Dáil Éireann debate -
Tuesday, 6 Nov 2001

Vol. 543 No. 2

Written Answers. - Pension Provisions.

Seán Haughey

Question:

584 Mr. Haughey asked the Minister for Social, Community and Family Affairs the plans he has to make the practice of abatement or clawback of the State pension or equivalent at the State pension age of 66, illegal; and if he will make a statement on the matter. [25976/01]

Minister for Social, Community and Family Affairs (Mr. D. Ahern):

It is assumed that 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.

At the outset, I would stress that 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 Social Welfare Act, 1999, 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 the Social Welfare Act, 2000, to prohibit this practice.

These measures clearly signal my concerns on this issue and ensure that social welfare increases are passed on in full. Another way of ensuring greater consistency across pension schemes in this area would be through indexation of pensions in payment and I set out proposals in this area in the Pensions (Amendment) Bill, 2001, which is currently before the Seanad. The Bill proposes for schemes that do not provide indexation that there be a mandatory review by the trustees of the scheme of the possibility of indexing pensions in payment at the lower of the increase in consumer prices – CPI – or 4%. The outcome of this review and the employers response, where required by the rules of the scheme, must be published in the annual report.