scheme would be in line with practice in the private sector and in many cases would have better benefits. I am advised that there are sufficient funds in the existing multi-employer scheme to fund the proposed improvements for pensioners and in relation to past service for existing staff.
An estimated overall surplus of £300 million in the existing scheme was identified in the actuarial assessment which accompanied the task force report. Since its inception surpluses have arisen in the normal course and have been used at the discretion of the trustees, acting on the advice of the actuary, to fund increases in pension payments. In the context of the proposed new schemes to be established, there would be an equitable pro-rata allocation, as appropriate, of the funds of the existing scheme in relation to the past service liabilities of existing employees and pensioners based on an actuarial assessment.
Aer Lingus has advised that the company contribution will be increased for future service liabilities as necessary to meet the proposed new scheme's funding costs. Employee contributions will remain at current levels. The rules of the existing scheme specify that equal contributions are payable by employees and employers.
There is no question of any subsidy being provided by the State towards the Irish airlines (general employees) superannuation scheme or the proposed new pension schemes to be established by either Aer Lingus or Aer Rianta. In so far as co-ordination of public sector pension schemes such as the Irish airlines (general employees) superannuation scheme with social welfare benefits is concerned, policy in this area is a matter for the Minister for Finance. I understand that such co-ordination is a central feature of public sector pension schemes for employees who pay the full rate of PRSI and qualify for social welfare contributory old age pension in addition to the occupational pension. The Minister for Finance does not consider that there is any justification for the removal of the co-ordination arrangements in public sector schemes.
It is Aer Lingus' intention to implement the new pension scheme as soon as possible after the IPO of the airline is completed. In the meantime, I will continue to monitor developments in relation to the discussions on the proposed new pension scheme.