Written Answers. - Pension Provisions.
Noel Ahern
Question:
194
Mr. N. Ahern
asked the
Minister for Social, Community and Family Affairs
when, and the reason, the pension co-ordination clause was introduced; if this clause will be amended or abolished in the Finance Bill to ensure that it does not discriminate against persons in receipt of occupational pensions which permit a maximum increase of 2.5%.
[30071/00]
It is assumed the Deputy is referring to the practice of "integration" whereby occupational pension schemes take the State old age contributory-retirement pension into account in designing the overall benefit promise being made by the scheme. I should point out that by operating integration, an employer may be able to provide a retired person with an earnings-related pension which might otherwise not be possible.
In considering any issue relating to occupational pension schemes, one has to take into account that such schemes are voluntary arrangements between an employer and employees.
However, where such occupational schemes exist, I consider they should operate on a sound basis from the perspective of the pensioner and I have made it quite clear since I became Minister that I expect the significant increases in the old age pension which have been introduced by this Government to be passed on in full to pensioners.
I have expressed concern on a number of occasions in the House regarding the less favourable aspects of integration. Accordingly, in the 1999 Social Welfare Act, I provided for a prohibition on the practice of reducing occupational pensions already in payment, as a result of increases in the social welfare pension. The effect of this measure is to prohibit occupational pensions in payment from being reduced in any one year from the level obtaining in the preceding year. Such a prohibition was recommended by the Pensions Board in its report on the national pensions policy initiative, NPPI.
Furthermore, while there is little, if any, evidence that any pension scheme rules permit an actual reduction in the amount of occupational pension in payment as a result of increases in the social welfare pension, this provision will act as a preventive measure to ensure that such a rule is not, in future, introduced in a pensions scheme.
While integration is generally carried out on a "once-off" basis at the point of retirement, in a very small number of pension schemes integration continued on an ongoing basis after retirement under a "total pension income" approach, which was provided for in the rules of these schemes. Therefore, I brought forward an amendment in this year's Social Welfare Act to prohibit this practice.
I believe that these measures clearly signal my concerns on this issue and ensure that social welfare increases are passed on in full. However, in relation to the specific instance outlined by the Deputy, I will have the matter examined further if the Deputy wishes to provide specific details.
Of course, another way of ensuring greater consistency across pension schemes in this area would be through indexation, and I can confirm that I am considering a report from the Pensions Board on the indexation of occupational pensions in the context of the forthcoming Pensions Bill.
