I thank the Ceann Comhairle for selecting this most important topic for debate, and I thank the Minister, Deputy Burton, for her presence here, which indicates clearly that this is an issue to which she attaches significant importance. This is a very sensitive and complex issue, which requires detailed analysis, focus and consideration, as undoubtedly there will be impacts as a consequence of any proposed change, but it must be tackled and addressed. The last thing we should do is to adopt an ostrich-type stance, with the wish that the circumstances relating to pension fund wind-ups, deficits arising and employer exposure will go away. Clearly, that will not suffice because of the pressing nature of events surrounding defined benefit schemes.
We are all aware that currently, when a defined benefit pension scheme is wound up, pension legislation and the trust deed require that the scheme's assets be applied to provide for members' benefits after payment of the expenses incurred necessarily in the wind-up, in the following order: first, benefit entitlement relating to members' additional voluntary contributions, AVCs, or relating to a transfer of rights from another scheme; second, the continued payment of pensions currently in payment, excluding any future increases; third, deferred pension entitlements for members who have not already retired, including statutory revaluations up to retirement age but excluding future increases post-retirement age; and fourth, post-retirement pension increases on the above benefits, in so far as they are required under the rules. It is possible, therefore, in the context of these priorities, that some people will receive 100% of their benefits while others will receive much reduced benefits or no benefits.
Prior to the Waterford Crystal case, in which judgment was delivered by the European Court of Justice, ECJ, in April 2013, the 1980 directive, which was updated in 2009, required the State to provide appropriate protection in the event of a double insolvency - that is, where both the employer and the pension scheme are insolvent at the same time. The insolvency protection scheme introduced in the 1980s provided for cover for contributions payable in respect of the last 12 months prior to wind-up, but in the current environment this can represent a small fraction of the deficit on a scheme.
Following on from the Carol Robins case in 2007, in which the ECJ ruled that the UK Government was not compliant with the directive, the then Government introduced the pension insolvency payment scheme, PIPS, for a limited three-year period, which I believe will expire in February 2013, with an initial budget of €100 million. This facility is subject to a number of stipulations and conditions; in particular, it is limited to pensions at the date of insolvency, so it provides no relief for active and deferred members. That is the area on which we are trying to focus our attention, particularly with regard to those who are active members and nearing the end of their lives. They are particularly worried and concerned about this matter and great stress and anxiety are caused to many people in these situations.
The structure of PIPS is designed to ensure cost efficiency and to provide pensions in a more cost-efficient way than through the purchasing of an annuity contract. It can reduce the cost of an annuity purchase, which ensures there is more cash available, but it is still possible that a significant deficit can arise.
We are all aware of the most recent decision in the Waterford Crystal case, and I understand that it has gone back to the High Court for consideration. As it is before the courts, we cannot comment too much on it until it is finalised, and I appreciate the Minister's dilemma in that regard. The ECJ ruled that the Irish legislative mechanisms do not provide sufficient protection in these situations.
I am deeply concerned about this matter and it is one I feel very strongly about. I have raised it in parliamentary questions to the Minister. It is important that an appropriate scheme be put in place to protect workers' pensions rights - workers who are paying into pensions are deeply concerned about this matter - when an employer becomes insolvent and the relevant pension fund to which contributions have been made is in deficit. There is no doubt that consideration of an adjustment of the priority order to ensure that significant funds will be available to active and deferred members will have to be confronted and addressed and appropriate alleviating measures introduced.
I genuinely wish the Minister well in her efforts to devise an appropriate scheme. I know she has received a report, which I hope addresses this matter, and I hope the decision of the High Court in the Waterford Crystal case will feed into her consideration.