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Dáil Éireann debate -
Thursday, 29 Nov 2001

Vol. 545 No. 3

Written Answers. - Pension Provisions.

Noel Ahern

Question:

136 Mr. N. Ahern asked the Minister for Social, Community and Family Affairs the situation regarding workers in various industries (details supplied) who do not receive the full benefit of social welfare old age pension; if this practice is enshrined in the rules of the individual pension funds; if this is due to a provision in the Finance Act of the early 1970s under the principle of co-ordination; the reason for the situation in this regard; and if he will make a statement on the matter. [30242/01]

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.

I 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 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.
If the Deputy has evidence that this amendment is being flouted, I would be happy to have it investigated if I am provided with the details. 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. I believe that 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.
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