Social Welfare and Pensions (No. 2) Bill 2013: Second Stage

I move: "That the Bill be now read a Second Time."

The Social Welfare and Pensions (No. 2) Bill and the measures contained in it will not in any way affect people who are in receipt of either the contributory or non-contributory State pension. The measures I am outlining relate to defined benefit pension schemes only and the need for greater fairness when such schemes run into difficulty. It is important to stress that these measures will apply only in a limited set of circumstances, meaning the potential number of schemes affected will be small. The aim of the Bill is to ensure in such circumstances a fairer deal for workers and sufficient protection for pensioners while allowing employers and trustees to tackle their pension problems. The legislation is in keeping with the series of steps I have taken in recent years to deal with the issues affecting defined benefit schemes.

I want to detail some of those steps and set out the defined benefit context as it currently stands. Last year, for example, I brought in legislation introducing a risk reserve into defined benefit pension schemes and that legislation was broadly welcomed. The risk reserve is essentially a mechanism to ensure schemes do not take on too much risk and to prevent the same difficulties from arising again. It is worth remembering that the OECD, in its recent study on pensions in Ireland, pointed out that Ireland's occupational schemes lost more funds during the financial crisis than any other OECD country because of the high level of risk being carried by the schemes.

Following the introduction of the legislation last year, the funding standard was reintroduced and schemes had to return their funding position to the Pensions Board by the end of June this year. The Pensions Board suspended the funding standard in 2008 after the bank guarantee scheme was introduced in the mistaken belief that it would be possible to reinstate it by Christmas, but of course that never happened.

Schemes got into greater difficulty in the aftermath of the bank guarantee and the crash. I am happy to report to the House that the position is somewhat better than expected. We now know that over 40% of schemes are fully funded. Other schemes are working on the funding arrangements. Although 20% are poorly funded, many of these schemes have submitted funding proposals to the Pensions Board to get them back on track. The Pensions Board is now working with them on an individual basis to help them get over the line and to a sustainable position on pension schemes. The aim is to continue to nurse these schemes into a good funding position. When schemes are well funded, there will be no need to fall back on the provisions in this Bill.

However, for schemes that are underfunded, the provisions in this Bill address difficult issues of equity and fairness and have been under careful consideration for some time. The provisions ensure a fairer deal for workers and sufficient protection for pensioners. Defined benefit schemes are private pension schemes where those contributing to the scheme - the employer and the members - pool their contributions, which are then invested in order to pay pensions on retirement. Employers establish defined benefit schemes to provide their workers with income in retirement. They sponsor and contribute to them in good faith, taking on a considerable amount of the risk. Employers also provide the employment opportunities in the first instance. The primary role of the employer, as the sponsor in these schemes, is an underlying principle informing this legislation. So too is the protection of pensioners in these schemes, given the importance of security of income in retirement. Members of occupational pension schemes contribute to them in the expectation of the pension promised to them being delivered in the future. The Bill acknowledges their role in the scheme and realigns their role to an extent.

The stakeholders share the benefits and also, in principle, the risks of the fund. Many of these defined benefit schemes were established years ago and some have more pensioners than contributing workers. The State's role as regulator is to watch over these private occupational schemes and ensure they can live up to their promises. The State recognises that it has obligations under EU law and it will address these obligations. This legislation does that. The State also has a policy role to try to ensure that all people have an adequate income in retirement.

In this Bill, I introduce changes to the existing priority order. The priority order comes into play when a defined benefit schemes winds up. It basically outlines, on a step-by-step basis, the order in which the assets of the pension scheme are distributed when the scheme is winding up. Existing legislation comes from a time when defined benefit schemes were carrying surpluses. There is no issue with a scheme winding up when the scheme is funded, as all benefits can be met, which is the critical issue. If the scheme is properly funded the measures are not at issue because the scheme has sufficient funds to meet the promises made in the context of the scheme. It is when a scheme is underfunded that difficulties arise. The key issue with the existing priority order is that it gives 100% protection to pensions currently in payment and then distributes the rest of the funds to current and former members of the scheme. It can arise at present that pensioners receive all or almost all of the pension fund and the members who have contributed but have not retired receive considerably less than they had expected. This issue has been of concern for some time and a considerable number of calls have come from employee and employer representatives, the pensions industry, actuaries and others to address the current inequities. Detailed examination of the issues has taken place. Technical advice was undertaken on the provisions and consultation with all stakeholder groups also took place. All stakeholder groups were invited to take part in a consultation process and participated. Following consideration of all the factors, I am replacing the existing priority order with two priority orders in this Bill. I am making provision for a situation in which the pension scheme winds up and the employer is solvent. I am also providing for a situation in which both the employer and the pension scheme are insolvent, which is called a double insolvency. This is to ensure the State meets its obligations under the insolvency directive following the ruling by the European Court of Justice in April this year.

In a single insolvency, where the scheme does not have enough funds to meet the claims on it, the priority order will change in the following way. The first priority will be given to defined contribution assets in a defined benefit scheme, which should not be part of the distribution of defined benefit assets. The next priority is given to pensioners. They will still be given a significant level of priority but there will now be provision for redistribution into the scheme from higher pensions at the initial distribution of the scheme assets. I am retaining 100% protection up to an annual amount of €12,000 for pensions. I am then providing a priority of 90% of pensions between €12,000 and €60,000 and 80% of pensions over €60,000. This reprioritising of the element of pension benefit over €12,000 will contribute to the benefits of current and former employees, which will be prioritised at 50%. Pensioner benefit will then be reprioritised before further resources are allocated to current and former scheme members. The impact of the changes will depend on the degree of underfunding. If there are sufficient funds in the scheme, any initial reductions to pensioners will be regained once the current and former members have been provided for and as the distribution of funds moves through the order outlined.

By maintaining significant protection for the pensioner, we are recognising that pensioners have retired from the workforce and therefore are a lot less likely to be able to build up more contributions. However, it aims to bring more equity to the current system by giving an improved outcome to current and former workers who have contributed to the scheme. Current workers paying into the scheme are often referred to as active members, while former workers who have not yet reached pension age are referred to as deferred members. The latter will not claim the pension fund until they reach retirement age.

The change recognises that all beneficiaries of the scheme - active contributing members, deferred members and pensioners - need to share the risks when a scheme is underfunded. The limit of €12,000 takes into consideration that the median private sector defined benefit pension is €11,000, the average pension is €18,000 and 55% of private sector pensions are below €12,000. Separately to any private pension, the vast majority of pensioners receive the State pension, which is not affected in any way by these changes.

I have fully protected the State pension since becoming Minister in light of its critical importance to older people. A pensioner who has a State pension of €12,000 and an occupational pension of €12,000 will retain an income of €24,000, which is approximately two thirds of the average industrial wage and compares well internationally.

The second provision we are allowing for is double insolvency, which applies when an employer goes out of business and the pension scheme is also underfunded. It is a particular situation that is covered by the EU insolvency directive. Article 8 of the directive requires the State to have measures in place to ensure that at least 49% of the expected benefits of the contributors to the scheme can be met. In April this year the European Court of Justice found that the State was not meeting its obligations under Article 8, and this provision is addressing the obligation. Again, the options have been considered in detail, and this also included an examination of the mechanisms in other countries. I am aware that other countries with defined benefit schemes have established large and complex structures to deal with occupational pension underfunding, but we need to bear in mind that this economy is recovering slowly from the severe downturn. Although I am thankful that unemployment is decreasing and we will exit the bailout on 15 December, resources remain limited.

We also looked at the risk of future double insolvencies and the role that regulation can play in keeping pension schemes aware of the need to manage their own funding position. Therefore, this provision changes the order of priority in a double insolvency situation as follows. As before, first priority is given to defined contribution assets, as they should not be part of the distribution of defined benefit assets. The second and third priorities are given to 50% of pensioner and members' benefits, and then priority is given to protecting pensioner benefits up to €12,000. The remaining steps of the order continue to provide for the benefits of pensioners and then for benefits of current and former scheme members.

These changes to the order do the following. First, they meet the requirements of the directive by ensuring that scheme funds are distributed in a way that ensures that all members, including pensioners, receive 50% of their benefits. The next priority is that significant protection is in place to ensure that pensioners receive a pension of €12,000. Again, much depends on the funding of the scheme. If the scheme is sufficiently funded, the distribution of funds can move through the various steps of the priority order and provide for the 50% requirement under the directive and then for pensioners' benefits up to €12,000, with the remainder going to pensioners' and other members' benefits.

In addition, the Bill provides that in a double insolvency where a scheme has insufficient resources to provide the 50% of benefits and protect €12,000 of pensioner benefits, the Minister for Finance shall provide for the shortfall in scheme assets. The scheme would wind up in the normal way and provide current and former workers with transfer values, which can be moved to another pension arrangement, and purchase annuities for the pensioners. The Minister has agreed that some of the funds obtained from the pension levy can be used to fund any costs which arise in double insolvency only. In such cases - which I should emphasise are very rare - it is proposed that there be a transfer of funds from the State to the scheme trustees by way of a once-off settlement. The provisions outline the principles of this process on which guidelines will be introduced. In short, the State does not intend to establish a complex and costly structure funded by taxpayers. What is provided for is a mechanism that can also provide for any historic situations that have arisen.

The aim of this Bill and the entire package of measures is to ensure as far as possible that we have the minimum number of double insolvencies. The Pensions Board will be introducing secondary legislation and tightening up the regulation around underfunded defined benefit pension schemes with a view to ensuring that such schemes take action to manage and improve their funding position. I cannot stress enough the importance of this, as pension schemes are based on promises made in good faith by employers. As a result of the events surrounding the Irish bank guarantee and turmoil in the international markets, pension schemes have gone through a very difficult time, although we are slowly recovering and stabilising. It is important that we get as many schemes as possible back into a properly funded position. That is the best protection for pensioners and active and deferred members. These measures and actions are all aimed at minimising the risk of double insolvencies in future.

The Bill broadens the category of benefits that can be reduced where a defined benefit pension scheme is being restructured to improve its funding position and remain viable for all its members. Schemes have numerous options in this regard. For example, they can increase contributions or extend the retirement age, and they can also reduce benefits. Schemes are managed by trustees under trust law, and people will be familiar with negotiations taking place between trustees, the employer, and active and deferred members on how to effectively restructure schemes to produce the best and most sustainable outcome for the fund. This provision represents an additional option for the trustee.

The reduction is progressive and the limits are as I outlined for single insolvency. Pension benefits up to €12,000 are fully protected, annual pension amounts of between €12,000 and €60,000 can be reduced by up to 10%, and annual pension amounts over €60,000 can be reduced by up to 20%. This again brings increased fairness to the scheme, improves the position for current and former scheme members and may help a scheme to stay open. I also want to emphasise the fact that the provision provides for a reduction of up to 10% and up to 20%, and the trustee has discretion as to the percentage that needs to be applied. If a viable restructuring package can be put in place, it will assist in reducing the amount of restructuring. For example, a scheme with a high number of pensioners with high average pensions that applies a 1% reduction could receive an injection of funds of 2% to 3% back into the scheme for current and former workers. Everybody speaking on all sides of the House is conscious of cases in which a person reaching the pension age of 65 years will get 100% while somebody who is 62, 63 or 64 but has not yet reached pension age is left with little or nothing. That is part of the fairness issue we are trying to address.

In addition to the changes to defined benefit schemes that I have mentioned, this Bill also addresses issues that have been raised in a recent High Court judgment concerning the legal powers of deciding officers and appeals officers to revise decisions in certain cases.

This is a complex area. Sections 301, 317 and 324 of the Social Welfare Consolidation Act currently allow officials of my Department, including appeals officers, to revise earlier decisions in a range of circumstances. This includes situations where new evidence is produced which indicates that the original decision was wrong and situations where there has been a change of circumstances since the original decision was given. These powers are wide-ranging and give considerable flexibility to deciding officers and appeals officers to deal with new evidence or changed circumstances which have been brought to their notice. Up until now, this flexibility has been seen as an asset in allowing deciding officers and appeals officers to deal with differing and, in some cases, changing circumstances. However, in the light of the recent High Court ruling, the provisions relating to a change of circumstances are now considered to be problematic. Up until now, in most cases, it has been the practice in the Department that once a claim is refused and all review and appeals processes are finalised, if the customer seeks a revised decision based on a change of circumstances, he or she is advised to make a fresh application. The new claim is then fully assessed in the light of all the circumstances of the case. In the light of the recent High Court decision, the Department can no longer require people to make a fresh claim but must reopen the claim, even if it was closed many years previously. The purpose of sections 3 to 5, inclusive, of the Bill is to address this issue, but in a limited range of circumstances. Specifically, section 3 amends the provisions of section 301 of the Social Welfare Consolidation Act which apply to the revision by a deciding officer of a previous decision of a deciding officer, an appeals officer or a designated person on entitlement to supplementary welfare allowance. I stress that where the original decision was wrong and if new facts and evidence emerge, the customer will still be able to seek a revised decision. The amendment does not change this. Where a claim is in payment, it will still be possible to revise the decision if circumstances change, but where a person was refused a social welfare payment in the past and his or her circumstances change, the correct channel is to make a fresh application in order that the application can be fully considered in the light of his or her current circumstances. The amendment aims to ensure that will be the practice in all cases. In the light of the High Court decision, I have asked officials of the Department to carry out a more wide-ranging review of the legislation on social welfare decisions and will bring forward any necessary legislation at a later date.

I will now outline the main provisions of the Bill. Section 1 provides for the Short Title, construction and collective citations. Section 2 defines the principal Act for the purposes of Part 2 of the Bill to mean the Social Welfare Consolidation Act 2005. Sections 3 to 5, inclusive, provide that where a person was refused a social welfare payment in the past and his or her circumstances have changed in the meantime, rather than seeking to have the earlier decision reviewed, the correct channel is to make a new application for payment in order that this application can be fully considered in the light of his or her current circumstances. Section 6 provides for the correction of an erroneous reference and the deletion of an obsolete reference contained in Table 2 of Schedule 3 to the Social Welfare Consolidation Act 2005 which lists certain items of income which are excluded from the assessment of means for social assistance payment purposes.

Part 3 and section 7 outline that the "Act of 1990" means the Pensions Act 1990. Section 8 amends section 41 of the Pensions Act to affirm that the changes to the wind-up priority order apply to all defined benefit pension schemes subject to the statutory minimum funding standard. Section 9 inserts five new subsections to provide for the amendments to the priority order to replace the existing order with two new priority orders to deal with scheme wind-up when the employer is solvent and the employer is insolvent - the double insolvency. Section 10 provides for the drawdown of benefits in the event of a shortfall arising in a double insolvency and provides the Minister with the power to make guidelines.

Section 11 broadens the category of benefits that can be reduced where a defined benefit scheme is being restructured because it does not meet the minimum funding standard. Section 50 of the Pensions Act permits the Pensions Board to direct the trustees of a pension scheme to reduce the benefits of current and former scheme members and-or post-retirement increases in benefits for pensioner members where a scheme does not meet the funding standard. The reductions apply to higher pensions up to the limits specified.

Sections 12 and 13 cross-reference section 50B and section 50C with subsection (1B). Section 14 amends section 59B to provide that the prohibition on reducing pensions in payment shall not apply to directions under section 50(1B).

The legislation seeks to achieve three things: it ensures the State meets its obligations to put measures in place under the European insolvency directive. It addresses the equity difficulties with the existing priority order. It goes further by providing a further option to enable schemes to stay viable and stay open, which is the purpose of the legislation, to get the maximum number of schemes across the line to becoming well funded, sustainable, viable schemes, with consequent benefits for pensioners, active current members and deferred members. People need to have a decent income when they retire and we want occupational pensions to be viable and effective. The legislation achieves a fine balance between the needs of the various parties and protects the State and the taxpayer. It does not in any way affect people receiving State retirement pensions, either contributory or non-contributory. A pensioner member of a defined benefit scheme who has an annuity will not generally be affected by the Bill. I commend the Bill to the House.

I am sure there is one thing on which Members on all sides could agree, namely, that pension schemes in this country are facing a considerable crisis. It is long past time for a mature, national debate on the subject. There are six people of working age for every person over the age of 65 years. By 2060 that figure will have changed dramatically to just two people of working age for every person over the age of 65 years. In recent years we have had a plethora of reports, studies, recommendations and suggestions on how to establish a sustainable pension retirement scheme. However, to date, all that is lacking is appropriate action. The Bill changes the priority order in the event that a pension scheme gets into difficulty and winds up for one particular type of private pension scheme, namely, a defined benefit pension scheme. Therefore, it is dealing with a very tiny part of the overall pensions jigsaw. Nevertheless, it does improve on the situation which preceded it.

The first question I must ask is why it has taken so long. I accept the Minister's point that this is a complex area, but the Government's proposal is relatively straightforward. A variant of it has been around since the Department commissioned a report in 2010. I readily concede that the previous Government had the report and suggestion for one year and did not do anything about the priority order, but the Government has not done anything about it for three years.

We are not in government for three years.

If the previous Government was wrong not to take action within one year, the Government is three times as wrong. I wish to ask the Minister about people who have lost some or all of their pension since she took office when the problem was already manifest and a variant of her solution had already been proposed in a report to the Government.

Yesterday, for example, I went downstairs to meet a delegation and one delegate asked me, in respect of a different matter, what was happening as regards the pensions legislation. I was explaining to her what was to happen today and she said she was a member of a defined benefit pension scheme that wound up in the past six weeks. She will not benefit from the changes. The problem is that the Minister made numerous public promises, to IBEC and other organisations, giving several deadlines that were not observed. Between 2009 and September 2012, 231 schemes closed. Almost as many have closed since. The Minister indicated so much in the response to a parliamentary question on 19 November. In the reply, she stated that, since 1 January, "96 schemes have commenced wind up". Overall since the Minister came to office, 50,000 to 60,000 people have lost either all or part of their pension because of the previously unfair priority system.

I have received numerous representations on a certain matter with which I want the Minister to deal in her closing statement. I have been asked to ask her whether the legislation enables or could be amended to enable the new changes, or the changes she is introducing today, to apply where the wind-up takes place before the Bill comes into law but where the funds have not been distributed by the time of its enactment.

The Minister introduced a section providing for a double insolvency situation, presumably in light of the Waterford Glass decision by the European Court of Justice. What is worrying about the Government's proposals in this regard is that they seem to envisage that the infamous pension levy will become a permanent feature of the Irish taxation landscape. That is in direct contradiction of the very specific commitments made by the former Minister for Finance when he introduced the levy. He emphasised time and again that it would be a temporary provision. For example, on 10 May 2011, he said, "The various tax reduction and additional expenditure measures which I am announcing today will be funded by way of a temporary levy on funded pension schemes and personal pension plans." He said it would apply for a period of four years, commencing in 2011, and that it was intended to raise a specified sum. In a reply to Deputy Michael McGrath dated 24 May, he again emphasised this: "As the legislation introducing the levy makes clear, it is for a temporary four year period only and pension funds are being asked to make a contribution to getting the domestic economy moving again over that period." That promise has obviously been jettisoned and now the levy is to be a permanent aspect of the Irish taxation landscape.

The position is now that the Government will be putting the shovel into people's private savings for an indefinite period and an indefinite amount, despite the former Minister’s optimism to the contrary. The pensions levy is an expropriation of private citizens' savings. It is similar in principle to the expropriation of bank deposits recently in Cyprus. It takes money directly from people's savings, including from defined contribution pensioners, who have no relationship whatsoever with those in the Waterford Glass circumstances. The irony is that the new regulations announced in the Bill by the Government will drive many defined benefit schemes to be converted into defined contribution schemes, whose members will then have the privilege of getting lower benefits in order to guarantee the position of those who are able to remain in defined benefit schemes and are, thereby, better off.

From the welter of publicity surrounding the introduction of this legislation, I understood that the new levy, the extra levy announced by the Minister on budget day, would be ring-fenced to deal with this situation specifically, and that there would be no other payments from it. Can the Minister confirm whether this is the case or whether it is an additional general levy?

With regard to single insolvencies, the changes are, by and large, modest enough. There is a guarantee of 100% up to €12,000 per annum. Pensions worth up to €60,000 per annum are guaranteed in the order of 90%, and pensions worth in excess of €60,000 are guaranteed in the order of 80%. There are anomalies in the figures, although I appreciate it is difficult to have them exact. For example, a person on a pension of €59,000 could lose up to €5,900 whereas a person on a pension of €61,000 could lose €12,200. In reality, however, many pensioners will not be affected at all, even if their pension fund winds up in deficit. A pensioner who was on the average industrial wage and who retired after 40 years’ service, having been in a typical pension scheme, will still probably have the same protection as he or she had heretofore. Despite the Bill, those with higher pensions will continue to receive much greater protection than those still at work or deferred pensioners.

As I stated, the double insolvency provisions in this legislation arise directly from the Waterford Glass case. There is, of course, an anomaly. Where a person loses his job and his pension scheme is wound up and the company goes into liquidation, amounting to double insolvency, the person has a certain guarantee of 50% of his benefits. Where a person loses his job and must rely on the pension, becoming a different pensioner, he has no guarantee whatsoever if the pension scheme winds up but the company does not. In an article in The Irish Times on 20 November 2013, Mr. Peter Fahy of Eversheds is quoted as having said, “There is a strong disconnect here which may lead to unintended consequences”.

The Minister referred to Article 8 of the EU directive, which refers to protection in the order of at least 49%. The Minister is providing 50% protection but I am sure she is fully aware of the decision of the High Court in the United Kingdom, where the appropriate level of protection was judged to be 90%. The Waterford Glass case is still before the courts and the question of the appropriate percentage has still to be decided by the High Court. If that court stipulates a figure greater than 50%, what will happen then? Perhaps the Minister will deal with that when responding.

There is nothing in the Bill – perhaps this is an oversight – about the indexation of thresholds. It is reasonable that we should ask whether the thresholds will rise over time to provide some sort of consistency. For defined benefit schemes, the minimum funding requirement is based on a fiction. The question asked is whether the pension scheme would be able to meet all its liabilities if it were wound up tomorrow. This is totally artificial. It fails to recognise the long-term nature of pension provision. Pensions are only paid out on actual retirement and businesses file their accounts on a going-concern basis rather than on an assumption of immediate wind-up. We must move to an ongoing funding model that recognises the long-term nature of pension provision. The present system values liabilities on the basis of a hypothetical set of circumstances that may never come to pass. I refer to how much it will cost to meet a liability by purchasing annuities which are largely priced in German or other triple-A rated bonds. The price of those bonds, as every Member will be aware, has soared significantly in recent years, often deliberately driven up by the authorities which sought to reduce the yield.

Healthy schemes do not need to purchase annuities, yet the very health of those schemes is measured against the price of those annuities and the capacity of the scheme to meet the statutory funding standards based on annual testing. The new Pensions Board rules, introduced in 2010, represent a positive step in the right direction although Irish bond yields have decreased since. However, they are far too restrictive and the trustees are still very unclear as to how much protection they enjoy in the event of something going wrong. There is an urgent need for creative thinking. There are alternatives. For example, Mercer has proposed that the link to German bonds should be substantially broken. It recommends that a certain level of the pension could be so linked and that the balance could then be converted into a lump sum on the basis of a fair actuarial value rather than the cost of an annuity. This lump sum could, in the event of a wind-up, be invested in an active retirement fund from which income could be drawn down, as needed. Other alternatives, or variants of that, have been canvassed by various sources.

There is no evidence, however, that such matters have received the slightest consideration by the Government. The Government policy appears to be to collapse as many defined benefit schemes as possible, to expose as many pensioners as possible to the full risks of defined contribution schemes and to minimise the cost of the commitment in this Bill to guarantee pension shortfalls in certain situations.

In view of this, it is all the more ironic that there remains in this country a very large cohort of pension funds which need have no worries whatsoever about meeting the funding requirements or about how those requirements are to be measured. A Government exemption granted last March to more than 100 State-funded schemes for employees of Government bodies excluded those bodies from all of these considerations. These schemes have approximately 340,000 members, dwarfing the numbers in private pension schemes. The exempt funds include the Central Bank scheme, the Pension Board schemes - surprise, surprise - university pensions and, of course, the Oireachtas Members scheme. If these State-protected pensioners were underfunded to the extent of those in the private sector, the liability would be approximately €30 billion. Overall, the liability for public pensions in this country is in the region of €130 billion. The State-guaranteed public sector pension scheme is the most insolvent scheme of them all.

It was the Fianna Fáil Party that did that.

Fianna Fáil brought in those schemes at the height of the crisis. It was former Deputy Brian Lenihan-----

My information is that it was done more recently.

No. I must correct the Deputy. It was done by Brian Lenihan, sitting here-----

If it was, I accept that but I am just pointing out-----

Certainly that is the case with the schemes Deputy O'Dea referred to at the Central Bank and-----

I am pointing out the difference between the treatment of these people by the State - which the Government can change - and the treatment of those who have to provide for themselves. If my information on that is wrong, I apologise.

I disagree profoundly with those commentators who suggest that the way of the future is the total elimination of defined benefit pension schemes. That will leave a situation where people in the public sector are fully protected with index-linked, fully-guaranteed pensions, for which the taxpayer is liable for every cent while at the other end of the scale, people will be at the mercy of the market and fund performance because they will all be in defined contribution schemes. There is a place for defined benefit pension schemes if we are prepared to look creatively, not at soft options but at the artificial way in which liabilities are measured.

The Bill makes no reference to or provision for early access to pension funds, a matter which has given rise to considerable debate in recent times. Does the Government have any proposals in this regard? Various measures were introduced in various finance Bills but there are outstanding recommendations for substantial change in this regard.

There is also a continuation of the situation whereby profitable employers are still allowed to walk away from pension problems by simply winding down their schemes if they are in deficit. The Government will be aware of an OECD recommendation that a minimum of 90% funding should be in place before a scheme can be closed when a company's financial position is healthy. I ask the Minister to address that point and explain why it is not part of the Bill.

Only 54% of the workforce has pension coverage as we speak. This takes on a very alarming aspect when the public sector is excluded because in the public sector, pension coverage is at 90%. In the health and restaurants sectors, for example, pension coverage averages only 23% according to a recent study conducted on behalf of the Pensions Board. In the wholesale and retail sector, coverage averages 36%. This is despite the fact that eight out of ten people surveyed who do not contribute to a private pension scheme said that the State pension would not meet their needs in retirement. The key issue is how to improve coverage. Among OECD countries, only Ireland and New Zealand do not have compulsory pension saving. An OECD report this year recommends a radical shake up of State pensions, with a new universal pension scheme for all, financed by taxes and contributions. It outlines the pros and cons of a compulsory contribution system. The Minister said in the Seanad that she intends to bring forward further proposals but I wonder how near we are to even beginning to solve this problem, seeing as it has taken three years to get this far.

In addition, pension costs must be tackled and we already have a report on that, which is fairly extensive. The private pension industry makes vast sums of money for fund managers, administrators and intermediaries at the expense of savers. A report commissioned by the Department of Social Protection last year shows exactly how exorbitant charges impact on pension schemes, particularly smaller ones. It showed, for example, that a person who saves €250 per month from the age of 35 could end up with a fund of €200,000 after 30 years, leaving him or her with an annual pension of €10,000 in retirement, if there were no charges. However, the average charge of 2.18% per annum would reduce the fund by €62,000 and the pension by €3,100 per annum, a 31% reduction. That money is simply swallowed up in charges by middle men and middle women.

There are many anomalies in the Irish pension system. I received an e-mail recently from a 57 year old man who has been contributing 4% of his salary to the TSB pension scheme for the last 20 years. That scheme has now been wound up but the levy is still being taken from his pension savings. I received correspondence only this morning from a person who has subscribed for years to the defined benefit pension scheme run by Johnston Press. He was made redundant in August 2010 and the company pension scheme was subsequently wound up. He has only €20,800 left, which will give him a pension of €380 per annum. He must pay tax on that because his wife is working, which means he will finish up with €4 per week, net. However, because the lump sum exceeds €20,000, he cannot take it, even though he wants to take it to fund his daughter's third-level education. Due to the fact that his lump sum is slightly over €20,000, instead of getting that money, he will have to be satisfied with a net payment of €4 per week. That is an anomaly that must be examined by the Department.

Many of the representations I have received on pensions concern access, particularly by deferred pensioners, to the trustees when they are making decisions, most notably on restructuring. I have not seen anything in the Bill which addresses that issue and will be asking the Minister to include some provision in that regard or at least to explain why it is not included in the legislation. It would be a good idea to have some sort of appeal system, particularly in the event of a proposed restructuring of a pension scheme. Those who could be hurt financially by decisions of trustees should be able to appeal those decisions to the Pensions Board. My party will table an amendment along those lines on Committee Stage.

In conclusion, the Bill is a variant of legislation I put forward myself several months ago so, from that point of view, I am not opposing it. It deals with an unfairness in the system. However, in view of all of the problems faced by pension schemes in this country, it is only a very tiny part of the jigsaw. That said, it does represent a slight improvement on the current situation and from that point of view, my party will not be opposing it.

Táimid ag déileáil le ceist mhór a dhéanann tinneas do go leor daoine sa tír. Bíonn gach duine buartha faoi phinsin. Sa chás seo, táimid ag déileáil le dream áirithe oibrithe atá thíos leis de thairbhe an teip sa gheilleagar. Bhí siad ag tnúth le pinsean réasúnta a fháil ag deireadh a saol oibre chun iad a chothú agus iad ag dul in aois.

De ghnáth, déanaim gearán nó casaoid leis an Aire faoin mhéid a bhíonn os ár gcomhair. Leanann sé sin ón seasamh atá glactha ag an Rialtas i dtaobh sochar leasa shóisialta go dtí seo. Sa chás seo, níl mé ag teacht salach ar an Aire. Aontaím gur chóir dúinn díriú ar na pinsin seo - pinsin le sochair sainithe, seachas pinsin le ranníocaíocht sainithe. Tá sé aitheanta le blianta fada go bhfuil fadhb ann sa chomhthéacs seo. Ba chóir dúinn déileáil leis an gceist seo agus leigheas a fháil air más féidir. Mar a dúirt mé, níl mé ag cur i gcoinne an Bhille seo. Tacaím leis. Measaim gur chóir go n-imeodh an reachtaíocht seo beagáinín níos faide i dtreo an bhealaigh a luaigh an tAire i mí Dheireadh Fómhair 2011 nuair a labhair sí faoin ábhar seo. Beidh sé spéisiúil ar Chéim an Choiste nuair a bheimid ag caint faoin bhfáth nár bhain an tAire amach an moladh nó an tuairim a bhí aici ag an am sin. Measaim nach bhfuil an tuairim sin le feiceáil anseo. Tá sé tábhachtach, áfach, go dtuigeann muid go bhfuil céim mhór tógtha anseo. As the law stands, in the event of a defined benefit pension scheme wind-up, pensions and payments must be fully discharged, no matter how lavish, before a single penny is allocated to future pensioners, however close to retirement they may be and however modest their pension expectation. It means that someone who might have expected to draw a pension in a year could be left with no pension, while someone who retired a year ago will still be paid in full. The fairness of this was always questionable. This is wrong and every Member accepts there is a need to change it.

A gold-plated pension is one worth more than €60,000 a year. Such a pension can be often matched with a State contributory pension for which most defined benefit pensioners would also qualify. That is twice the average wage. One must remember that the State subsidised these gold-plated pensions in the form of tax foregone and tax relief regimes over the years. We must be always careful that we do not facilitate the private over the public good in public policy. This legislation may get the balance right in this regard.

It is agreed the burden of risk is not shared fairly under pension law. The priority order in the event of a pension wind-up also needs to be changed, and this is also addressed in the legislation. Deputy O’Dea asked why we had to wait so long for the legislation. It was too long a wait for some of those defined benefit schemes which were already in crisis. Up to 50,000 people under 65, according to the Irish Brokers Association, have already wound up with no pension or just a tiny retirement fund far short of their expectations because of their schemes becoming insolvent. There is no relief for these people as there is no retrospective aspect to this Bill. I have several proposals which might ameliorate these funds which can be dealt with on Committee Stage, such as funds being asked to purchase State contributions to ensure those affected without full contributions can avail of the State contributory pension. It is the case that many employees before 1996 were paying the wrong stamp.

The Minister referred to historic cases of pensions being wound up. There is nothing historic about people in their 50s and 60s in employment facing a bleak future due to insufficient pension funds in their retirement. Many of them will end up dependent on the State non-contributory pension due to no fault of their own. While the Bill’s introduction is late in the day for those affected and, lacking as it is, it does represent an improvement. Saying that, it does not get the balance right. It is not, as the new Dublin south side term states, amazeyballs.

Amazeyballs. There you go, Minister, there is a new term for you.

We are all north siders over here.

It certainly does not come from the west side where I live. There are fundamental-----

Deputy Olivia Mitchell is from the south side. Maybe she heard it?

Of what is he accusing us? What is the phrase?

Amazeyballs is the new term for “fantastic” or “brilliant”.

It must be a DART expression.

We can have a discussion on it another time.

The Deputy might enlighten the rest of us as we would like to understand what is going on as well. This new terminology is unknown to us.

It means “fantastic”.

Acting Chairman, if we are not allowed to use the term “bristle”, we certainly should not be allowed use the term “amazeyballs”.

Deputy Boyd Barrett should know the term as he is from Dublin’s deep south.

Fundamental inequalities are left unaddressed despite the original proposals the Minister made in 2011. To protect high-end pensions, deferred workers approaching retirement will remain woefully unprotected. When pension funds get into difficulty, the response should not be about protecting pensioners versus protecting contributors who have yet to retire, it should be about protecting pensioners of today and tomorrow. In that regard, this Bill is not strong enough. On Committee Stage, we must strengthen the legislation to ensure all pensioners are protected without putting an undue burden on the State.

I have a problem with the way this was introduced. Despite the much hyped Dáil reform proposals, the heads were not put before a committee nor was there any pre-legislative Stage. It was sent straight to the Seanad after it was published. At each Stage since, there has not been the conventional two-week gap which would allow Members, the Minister, the Department or the Bills Office the time to consider the debate and to prepare amendments.

While I welcome the departmental briefing on legislation to Opposition spokespersons, it was at a moment’s notice. My parliamentary assistant, Miriam Murphy, attended it and probably tortured the officials with loads of questions. I, by chance, was checking e-mails and told her the briefing was in 15 minutes. The e-mail had been sent out an hour before the briefing. That is not the best way to do business.

Hopefully in the future, the Minister will give enough time for the Deputies to get the briefing so that we can contemplate what are substantial changes to the pension regime in this country.

The Minister commissioned Mercer to write a report on the wind-up priorities of pension schemes at the end of 2012. I do not think it has ever been published. We have searched everywhere on the website, and that would have been a vital report to have in front of us, given that it was to examine the points we are raising here today. The purpose of the review was to determine to what extent the existing pensioner priority should be revised to provide for a different approach to the distribution of assets in the wind-up of an underfunded pension scheme. That is exactly what we are talking about, but it is not in front of us. Can it be published, or at least circulated to us so that we can use it? It might back up the Minister's contentions and the reasons for this Bill, or it might not. We can debate that.

This Bill is an improvement, but it does not go far enough. Where a scheme fund is in deficit, the trustees may need to wind it up or restructure it. In the case of a wind-up, the current priority order means that after the AVCs, the fund's assets must first be used to discharge up to 100% of the liability to existing pensioners. Only then can the active and deferred members get the benefits they have accrued, by which time there may be little or nothing left in the fund. In such circumstances, workers approaching retirement age are particularly hard hit.

This Bill lists six priorities to govern the distribution of a fund in the event of a scheme wind-up, but I would propose eight priorities. I will go into detail if I have time today, but I have submitted amendments to that effect on Committee Stage.

The Minister stated that most people have a State contributory pension and that the occupational pension is additional to that, giving the impression that pensioners will have 100% protection up to €24,000, with €12,000 as part of the non-contributory pension. However, not everybody affected in this Bill is entitled to a State pension. In the case of the ESB pension scheme alone, I was told that 11,000 members are not entitled to a State pension because they began work before 1996 and have therefore been paying the wrong stamp. I might be wrong, but that is what was-----

That was at their request.

I understand it is not the fault of the State, but it means that in the event of such a scheme winding up, the burden will be fully on the State one way or the other because they may only qualify for a non-contributory pension and their income will be quite reduced. I believe that we can address that through using the scheme and funding whatever contributions are missing.

Recognising that some defined benefit scheme members are not eligible for the contributory State pension, my proposal sets out to ensure a minimum safety net for all scheme members, first through the purchase of the requisite contributions record for the State pension for all scheme members who do not have such a record or who are not on the road to it. In the event of a pension scheme wind-up, I believe that should be the first priority. After that, my priority is to protect those on low pensions and those with low pension expectations. My second priority goes to the first €12,000 worth of pensioners' benefit, as the Minister mentioned. I also think it is important to recognise that people approaching retirement age are particularly hard hit when a pension fund collapses, as they do not have the ability or the time to make alternative arrangements. Those who are over 50 or over 55 should also be taken into account. I propose two tiers of protection for those people. My third priority goes to the age-related portion of the current and former members' benefits, and the fourth to the eighth priorities are just different ways of dealing with the distribution back and forth between pensioners and future pensioners. The changes I have suggested mean that once we have ensured that existing pensioners have the full State pension of €12,000, plus their full occupational pension benefit up to €12,000, we can immediately turn to the protection of future pensioners. I believe this is a fair distribution and I have submitted the amendments to that effect on Committee Stage.

I wish to address the Minister's assertion that she is protecting the State and taxpayers from liability for the failed investments of private pension schemes. She also asserted that the pension levy would be used to cover funding shortfalls in the case of double insolvency. That is double or even treble accounting, because a pension levy has already been verbally allocated by various Ministers to the central Exchequer, to deficit reduction and to the Government's so-called jobs initiative. I do not know which it is. It cannot be allocated to everything at the same time. The Minister's press release at the time stated that she had secured agreement with the Minister for Finance to use funds from the pension levy to meet any obligation on the State that may occur arising from such double insolvency. I asked the Minister for Finance about this last Tuesday, and he said that agreement has been secured for these liabilities to be met by the Exchequer where they arise. That is not the pension levy. I hope the Minister can come back to that. Even if the shortfalls were to be met by the pension levy, this levy is paid by pensioners with defined contribution schemes, so it is questionable whether it is fair to spend it on compensating members of defined benefit schemes. There is a question here about poor investment outcomes when the defined contribution members are already being offered no such protection. The questions raised are not enough to make me oppose the Bill, but they are questions that need to be addressed.

I will recap on who is legally exposed when defined benefit schemes go forth: workers, pensioners and the State. The sponsoring employers, who made the pension promise in the first instance, are noticeably absent in all of that. When the OECD recommended in its recent review of the Irish pension system that the insolvency guarantee arrangement was needed, ensuring payments after the bankruptcy of a plan's sponsor, it emphasised that for this to work, the employer must have a primary obligation to fund shortfalls. The OECD was very critical of the nearly unique situation in Ireland which allows healthy sponsors to walk away from defined benefit scheme plans, shutting them down without creating a high-priority debt on the employer itself. The OECD described this as a particular weakness of our system. It recommended that healthy planned sponsors, defined as employers with positive net revenues, should not be allowed to walk away from defined benefit plans unless the assets cover 90% of pension liabilities. The Bill does not address this failing in our system.

Employers include the parent companies, because far too often, especially in a small economy like ours, subsidiary companies are set up, and while the parent company is very healthy, in many cases the subsidiaries are walking away from the defined benefit plans. That cannot be allowed to happen. Employers who have the ability to pay the pensions they promised must honour that commitment to their workforce past and present. I will be tabling an amendment flowing from the OECD recommendations on Committee Stage.

In the absence of a clear legal obligation preventing healthy employers from walking away from defined benefit schemes, these matters often get sorted out by the industrial relations infrastructure, including the Employment Appeals Tribunal, the Labour Court and the Labour Relations Commission. However, in such instances, deferred scheme members are at a particular disadvantage because they are excluded from those processes.

I was lobbied by a trustee of one of the schemes, the Aer Lingus, Dublin Airport Authority, DAA and SR Technics pension scheme, outlining the particularly harsh pension cuts deferred members are facing in that context. Without going into their scheme, they do not have a voice if it gets to the Labour Relations Commission. I will try to address that in an amendment but it should be examined, even though it is complicated because deferred members could be scattered around the country or the globe. There should be some voice for them in the event of a scheme going south.

It is important to consider the backdrop to this Bill. There is a crisis in pensions across the board. The capacity of the State pension to reduce pensioners' poverty into the future has been undermined by this and the previous Government. The population is aging. We can argue how fast or slow that is, there are many variables we could use to make accurate, long-term predictions, but there is no doubt that the ratio of workers to pensioners is decreasing. Our fertility rates are more favourable than in many European states but increased life expectancy is also a significant driver.

The social insurance fund has a gaping hole, which we have discussed before, and that hole will either increase or remain static, even if we return to near full employment, because of our aging population. We need to get this fund onto a sustainable footing. The first port of call for doing this is to examine the income which may or may not result from cutting benefits, which seems to be the Government's main focus to date. Changes have been made to the State pension scheme. Increased rate bands, increased numbers of contributions and the raising of the State pension age all undermine the adequacy of the State pension in terms of providing sufficient retirement incomes and will result in rising pensioner poverty. From 2020 onwards, increasing numbers of people retiring will find themselves entitled to less than 80% of the State pension given the recent changes.

In that context, the question is whether the private pensions can solve the pensions time bomb as this and the previous Government would have us believe. I do not believe so and the crisis in the defined benefit scheme will not help anybody else have faith in the future of the private pensions. We are here to discuss the defined benefit schemes. There are 800 such schemes, down from 2,500 a decade ago. Some 30% of those have some underfunding and 20% are underfunded. That is a substantial amount. I do not know how many people that affects, and maybe the Minister could tell us that before Committee Stage. While we know the number of schemes, we do not know the number of people in those schemes. The 20% which are underfunded may be large or small schemes.

The main alternative to the defined benefit schemes is the defined contribution schemes, which have taken over from the defined benefit schemes as the norm. The problem with defined contribution is that the individual person carries all the risk unlike defined benefit where the employer makes a benefits promise. In a defined contribution pension one's pension is determined, in most cases, by the size of the annuity that can be purchased for the amount of money in one's fund when one retires. When the yields on German bonds are low, the cost of the annuities is high. There can be problems there. The cost of annuities is high now. While governments and businesses all want low interest rates to facilitate their borrowing, the defined contribution pension schemes want the opposite. There will always be a contradiction or a push-and-pull effect with pensions.

Pension fund charges are another scandal which we have discussed here before but which have not yet been fully addressed. In Ireland we have many small pension schemes and these charges have been found to eat away at a sizeable chunk of people's funds. The most prudent pension fund portfolio is a diverse one, but this is likely to incur even more charges than those which are concentrated on one system. People need an affordable avenue to save for their retirements in which they can have confidence. From the track record of the private pensions industry in this State, I do not think it can deliver. It has taken disproportionate risks and has not learned its lessons. It continues to invest disproportionately in equities.

Despite billions of euro spent on tax reliefs to encourage the take-up of pensions, private pensions remain low among women, the low-paid and part-time and flexible workers. As insecure work becomes more prevalent the capacity of private pensions to provide reliable incomes into the future diminishes even further, so they are not the solution. A radically reformed and more robust State pension system is the way to go. The private model has failed thus far. The State pension model offers relative simplicity, it is cost-effective, less risky - although not without risk as all pension schemes have risk - and can be designed to recognise work without a market value, such as caring, and afford meaningful coverage to those on low-paid and insecure work.

There have been some reforms in the tax treatment of private pension contributions in recent years and the current Finance Bill reduces the standard fund threshold, which further limits the amount of tax relief that can be availed of. However, we are still spending on tax reliefs, including at the marginal rate, in a highly regressive manner. We cannot continue to subsidise private saving while unable to afford the State pension. Significant reforms to the public sector pensions have been introduced but because these will apply only to new entrants, the impact will not be felt for some time. In the shorter term, the public service pension reduction emergency measures introduced from 2009 have had the effect of reducing pensions in payment by way of a levy. Sinn Féin proposes different thresholds and rates for this levy which would have been much more progressive than those chosen by the Government.

The Minister proposed one priority order in 2011 but what she brought forward today is different. Hopefully she will be able to outline the reasons for the change from the original proposal. The system still overly prioritises the gold-plated pensions, those over €60,000, at the expense of future pensioners even potentially those with very modest occupational pension expectations with no entitlement to a State pension. That priority order can be changed. In the intervening years the Mercer report, commissioned by the Minister for Social Protection, should have been published, if it was any use at all. If I have missed it, could the Minister please tell me? If not, it would be useful to have it. If it was not good enough or came up with different conclusions to those we are discussing, so be it.

I am happy that we are here dealing with an issue that has been around for a number of years. It was always identified because it was always a potential problem but we did not address it. We are addressing it now. This does not go as far as we wish and does not have retrospective effect for those pensioners who have already suffered the consequences of collapses or insolvencies.

It is not before time that the Government is attempting to get its act together on the defined benefit scheme fiasco. I am not surprised it took another directive from Europe, the EU insolvency directive, before the Government was motivated to put this legislation in place. Further clarification is needed on a number of fronts, notably the situation where a double insolvency arises in the context of a multi-employer scheme where all the employers are insolvent.

I also have a concern that this legislation will allow companies to wipe out their obligations to their pensioners and that the public will subsidise this. I am concerned that trustees will attempt to seek increasing contributions from an employer to bridge a deficit, to the extent that the employer is pushed into insolvency and the trustees can then avail of the State guarantee.

In the case of existing pensioners, are their individual means, including all outgoings, to be taken into account before their scheme funds are redistributed? These people will have worked hard all their lives and paid into pension funds under the impression that their income would be secure for the rest of their lives, but I do not think the circumstances of existing pensioners came into play in the drafting of this legislation. In bringing forward the Bill, the State says it has legally covered itself and that it complies with its obligations under the insolvency directive. However, the moral argument as to whether it is fair that a worker is guaranteed just 50% of his or her pension, despite having contributed to it for 30 or 40 years, is another matter entirely.

I have a strong suspicion that this legislation will not act as a definitive solution to the defined benefit pension crisis. No doubt the Government is acutely aware of the Robins case in the UK, in which, in reacting to a similar European judgment to the Waterford Crystal case a number of years ago, it was ruled that the State must protect 90% of members' benefits, albeit up to certain limits, and that protection amounted to buying out the benefit for all members, including those yet to retire. There is a big difference between 90% and the 49% being guaranteed under this legislation. I would be interested to hear from the Government benches whether this legislation fully complies with the insolvency directive. In my view and in the view of legal people to whom I have spoken, there will be challenges to it.

There has been much palaver from the Government that this legislation will bring about fairness and equality for pension holders. This is untrue. If the Government was genuinely serious about equal rights for pension holders, it would cease its delaying tactics and address the issue of the Waterford Crystal workers' pensions that is currently before the High Court. Although these new rules will not apply to members of the Waterford Crystal pension fund, those 1,500 workers will get a minimum of 50% as a result of a ruling by the European Court of Justice this year. That ruling cannot be challenged. The ECJ has categorically said that the State did not take steps to protect employees when it was clear from the judgment in the Robbins case in 2007 that provision of 49% of employees' benefits was not sufficient protection.

Since the Waterford glass factory closed in 2009, some 23 former Waterford Crystal workers have passed away, without ever receiving even one cent of their pension entitlements. The lives of the remaining workers are on hold while the case continues to sit before the High Court. Many former Waterford Crystal workers tell me they and their families are now living on the brink of poverty. Despite having contributed to a pension for, in some cases, 46 or 47 years, they are now totally reliant on social welfare payments. They are borrowing to keep their heads above water. This is an appalling situation in the year 2013.

I have been repeatedly told that the Government cannot intervene in legal proceedings. I refuse to accept this. The State is, without a doubt, in a position to instruct its legal team to seek to make a settlement with the Waterford Crystal workers. I am told that, should the legal process run its full course all the way to the Supreme Court, it could be 2016 or beyond before these workers get fair treatment. This is unacceptable. These men and women who worked hard all their lives, who kept Waterford going through the recession of the 1980s, thought they had hit rock bottom when the Waterford Crystal factory closed and their livelihoods were wiped out. However, nothing prepared them for the shock, the humiliation and the anger that they now feel as the Government repeatedly kicks them while they were down by dragging them through the courts to fight for their entitlements. This is shocking and appalling.

I understand that the Waterford Crystal workers have been back in court this week and it is likely that the court will set a date for further hearings in February. However, there is nothing prohibiting a settlement being reached under the European directive. I appeal to the Department to consider this. It is not beyond the realms of possibility that a common agreement can be reached. If the Government is serious about treating workers fairly, it will immediately cease treating Waterford Crystal workers in this despicable way.

I remind the Government that 23 former workers have passed away. I am in contact with a worker currently who is critically ill, the father of three children. He has worked for 40 years with the company, but says he may be dead before his pension entitlements are paid to him. Surely, some compassion should be shown. Even if this man is only to be paid 50% or 49% of his entitlements, I plead with the Government not to drag him through the High Court and then to the Supreme Court.

It is not beyond the realms of possibility the Government can show some compassion. Let it negotiate with the Unite union and the workers. Please do not drag them through the courts while more workers lose their lives.

I apologise in advance because I must leave the Chamber as soon as I have spoken to attend a meeting of the finance committee.

The pensions situation is an absolute shambles and the lack of a policy for dealing with it is a disgrace for both the current and previous Governments. Pensioners in general, whether public or private, have been the innocent victims of an economic and financial crisis not of their making. Whether it is the extension of the retirement age, pension levies, the reduction of pension benefits in the public sector or the crisis of defined benefit pension funds, pensioners have got it in the neck. This is a disgrace.

The pensions situation is complicated, but much of the complexity, in terms of different pension arrangements, whether public or private, arises from the fact the system is a shambles. It is an ad hoc process. This legislation is being brought forward under pressure because of the crisis and because of the European directive, but it is yet another ad hoc response that attempts to deal with a more general crisis. If we are to deal with the general crisis, we must start from first principles. We must ask ourselves what we are trying to do and what are to be our priorities. Our priorities should be based on the fact that a decent society provides education, housing, health services and a secure and dignified existence for people who retire. This provision for retired people should not be subject to the vagaries of markets, financial crashes and so on and should be enjoyed by all pensioners, whether in the public or private sector.

Although we must start from the complicated situation we are in currently, the broad answer to the pensions crisis is to deal with the anomaly where €2.9 billion goes in tax relief to private pension schemes, the greatest beneficiaries of which are high income earners with big pensions. Most of the pension relief goes to these people. We cannot deal with this overnight or immediately, but we must do something to resolve this crazy situation. What this €2.9 billion in tax relief to private pensions means is that the State and ordinary citizens are underpinning a private pension casino for these pensioners, with disastrous consequences. We are making a casino of pensions, here and internationally, and whether people will have a dignified existence after making contributions all their lives is subject to the crazy vagaries of the market - of certain people making a lot of money in private pension schemes and of companies running away from their responsibilities.

This must end. It would be far better to transfer the €2.9 billion to a universal pension scheme. One estimate is if we put the €2.9 billion into a universal State pension scheme we could double the State pension for everybody and it would be guaranteed. The advantage of this would be we would have public control of the pension funds and we could use them to invest in what we desperately need to restart the economy. This would not involve gambling them; of course there are never absolute guarantees, but if they were publicly controlled and we invested them in what would be useful in the domestic economy we could be far more certain of the outcome of the investments and therefore have a defined benefit for pensioners which they deserve.

The idea we are moving increasingly from defined benefits to defined contributions, which are like a casino as to what one will get at the end, is wrong and regressive. It is part of a very worrying narrative that old people are now a problem and a burden for society. This is a disgrace and is indicative of a society which is going backwards. For many years after the Second World War we moved in the opposite direction and stated we would guarantee better things for pensioners. When I studied geography at school in the late 1980s I learned that because of the enormous wealth being generated by society the biggest problem we would have 20 or 30 years later would be the fact we would be retiring earlier and what would people do with their leisure time. Instead it has gone in the exact opposite direction; we have longer working lives, more precarious situations for pensioners and fewer benefits. This must be changed.

The legislation is dealing with defined pension schemes and we must deal with this in the immediate term. Unless we deal with the more general problem we will keep running into crises. We must resolve it. In England 90% is guaranteed to a much higher level. We could do this. We could guarantee 90% or 100% up to €60,000 and cut the guarantee for those entitled to more than €60,000 to approximately 50%. Why do we need such a high guarantee for people on massive pensions which in many cases are double the average industrial wage? We should cut it.

The Bill represents the minimum required to comply with the EU insolvency directive. While the Bill will provide some protection for members of defined benefit schemes restructured or wound up due to insolvency it will do so by reducing the benefits of the retired members. We face a wide variety of problems in pension provision. The State pension is not sufficient to meet the needs of retired persons particularly if they live alone. Many pensioners live in poverty or at risk of poverty.

As in every aspect of Irish society, huge inequality is built into the pension provision system. This exists because of the linking of pension entitlements to a percentage of earnings, which favours the higher paid and particularly the very highly paid, and the fact that tax exemptions for private pensions almost exclusively favour the well-off and are extremely expensive for the State. We have a serious mess in our pension funds. ESB workers are being forced to strike to defend their pension rights. Marks & Spencer workers have also balloted for strike action to defend their pension rights. We could also have strikes on this issue in Aer Lingus and the Dublin Airport Authority.

Active members in defined benefit schemes are being set up against retired and deferred members. Many workers now pay large amounts into the schemes with no clear idea as to what benefits they will receive when they retire. There is no requirement on employers to fund pension schemes to a level to ensure sufficient funds to meet the cost of the benefits promised. Insufficient regulation has allowed employers to wipe out pension promises at the stroke of a pen.

The protection offered in the Bill of 50% of expected benefits with a minimum of €12,000 will be challenged by those involved in cases before the courts such as the Waterford Crystal workers. I contacted Unite for a response on its concerns, if any, with the Bill. The actuarial adviser made the point that in the case of double insolvency the EU insolvency directive requires member states to ensure employees and former employees are protected. The Bill would provide protection of only 50% to a minimum of €12,000. This falls short of an ordinary interpretation of the word "protect" and inevitably it will be challenged by workers.

It is remarkable how differently a person is treated in Ireland as opposed to the UK in the case of double insolvency. Pensioners with an entitlement of €10,000 or equivalent in the UK would receive the full amount in Ireland and the UK. Those with a €20,000 entitlement or equivalent in the UK would receive €12,000 in Ireland but the full amount in the UK. Those with a €30,000 entitlement or the equivalent in the UK would receive €15,000 in Ireland but the full amount in the UK. This is a huge difference when one considers the economy and cost of living. Those not yet retired in Ireland with an entitlement of €10,000 could expect €5,000, but someone with an entitlement of £10,000 in the UK would receive £9,000; someone with entitlement of €20,000 would receive €10,000 while someone with an entitlement of £20,000 in the UK would receive £18,000; and someone with an entitlement of €30,000 would receive €15,000 while a worker in the UK with an entitlement of £30,000 would expect to receive £27,000. These are also large differences. The UK approach has been in place since 2005 and has not yet been challenged. As such it can be considered as meeting the requirements to protect employees and former employees. This is an important point and I would like to hear the Minister's response on this.

There is no need to have a three-tier pension system in the State. At present the State pension is paid for by stamps, the public service pension scheme awards scandalously huge pensions to an elite, and a private pensions industry benefits from expensive tax breaks amounting to €2.9 billion which favour the very well off, a point made by the previous speaker, Deputy Boyd Barrett. There could and should be universal pension provision based on the right to a decent standard of living, such as €25,000 a year, with employees and employers paying into a State scheme. Public sector pay should be capped at €100,000 a year and pensions at approximately €50,000 a year, although this could be discussed. All tax concessions for private pensions should be ended. In the longer term we should have a more affordable and fairer system than we do at present.

Many Deputies received an e-mail from the Irish Senior Citizens' Parliament highlighting concerns about the right of audience for pensioners in schemes. It states pensioners feel they were not consulted, and that some consultation took place several months ago but not on the legislation. Pensioners particularly want consultation on the restructuring of schemes and hope an amendment can be made to the legislation to allow a right of audience for pensioners in schemes.

It is fair to say prior to the banking crash which damaged the economy a huge emphasis was placed on encouraging people to invest in their future through pension schemes, and we all remember the almost daily television and radio advertisements. The emphasis was all on workers investing and little emphasis was placed on the regulation or robustness of the actuarial assessments of the health of the schemes. We are probably having this debate today in part because of this. Some semi-State companies were and are also hugely exposed. When the previous Government sold the majority shareholding in Aer Lingus I remember the chief executive arguing at the time that there was a huge hole in the pension fund. This was prior to the crash. He argued there should have been investment in the pension fund at that stage but this did not happen. To a degree, the current sense of anger and frustration among people dates to this decision not being made by the previous Government.

The Bill is obviously an attempt to retrieve a bad situation. I take the point made by Deputy Joan Collins to the effect that only the minimum is being done. We were previously informed that the pension levy would be a one-off temporary measure. The commitment in this regard should be restated in the House today. There was consultation with some of the stakeholders prior to the publication of the Bill. However, we were informed that in future legislation would be dealt with differently and that there would be a pre-legislative stage. The legislation before us would have benefited greatly if consultation had actually taken place when the heads of the Bill had been published. The Irish Senior Citizens' Parliament is on record as stating:

It is worth reiterating that pensioners are former workers who are now in receipt of a benefit for which they and their employer paid during their working lives. Employers asserted that pension payments and sponsorship of pension schemes was a benefit to an employee and was a valid part of remuneration. [People sometimes earned less because they were of the view that this was part of the package.] Membership of schemes was compulsory [in a substantial number of cases] ...

Senior citizens are not, therefore, disinterested parties and I completely accept the point they make in respect of their being given an automatic right of audience. The Bill should be altered to take account of this. Prior to the early 1970s pensioners had a right of audience to the industrial relations machinery of the State. The Irish Senior Citizens' Parliament has also stated, "In many schemes Pensioners and or their associations are denied access to Scheme Trustees [and sponsoring employees]". This is unacceptable and it must be changed in order that people will be fully engaged.

I agree with the points made by Deputy John Halligan on the former employees of Waterford Crystal who took their case to the European Court of Justice. It is clear these workers will obtain at least 50% of their pensions. What makes their case doubly unfair and what is angering them is that instead of paying the guaranteed 50% now as a gesture of goodwill - it will have to be paid - the Government is waiting for the court case before making any payment. That is the wrong way to approach this matter. Again, the Irish Senior Citizens' Parliament has pointed to a number of facts in respect of this matter and I wish to refer to some of them. In the first instance, not everyone is going to end up with €12,000. Those being paid under €12,000 will obviously receive less than this. I say this just in case people are under the impression that everyone is going to receive €12,000. As some members of pension schemes do not have State pensions, they will not receive a double amount. They may well have qualified for the non-contributory pension as a result of this. It would be useful if the numbers underpinning the legislation could be provided. As many schemes are integrated, the value of the State pension is taken into account when calculating the changes under discussion. Changes to contribution requirements in respect of qualifying for the State pension mean that some people may not receive full pensions.

A number of the changes that occurred in recent years really anger people. Let us consider the example of some individuals - mainly women - who might have begun working at 20 years of age and who might later have been out of employment for ten or 15 years. They really become angry when they discover that they are not entitled to full pensions. If they had not started work until the age of 55 years, they would be entitled to the full State pension because it is averaged out over their working lives. That is wrong. This matter must be revisited because it is extremely unfair that someone who may have contributed for 40 years will receive less than a person who only paid contributions for ten years. I do not see how there is justice in this.

The Minister, Deputy Joan Burton, talks a good game and excels at presenting matters as if there are always benefits involved. People who do not use Dublin Bus are of the view that it offers a terrible service, while those who do use it are of the view that the service is quite good. In the case of the Minister's Department, the opposite is true. Those who engage with it know that some of the changes will have a very direct negative impact on them, while those who do not engage with it are of the view that these reforms are fantastic. In the light of the Minister's glowing praise of the Bill and her claims that it will be all things to all people, I have reached the conclusion that there is something hidden in its provisions. I reserve my position on it because I know what is likely to happen.

I welcome the opportunity to contribute to the Second Stage debate on the Social Welfare and Pensions (No. 2) Bill 2013. This is an important debate because we must ensure existing pensioners and those who will be in receipt of pensions in the future are treated in a fair and correct way. We cannot live in a society in which pensioners are not looked after and cared for in their later years. Any society which does not care for its senior citizens, people with disabilities and the sick is one without a heart and a soul. We must focus on that issue in the context of the legislation before us. Pensioners' rights must be protected.

The Bill amends the Pensions Act 1990 to change the manner in which the resources of a defined benefit pension scheme are distributed on the wind-up of a pension scheme. It also broadens the category of benefits that can be reduced where a defined benefit scheme is being restructured because it does not meet the statutory minimum funding standard. It amends the Social Welfare Consolidation Act 2005 to provide for a number of technical changes. That is the purpose for which the legislation has been introduced. In that context, it is important that we plan for the future and ensure fairness for all pensioners.

Earlier today I received letters from two constituents on this urgent and important issue. The first states:

I am a defined benefit pensioner, who contractually had to sign up for the scheme on entering employment. I had no other option.

I am just amazed, it is beyond belief, that the Government could consider introducing a law that would reduce pensioners' income by 10%. Pensioners have invested, over their 40 years employment, into the pension fund, and it is the employer's responsibility to address the funding shortfall problem not the pensioners.

I find it hard to understand how my contract can be renegotiated by the Government just because it has the legal powers to do so. What is the value of any contract now (e.g. owning my own home) if the Government can just change the terms of any contract.

Please oppose any legal changes to reduce my pension by 10% and continue to press employers to take responsibility to make some effort to correct the deficit.

The second item of correspondence I received came from a person who used to work for Aer Lingus. It states:

Dear Mr McGrath

As a retiree of Aer Lingus, having served for 36 years, I am appalled that my modest pension, membership of which was a term of employment and hard paid throughout my working life, can simply be diminished at the stroke of a Minister's pen. This new Bill which Minister Burton is proposing is fundamentally unfair, immoral and ageist. Surely there is a more equitable manner in which to deal with the problem than wielding a hatchet at the victims who have done their duty, paid their way, but are now no longer apple to supplement their pensions.

The average Aer Lingus employee was (is) not highly paid; therefore individual pensions are quite modest. During eleven years of retirement one modest increment was paid by the IASS Trustees, but it was clawed back by this Government under some "spurious" label.

The time has come to shout "ENOUGH IS ENOUGH! HANDS OFF OUR PENSIONS". I sincerely request that you reconsider the Social Welfare & Pensions (No. 2) 2013 legislation.

These are the views of two of my constituents but many more communicated their opinions to me in recent weeks. It is important to place these views or record because it is essential that we deal with this issue. I urge the Minister to consider the injustice of what is proposed.

On the broader issue of pensions, it is very important to consider what is happening in the country. Ireland will experience a significant ageing of its population in the coming decades. The population of the European Union is projected to increase from 501 million people in 2010 to a peak of 526 million around 2040 and to then decline to 517 million in 2060. The greatest proportion of population growth is expected to be in Ireland.

It is projected that the Irish population will increase by 46%. During this period, the share of the European Union population aged over 65 years is expected to increase from 17% in 2010 to 30% in 2060. While the projected increase in the proportion of the population aged over 65 years in Ireland, from 11% in 2010 to 24% in 2060, is less than the projected EU average, it still amounts to a major change in the age distribution of the population.

As the proportion of the population aged 65 years and over increases, the task of financing associated pensions spending will fall to a diminishing share of the population. The ratio of workers to retired persons, which stood at 5.3:1 in 2010, is expected to decline to 3.9:1 in 2020 and to 2:1 in 2060. This demographic transition, while slightly less dramatic than the average across the European Union - whose population is among the most rapidly ageing populations in the world - constitutes an unprecedented change. A robust and dynamic pensions system will be required to maintain an adequate and sustainable income support for older people. I urge the Minister to listen to my concerns and examine all the issues raised in this debate.

I welcome this legislation. That so many defined benefit schemes are collapsing is a disaster of monumental proportions for many people and another aspect of the fallout from our economic woes. A failure to recognise or address the collapse of pensions schemes would be an even greater disaster for the many workers who, until recently, could assume their retirement income was assured. Approximately 2,500 defined benefit schemes were in place until well into the 1990s. The members of these schemes believed they did not have to give a moment's thought to their pensions, as they would flow to them seamlessly on retirement. By 2011, a mere 800 defined benefit schemes had survived, and they continue to close, virtually by the week. Many thousands of people continue to depend on these schemes. While estimates vary, I have seen figures suggesting that at least 80% of defined benefit schemes are underfunded.

We have all heard heartbreaking stories of people who discovered on the brink of retirement that their pensions had been decimated while current pensioners in the same scheme continued to enjoy full pensions. This clear intergenerational injustice needed to be addressed. Like Deputy Finian McGrath and others, I have received complaints from people who are retired. Who can blame them for complaining? It is a blow to existing pensioners to learn their income may be reduced. While not every retired person will be affected, some will suffer a reduction in pension. The level of reduction provided for has been made as fair as possible through the introduction of a sliding scale of liability. I accept, however, that it is difficult to be fair when taking money from people who had every right to believe it was theirs. In my view, the possible consequences of doing nothing, in terms of social disruption, would weigh even more heavily on pensioners generally. Nevertheless, I have great sympathy with the complaints that have been made in this regard. The economic recession has shattered expectations, most certainly on the pensions front.

It should have been obvious to all of us that the concept of a defined benefit pension scheme is utterly daft. It is almost impossible to have a guaranteed flow of income in a volatile market. When markets are stable one can reasonably calculate the level of investment necessary to produce a certain income. However, markets have never been predictable or stable over the period of a typical working life and retirement span. The State has discovered this to its cost, having built up defined pension liabilities, the payment of which will continue to impact on every other service it provides for a long time. Last year, for example, public servants - everyone present is a public servant - paid a total of €3.8 billion in income tax, including the universal social charge. In the same year, the State paid out €3.1 billion in public sector pensions. The total contribution of the entire public service to its members' pensions and the running of the State was a mere €700 million, much of which will be wiped out when the universal social charge is abolished, as we must assume it will be. While I appreciate that changes have been made to public sector pensions, these will probably not become effective for another 40 years. In the meantime, the cost of public sector pensions will continue to weigh heavily on the public purse.

I agree with the Deputies opposite who pointed out that we face, in pension terms, a perfect storm. We have an ageing population and a pensions industry in disarray. Perhaps "shambles", the term used by Deputies opposite, is a more accurate description of the sector. Nobody is in charge of pensions because responsibility is shared between the Departments of Social Protection and Finance, the Pensions Board, the Central Bank, the Pensions Ombudsman and the Financial Services Ombudsman. I understand a new pensions council is also to be set up. It is a tribute to the Minister that she has tackled head-on the immediate, specific and urgent problem, namely, the requirement to restructure defined benefit pensions that are in deficit and to wind up those that are insolvent.

The pensions problem is much larger than this and it is necessary to have a coherent single-agency-led solution. We must find a way to encourage or compel everybody, but particularly young people, to provide for old age. We must decide whether to introduce a compulsory State system, a private-sector incentivised system or a combination of both. What we do not need are disincentives to saving for a pension, which is, I am sorry to say, the case with the current pensions levy. This measure runs utterly counter to the policy of encouraging savings. A revolution has only been avoided because few people understand the extent to which the levy affects their final pension. The measure is also inequitable in that it hits most egregiously those elderly workers who have accumulated a lifetime of pension contributions and are on the brink of retirement. They are the very people who, because of their age, do not have any prospect of benefiting from a recovery in the value of their investments.

The most damaging aspect of the pensions levy is that it introduces uncertainty to an area where certainty and security matter. The purpose of a pension and the incentive for having one are to be secure and certain in one's old age. While young people take risks, older people tend not to do so because they cannot afford risk. They will put their money where they believe it to be safe and secure, as was the case with pensions before the equity markets collapsed. The last thing people expected, having taken a hit as a result of the collapse in the market, was for the State to step in and expropriate their savings. Given the extraordinary lengths to which the State went to protect bank savings, one would expect pension savings to be at least as worthy of protection. The lesson young savers will learn from this decision is that they should not put money into a defined contribution pension or any voluntary fund because it may be taken from them subsequently. Even if we were to abolish the levy today, the damage has been done. By setting a precedent that savings are fair game for expropriation, the incentive to save for pensions may have been seriously undermined. It is vital that the pension levy does not become a permanent feature of savings and is abolished as soon as possible.

As I stated, I support the measures set out in the Bill, including that the State should step in to ensure a minimum level of pension where there is a double insolvency, which is an essential provision. However, I do not support the decision to use the levy on defined contribution pensions for this purpose. Many of those whose savings are the target of the levy have pensions of a lesser value than €12,000, the level of defined benefit pensions they are being asked to support. This is nonsensical. The individuals in question have suffered exactly the same market collapse in the value of their funds as defined benefit funds and in many cases their funds are entirely the result of their own saving efforts, which is not the case with defined benefit funds. These pensioners could be forgiven for being outraged at the prospect of their meagre and depleted funds being targeted to support people who are much better off than they are.

I understand the double insolvency funds must be supported, but the money should come from general taxation.

The Minister for Finance, Deputy Michael Noonan, did suggest when the levy was introduced that it might be absorbed by the companies managing funds, and a report was commissioned to assess their ability to absorb it. Nothing came from that aspect of the matter, but a good report was compiled. I am really pleased that the Government has accepted all of the recommendations made in the report and intends to follow through on it. The thrust of the report was the need for transparency around charges, with which I completely agree. There is a real need for consumers to be aware of what they are buying when they invest in a pension scheme and how much they are paying to those who will make the investment for them. The report provides a noteworthy example of the impact on a smallish fund of €200,000 which, in theory, should give a pension of €10,000 a year. According to the report, the average charge on pensions is approximately 2.8% which over the savings period reduces the pension payable by a staggering 31%. If consumers were acting rationally and fully informed, they would not consider this to be good value. One might instead consider a speculative purchase to cater for old age, such as buying a painting or backing a horse, which might at least give some entertainment and enjoyment, or one might decide, if one was careful, to put one's money under the mattress, but it is difficult to see any sense in spending that kind of money on a pension scheme and have somebody manage one's money. That 31% figure would certainly wipe out the value of any tax relief received. I point out to Deputy Richard Boyd Barrett, who spoke about a figure of €2.9 billion going in tax relief on private pension schemes, that such a figure is erroneous and also that the tax relief is not permanent but represents tax deferral; there is no pot to be spent on subsidising pension schemes generally. My point is that consumers need to know this information. If they are to make rational decisions, they need to know what it is they are buying and how much they are paying for it. There should be absolute transparency around the purchase of any product. In Tesco one expects to know the price of the goods one is putting in the basket. It is all the more important when one is buying a life-changing product such as a pension that one knows how much one is paying for it. Without such information on prices, the normal competitive market forces cannot operate. This facilitates the emergence of cartels and oligopolies and certainly does not lead to better prices for consumers. I am glad that the report's recommendations have been accepted by the Government and will be followed up on.

I note that a new pensions council is to be set up to advise the Government on policy changes needed for the future. The Bill is a major and urgently required step to deal with what is an emergency in the defined benefit pension scheme sector, but there is still a long way to go in meeting the overall challenges posed by the pension problem. As a work in progress, I see the Bill as a welcome step.

While the Minister is here, I will put in a word for a group who, as it stands, will miss out on the provisions of the legislation. I refer to workers whose pension schemes are in the process of being wound up but where the fund has not yet been distributed. They face a double whammy in that when their now depleted funds are distributed, they will be subject to the levy, as well as everything else. They will also have last call on what funds there are available. Their request is that they be included in cases in which funds have not been distributed in order to benefit from the redistribution of funds as between pensioners and those still in employment. I ask the Minister to consider their position if possible. Another Member has stated that 50,000 people have been members of defined benefit pension schemes that have been closed who virtually have no pensions left. If there are some who could be captured within the net of this legislation, it would be in everyone's interests to see what we could do in that regard.

I very much welcome the legislation. It is, as I said, a work in progress but still welcome.

The Bill amends the Pensions Act 1990 to change the manner in which the resources of a defined benefit pension scheme are distributed on its wind-up. It also broadens the categories of benefits that can be reduced where a defined benefit scheme is being restructured because it does not meet the statutory minimum funding standard. It amends the Social Welfare Consolidation Act 2005 to provide for a number of technical changes. When an employer goes out of business and the defined benefit pension scheme in that business is underfunded, the funds in the pension scheme will be divided to ensure all of its beneficiaries, including pensioners, current employees and former employees who have not yet retired, will receive 50% of their benefits. Existing defined benefit pensions in payment will be protected up to a figure of €12,000. Where the defined benefit pension scheme does not have sufficient moneys to meet this amount, the State will meet the shortfall using pension levy funds. This addresses the exposure of the State following the ruling of the European Court of Justice in April 2013 which stated Ireland was in breach of the EU insolvency directive. The European Court of Justice ruled that when both the employer and the pension scheme were insolvent, the State must put measures in place to provide at least 49% of the pension benefits expected. This measure provides for a fairer outcome for all members, gives protection to lower paid pensioners and limits the extent to which the taxpayer must contribute.

Other measures are being introduced in the Bill which are not requirements under the insolvency directive but which seek to minimise the likelihood of similar situations arising. In the future when an underfunded pension scheme is being wound up and when the employer is in business, the 100% priority given to pension benefits is being changed to reduce the priority given to higher pensions. This will ensure current employees and former employees who have not yet retired and who have also contributed to the pension scheme will receive a greater share of the benefits. It can also arise that pensioners receive all or almost all of the funds and members who have contributed but not yet retired receive little or nothing. Pensioners in receipt of pensions under €12,000 will have first priority to ensure they are not affected. Pensions between €12,000 and €60,000 will be reduced by 10% of the total pension amount. The overall reduction is limited to a maximum of 20% of the total pension amount where the pension is over €60,000. The State is not contributing in this instance. The employer is still in business and it is the employer who sponsors the defined benefit pension scheme and makes the pension promise.

The Pensions Board will be introducing tighter regulations for defined benefit pension schemes. This entails refusing to accept funding proposals from schemes with a funding figure of less than 50%, forcing schemes to take action to address their poor funding position; imposing additional obligations to ensure significantly underfunded schemes achieve a base level of funding in the short term; and withdrawing flexibility options for schemes which go off track while subject to a recovery plan where the level of funding falls below 50%.

IBEC, the group that represents Irish businesses, welcomed the announcement by the Minister for Social Protection, Deputy Joan Burton, that the Government would reform pension rules to ensure the remaining funds of insolvent defined benefit pension schemes were distributed more fairly between those in retirement and those who had yet to reach retirement age. The existing system means that those of working age must lose everything before pensioners are asked to lose anything. IBEC has been leading the call for change for several years. Members across the Chamber will be aware of cases in which, where a defined benefit scheme was in trouble, a 66 year old who had only just retired received his or her full pension, while a 64 year old due for retirement saw his or her pension decimated. It is important to note that these measures will apply only in a limited set of circumstances, meaning the potential number of schemes affected will be small.

Crucially, none of this impacts on the State pension, which is not affected in any way by measures included in the Bill. The Government has protected the State pension in all three of the budgets it has introduced.

Debate adjourned.