Social Welfare and Pensions (No. 2) Bill 2013 [Seanad]: Report Stage

The first amendment, in the name of Deputy Willie O'Dea, is out of order.

Amendment No. 1 not moved.

Amendments Nos. 2 to 4, inclusive, and 22 are related and may be discussed together.

I move amendment No. 2:

In page 9, between lines 19 and 20, to insert the following:

“9. The Principal Act is amended by inserting a new section 48A as follows:

“48A. (1)A healthy sponsor shall not be allowed to close a defined benefit pension scheme except where the scheme has reached a minimum 90 per cent funding standard.

(2) For the purposes of this section a healthy sponsor means an employer that—

(a) has positive net revenues, or

(b) has a parent company with positive net revenues.”.”.

We discussed these amendments, or similar ones, on Committee Stage. Their primary role is to ensure that a sponsor or a company that has sponsored a defined benefit pension scheme would not be allowed to close that scheme except when the minimum 90% funding standard has been achieved. The phrase "healthy sponsor" is the wording from the OECD report on pensions in Ireland, a substantial document which in many ways triggered what we are doing today, along with the fact that a number of these schemes have run into trouble or have had some type of difficulty including full closure.

Pensioners and active members have been left with much less than they had intended and agreed to when they initially signed up to their pensions. They had looked forward to their retirements in the hope that they would have pensions that would allow them to enjoy them. Some of them put away a substantial sum of money for a long period. Only yesterday I received a letter from a person affected by this Bill, although in his case there are peculiarities which I will come back to later. He said that after paying into a pension for 31 years, with a combined contribution from him and his employer of €90 per week, he can expect to receive a pension of €15 to €18 per week. The pension scheme is getting a substantial reduction on that €90 per week. That is obviously part of where these schemes are, as well as the collapse in this instance of the fund and the sponsor. It is a legacy case that is not necessarily covered by this legislation because it cannot be retrospective.

One of the problems that we and the OECD identified is that there are situations in which the sponsor or its parent company is solvent but desires to get out of the defined benefit pension scheme because it is seen as a liability on its books. The OECD review of the Irish pension system says:

Another weakness of Irish legislation is that it allows healthy sponsors to "walk away" from DB pension plans, shutting them down, without creating a high-priority debt on the employer, as is the case for instance in the United Kingdom. Under the UK’s “debt upon employer obligation”, the sponsor’s debt (if the plan is underfunded) is determined by valuing the benefits on the basis that they are bought out in full via immediate annuities (for pensioners) or deferred annuities (for non-pensioners).

We are trying to ensure that no company that is still trading - or, in the OECD's words, whose parent company has "positive net revenues" - can avoid or evade its responsibilities to a pension fund that is in crisis. We are asking that this be recognised in legislation to ensure subsidiaries of profitable multinational or Irish companies do not avoid their responsibilities by shutting down their pension schemes.

I urge the Minister, even at this late stage, to devise a mechanism that will allow this amendment to be accepted. There is an urgency about getting this legislation passed to ensure that people affected by the collapse of any scheme in the next couple of months are covered by it. Even in cases before the courts now the judges can see the Government's intention, although they do not have to abide by it. This is also tied to the European Court of Justice legislation on pensions and the EU directive.

I do not know whether the Minister has had a chance to examine the proposal before us. It does not deal only with pensioners who benefit from pensions now. It would also ensure that active members who are paying into the pension pot and deferred members are looked after. We will return to that. This ensures that responsibility lies with the employer in these instances.

It is important to put the amendments in the context of the backdrop to the legislation and the stated objectives of the Minister, and whether they have been addressed. We are dealing with a scenario in which some defined benefit schemes have run into difficulties. As it is constituted now, many active members and some deferred members are left with a very serious hit, whereas up to now those who were already on a pension had a certain amount of protection. This Bill proposes to alter that priority arrangement. We have to be very careful because, while there is obviously a serious issue that needs to be addressed for the active and deferred members of schemes, examination of the impact on pensioners needs to be carefully factored in.

The Bill deals with double insolvency scenarios, in which both the company and the pension scheme are in financial difficulties, and guarantees certain benefits in that scenario. The Bill does not sufficiently address scenarios in which the company is financially secure but the pension scheme is potentially in difficulty. The issue of employer responsibility is the key part of this legislation which needs to be tackled. On Committee Stage the Minister was sympathetic to these points, but she has not accepted any changes to the legislation which are necessary to address this. We must stress the reasons these amendments must be taken on board.

I am very conscious of the situation where companies, like Aer Lingus, have cash reserves of almost €1 billion yet refuse to invest adequately in a pension scheme which, based on the way it is actuarially calculated now, has been depleted a little because of some of the antics of that company. It is not good enough that a company like that can walk away and leave either pensioners who are currently drawing their pensions, active members or the State picking up the tab. There is a statutory basis to what we are saying, but this Bill leaves it too open. Up to now, employers have been using a certain loophole in this regard. They have looked at standards like FRS17 and so on, but that the issue has been adjudicated by the Pensions Board and it was decided that the accounting of the scheme as a defined contribution scheme does not negate any of the statutory obligations on the employer.

The Minister is aware there was an important case in the commercial court last year with Aer Lingus. The ruling in that case was that pensions were a contingent liability and that these issues - the debt - existed. What we are trying to do is have this recognised in law as it is in Britain. It is somewhat ironic that in America even people like George Bush implemented legislation which put the pension obligations of employers in law. That is what we need to do here. On Committee Stage, the Minister said the reason she could not do this was because it might result in some of these schemes shutting down.

We must be clear about this issue. As things stand now, defined benefit schemes are not open for business and no new ones are being created. In fact, in many of the companies where they exist, they have been shut to new applicants. The Irish airlines superannuation scheme, IASS, which has almost 15,000 members between the various categories, has been closed to new applicants as a defined benefit scheme since 2008 and 2009, because Aer Lingus has set up an Aer Lingus Ireland pension scheme and the Dublin Airport Authority has set up a Dublin Airport Services Limited scheme. Both of these schemes operate as defined contribution schemes. Therefore, the doomsday scenario the Minister warned might happen is here already. The defined benefit schemes are shut for business.

A good argument could be made that if the Minister imposes strict guidelines and legal requirements on employers that do not allow them walk away, but compels them to face up to their responsibilities for the schemes, this would act as a deterrent to them shutting defined benefit schemes. Currently, they can close them and do not have a liability. What we seek to do is to ensure that if they try to close them at a time when the company is in good financial health, they should be penalised or compelled to foot the bill for that. This is necessary, because if we do not factor this into the legislation, de facto we are saying that existing pensioners must pay to solve the problem. This is not good enough, particularly when the majority of pensioners across the State, including those who have contributed over a lifetime of working, have a very modest pension in their retirement years.

It is not true to say that pensioners have not contributed. Let us take as an example a scenario like that of the airport schemes, in the context where this legislation was passed and the 10% cut was to be implemented. Some 95% of the pensioners in that scheme, which would have been considered okay, would come into the lower category and would be open to the 10% cut proposed by the Minister. This would take €8 million per annum from the pockets of those pensioners. This is not good enough, particularly when dealing with companies that have a fine balance sheet. We must take into account the fact that pensioners have funded their schemes over a lifetime of work. They have already seen reductions in pensions due to stamp duty, the pension levy of 2.55%, with another one scheduled for 2015. Many of these pensioners have seen no post-retirement increase in their pension since April 2007. This means that in terms of purchasing power, they have been falling behind.

The Minister made the point on Committee Stage that people are living longer and that this is the reason for the problems. I do not see that as the reason. It may be a small element of the problem, but to be honest the problem is due more to the policies pursued by these companies. They should have recognised this. Some of the big schemes facilitated the problem by using reserves built up in the pension schemes. They diverted the funds belonging to the pensioners who worked a lifetime to pay for them to incentivise early retirement or voluntary severance programmes, thereby causing a problem in the schemes.

In many instances these employers gave workers no choice. Joining these pension schemes was a condition of employment. If the company has taken steps to break that contract, it is liable. If we do not accept that, we are saying that pensioners or deferred or active members are responsible. That is not good enough. Over a lifetime of work, workers have paid an average employer-employee contribution of over 10% or 15% of their income. That is more than enough, or would have been, to fund an adequate pension on retirement.

For all of these reasons, employer responsibility must be factored into this Bill. The amendments we proposed is one way of doing that. In some of the discussions ongoing in regard to defined benefit schemes, compensation funds are being considered by employers and some moneys are being invested in these. We saw this in the case of the ESB and similarly in the IASS. However, these contributions are not legislated for in the Bill. They need to be legislated for to provide security and to ensure the onus is put on the employer in this regard.

I wish to express disappointment at the Minister's attitude to the debate on this legislation. Many people, particularly spokespersons, have put in considerable time working on this Bill and it is regrettable that once again a wall has come down blocking contemplation of any amendments. Like many of her Government colleagues, the Minister is making a sham of what should be proper debate in our national Parliament. I ask her to reflect on the fact that not all wisdom resides on the Government side of the House. It would encourage us Members who have a mandate to represent the public here if it was clear the Minister was at least open to considering other points of view and other approaches to issues.

The big problem with this legislation is that it seeks to put a sticking plaster on an area that needs fundamental reform and does not make any serious attempt to introduce proper pension reform or protection. This is what is required. We need a whole of Government response, in particular a response from the Minister for Finance and the Minister for Social Protection, to tackle this issue. Dealing with loose ends or various aspects of the pensions issue does not get to grips in a serious way with the many problems that affect the pensions area. It is regrettable that a more fundamental approach has not been taken.

This group of amendments deals with the issue of a single insolvency situation, where a company is solvent, but the pension scheme is not. It is regrettable that no attempt is being made within the legislation to ensure that at least some of the deficit in a pension scheme will remain as a debt on a company. This is the single biggest flaw in the legislation that the Minister has brought forward. As I described it earlier, this legislation is another form of corporate welfare. It is also another example of socialising what is essentially private debt. In a situation where a solvent company moves to wind up an insolvent pension scheme, the Minister proposes that the pain will be shared among the existing and deferred pensioners. None of the pain would be taken by the company concerned.

The company concerned entered into an agreement with its employees that if they made certain contributions, the company would make certain contributions and there would be certain pension benefits arising out of the agreement.

The Minister is now telling the corporate world that companies that wish to wind up defined benefit pension schemes may do so and may walk away, as other speakers have said. The Minister will spread the pain to existing pensioners who previously enjoyed security and a sense that their income would not be affected in future. She will spread the pain and proposes to reduce the pension benefits of existing pensioners to improve the pension prospects for deferred pensioners. The big issue in all of this is that the body that was contractually required to honour its agreement in respect of its pensioners and future pensioners will not be expected to do anything about it. As we have seen in recent times, more and more companies, including very profitable ones, are choosing to wind up defined benefit pension schemes. Unlike in other jurisdictions, they are being allowed by the Minister and the Government to walk away from these debts. There can be no justification for this whatsoever.

Changing the priority order to benefit future pensioners at the expense of existing pensioners merely spreads the unfairness further and does not tackle the core issue. Ireland will allow very rich companies to simply walk away from the debt of their pension promises. One must question why the Government proposes to do this in the current circumstances. It does not happen anywhere else in Europe and companies are certainly not allowed do this in the UK. There is a sense of social solidarity between governments and people who in good faith entered pension schemes, made contributions over decades and had a reasonable and fair expectation the commitments entered into by their employers or former employers would be honoured. Through this legislation the Minister will facilitate and allow a situation whereby these commitments will be binned by the companies concerned. I cannot understand how a Minister of the Labour Party, in particular, could allow this situation to arise or would facilitate it in developing.

If a suggestion were made to do anything in the public service along the lines of what the Minister proposes to do to private sector workers, there would be riots in the streets. For example, what would happen if the State told teachers it was closing down their pension scheme and would not honour earlier commitments? Essentially, this is what the Minister will allow companies to do. She will allow them walk away from their responsibilities and leave people high and dry with regard to the reasonable expectation of pension benefits.

What worries me about this is that when people entered into an agreement with their former employers to make pension provision over their working lives, the expectation was that the commitment would be honoured in full. There is no reason healthy, solvent companies should not be required to honour this commitment to the level of 100%. In essence, this was the agreement reached and the contract made. Where this is not possible, it should be up to the Pensions Board to ensure any outstanding debt and deficit in the scheme remains as a debt with the company. Otherwise, there will be no justice in what the Minister proposes to do. This is why I propose that solvent employers should be required to honour the commitment to the level of 100% and should not be allowed wind up schemes without doing so.

I also propose that the maximum pension benefit in a case of single insolvency should be €60,000. This is an exceptionally generous pension arrangement. There was recognition of sorts by the Government that this is the maximum that should be subsidised in any way by the taxpayer. Last year in the budget the intention of limiting pension tax relief was announced to allow for a maximum pension of €60,000. This is a very generous pension. There seems to be recognition there is no case whatsoever for the taxpayer to subsidise pensions above this level. For this reason I propose that, as well as requiring companies to adhere to their original commitments and to 100% funding of pension arrangements, we should establish a maximum of €60,000. The Minister's proposals to reorder the priority will mean that people on very small pensions will see these pensions cut, but the pensions of some very high earners in a company scheme, which could substantially exceed €60,000, will see a percentage reduction. There is no justification, in my view, for making provision for pensions in excess of €60,000. It would be much fairer if a pension limit of €60,000 were to apply in the reordering proposed by the Minister.

Overall, it is extremely disappointing that the Minister will facilitate companies in welshing on commitments entered into with their former employees and allow a situation to exist where profitable companies completely renege on their commitments to their former employees. She will facilitate this, and there will be a knock-on effect for the people concerned and a knock-on impact on the State because of the subsidies that must provided to pensioners as a result of the reduced benefits. This seems to be another bailout for the corporate sector. I cannot see how allowing people to walk away from their financial responsibilities can be described as anything else. I must say it is incredible that the Minister would propose to do this.

The thinking behind these amendments was discussed at some length on Committee Stage, and I support them. In its wisdom, the OECD recommended a certain course of action, which is what is proposed here. I am sure it examined very carefully all of the arguments with regard to various jurisdictions, as well as the arguments specific to this country, and recommended that we do what every other country does - particularly our nearest neighbour the United Kingdom - which is to prevent financially healthy, solvent companies from closing down their defined benefit pension schemes. The Minister's advisers seem to have taken a different view from the OECD with regard to the wisdom of doing this, for what reasons I cannot quite fathom.

Companies would not be in danger of being plunged into bankruptcy if we brought forward this provision to compel them to close their defined benefit pension schemes until they had reached a specific threshold in order that the commitments made to retired employees could be honoured for the most part. This provision concerns companies that are financially healthy and could well afford to keep their pension schemes open. Whether they are subsidiaries or parent companies, if they are financially healthy, it is, by and large, due to the efforts of those who will benefit from the defined benefit pension scheme. There is no logic to or justice in failing to place an obligation on them. Perhaps we might agree a lower figure than 90%, but there should be an obligation on them. Companies should not be allowed to walk away scot-free and leave their employees hanging.

On Committee Stage the Minister said if we were to do this, more companies would close their defined benefit pension schemes. When will they do it? We are supposed to conclude the legislation today and it will be signed by the President shortly. Will there be a rush in the meantime by solvent companies to close their schemes or can the Minister table an amendment to make this proposal effective from today, which would cut off that opportunity for them? In the interests of justice and fairness, we cannot say we are introducing legislation, while, at the same time, remaining the only country in the civilised world that permits employers to enter into defined benefit pension schemes with employees and then to walk away for no reason or to decide unilaterally to close them, regardless of how successful their employees have made the finances of the company. Will the Minister give serious consideration to this set of amendments?

Since becoming Minister, I have commissioned the most comprehensive review of pension schemes in the midst of all the economic difficulties that beset Ireland following the bank guarantee and the collapse in the construction sector. The OECD has strongly recommended, in the context of the continuing difficulties experienced by defined benefit pension schemes over a long period - the problems did not arise today or yesterday; they have been ongoing for a long period - that we, as a country, when economic recovery permits, seriously consider debating a move to mandatory enforcement in supplementary pension schemes or auto enrolment. That is what is done in most countries with systems similar to that in Ireland. For a variety of reasons, not excluding the FRS 17 accounting standard referred to by Deputy Clare Daly, the landscape has changed in the past 20 years in how pensions are accounted for in defined benefit schemes. I understand why people may dislike FRS 17 which has evolved since the 1980s and, unfortunately, resulted in the fall-out affecting defined benefiot pension schemes in the past two decades that Members have described.

In Ireland defined benefit pension schemes are set up and maintained by employers on a voluntary basis. There has never been a statutory obligation on them to contribute to their pension schemes. None of the Members who have contributed suggested there be such a statutory liability when establishing a pension scheme; rather, when a defined benefit scheme is set up, the level of employer and employee contribution is agreed and established under contract law in each of the scheme's trust deeds and rules where they operate under contract and trustee law. The suggestion that no law applies to defined benefit pension schemes in Ireland is incorrect. However, they come under a particular structure that has applied to them since they were first set up. The trust deeds and rules differ from scheme to scheme because there are three parties - the employer, the trustees who administers the scheme under trust law and the employees. The employees are split into three groups: pensioners - retired employees; active members currently contributing to the scheme who generally are employees of the company; and deferred members - people who have not reached pension age but who have left the employment of the company. All three categories have rights under the scheme as contributors.

I refer to what has happened in the past ten years. The funding standard expert group of the Pensions Board recommended against the introduction of a debt-on-employers in 2004 and again in 2005. I highlight this because at that stage the economy was doing extraordinarily well and the State had been a generous contributor to the schemes over a long period via tax reliefs. The expert group viewed this proposal as introducing a retrospective cost on employers and feared it would undermine the voluntary basis on which defined benefit pension schemes were set up. It is interesting that the OECD's report recommends that, as a society, we debate a supplementary pension scheme in addition to the State pension contribution which is all that many people have to rely on and which is worth approximately €12,000 annually. However, somebody retiring on a State contributory or non-contributory pension equating to that amount will sometimes get a shock, although, comparatively, it is a high pension rate within the European Union. It is a comment on Ireland that members of all political parties and none have been strong supporters of strong State contributory and non-contributory pensions.

A Green Paper on pensions was published in 2007. It considered the debt-on-employer provision and referred to what had been said in 2004 and 2005. The high watermark of the Celtic tiger era was in 2007. At the time there were many difficulties with defined benefit pension schemes because of changes in businesses and because of the changes brought forward by FRS 17, an international accounting standard that did not originate in Ireland. In 2010, following a public consultation process on the Green Paper, the national pension framework was published by the then Fianna Fáil Minister and it did not include a debt-on-employer provision at a time when the financial circumstances in Ireland were unbelievably benign.

If the Deputy wants an honest discussion on this, he should examine the history of what all the parties have said about pensions at a time when the country was prosperous and read the OECD report which I commissioned in order to start a debate on the issue. The OECD's review of the Irish pension system recommended a degree of risk sharing and concluded that the priority currently given to pensioners before other members when a scheme is wound up creates significant inequalities across members. It also recommended that the priority currently given to pensioners over other members where a scheme closes because of sponsored bankruptcy should be eliminated. It is easy to say this, that or the other could be done if we had the money. This issue was previously debated in the Dáil during a period when the country was prosperous but I do not recall any dissent onthe Green Paper or the national pensions framework. They were regarded as broadly progressive documents. I raised issues regarding the application of large amounts of tax reliefs and the fact that some people were able to create extraordinary levels of pension provision through generous and uncapped tax reliefs.

In 1997, 2,242 defined benefit pension schemes were subject to the funding standard. At the end of 2007, when the Green Paper was issued and when the economy was enjoying a peak of prosperity, even if it was built on a bubble, the number of schemes had dropped to 1,319. The difficulties in defined pension schemes have not arisen overnight. Unfortunately, they have been ongoing for 20 years. As the end of 2012, there were 993 schemes and currently there are just over 800 schemes. The good news is that more than 50% of schemes have introduced restructuring arrangements that allow them to continue in operation. However, between 10% and 20% of schemes have severe difficulties.

The purpose of the legislation is to nurse as many schemes as possible to continuing health and to make provision for currently active members who are paying into schemes and deferred members who paid into schemes during their periods of employment. On Committee Stage we discussed the pros and cons of imposing a debt on an employer. This debate has gone on for a long time. Deputies have argued that imposing a debt on the employer would protect all scheme beneficiaries because the employer would meet all of the requirements. I will not speak about the capacity of an employer to meet such an obligation. Deputies also argued that it would prevent employers from walking away, encourage them to ensure schemes are well funded and managed and reduce the potential risks for the State. The arguments against the proposal are equally important and relate to protecting the parties to the scheme. There would be a threat to the financial stability of the companies concerned which, in some cases, could render them insolvent. Deputy O'Dea referred to that issue. A large number of the companies based in Ireland are subsidiaries of international parents and may have been bought and sold on several occasions. The employer which originally established a scheme may subsequently have been replaced by an international employer without any deep loyalty to the scheme and is prepared to make only a limited contribution to it.

Deputy Shortall asked about the amount of discussion we have had on these matters. I do not think I have discussed another issue with more individuals and groups on all sides of the argument. I assure her that my Department continues to engage in extensive discussions with stakeholders and the Pensions Board. It is not correct to say there has been no discussion. In many cases there has been agonised discussion about achieving the right balance.

An employer obligation will impact on company debts, investment and growth, as well as the employer's ability to raise funds for a pension scheme. If companies are raising funds on the open market it may face problems in terms of employer debts. I am not saying that I approve of there being a problem but modern international finance is complex and companies have to fund themselves. If a company is not able to find finance on reasonable terms and conditions, its future may be undermined. There may also be competitive advantages for employers who never provided a pension scheme or operate relatively risk free defined contribution schemes, which are now the norm among younger people.

If we end up prompting well funding schemes to wind up in order to avoid future debts, that would be an unintended consequence of the good intentions behind the amendments. Some industry experts have suggested that a statutory obligation on employers has the potential to eradicate the provision of private defined benefit schemes in Ireland. The experience of the UK and internationally has shown that complex anti-avoidance structures, with requisite resources and expertise, were required to prevent employers from restructuring to avoid their obligations. There was also an impact on companies' general creditors in terms of whether they continued to offer credit in the event that the debts accrued on pensions cannot be funded. Internationally, the structures in large economies such as the UK and the United States are both extensive and expensive. I do not know whether it is possible to have these kinds of structures in Ireland given the costs they entail, as well as the anti-avoidance mechanisms that would almost certainly be required.

We are all aware of the magnitude of tax planning in this country by corporates. Things are much the same in terms of pension planning.

Many employers that set up defined benefit schemes - as some commentators have stated, they were not required to do so; it was done on a voluntary basis, and employees were enrolled in the schemes as part of their employment - have been good in seeking to renegotiate their schemes in a way that benefits all parties to the scheme, including pensioners, deferred members and active members. It is important to recognise that rather than assuming complete bad faith on the part of employers, and to recognise their commitment to their employees, who, as it has been rightly stated, make their businesses successful.

I refer also to representations and commentary made to me as Minister by a variety of groups representing different aspects of Irish society which are stakeholders or have an involvement in pensions. They asked for the current section 48 framework on restructuring to be changed for a number of reasons. With regard to the fact that insolvent schemes have been winding up, thankfully, with the restructuring we hope to get as many schemes as possible safely across the line. More than 50% of schemes are now in such a position - which is, by the way, a much better outcome than was predicted when this process started. The groups referred, secondly, to the risk carried by the shrinking population of active and deferred members, which will become more pronounced in the future as schemes are closed to new entrants. The level of protection for pensions, they went on to state, is not compatible with the concept of intergenerational risk sharing among active and deferred members, and it is possible that active members who have increased their contributions or agreed to reductions in their benefits in order to sustain a scheme would receive no benefits on a subsequent scheme wind-up. Those who contacted me about this - I am summarising some of their views - included employers, the society of actuaries, representatives of trade unions and employees, and representatives of the Irish Association of Pension Funds - the pension funds sector. It is a difficult issue. For the record, that is what they had to say.

They would say that, because they are the interests the Minister is serving.

Those in the Irish trade union movement have gone to extraordinary lengths to seek to protect members' interests, but one must bear in mind the difficulty that there are three different categories of member. What we have tried to do here is to balance the interests of the three categories of member in a difficult situation.

I note that Deputy Shortall suggests in one amendment that anyone with a pension over €60,000 would lose everything greater than that amount. This was discussed in the Seanad and on Committee Stage. The advice from the Attorney General is that any action reducing anybody's entitlement to a pension must be proportionate and fair. I came up with a scheme whereby those with a pension of up to €12,000 are not affected - I gave the information that the median pension in Ireland under DB schemes is €11,000, which means the vast bulk of pensioners would not be affected; those on a pension of between €12,000 and €60,000 would contribute up to 10%; and those on a pension above €60,000 would contribute up to 20%. In a restructuring situation, if one can manage to make the scheme viable, it should be possible to protect pensions to a higher level than that, and that is the object of what we are doing. Where those in a DB scheme have made higher levels of contribution for a higher level of pension, I am advised by the Attorney General that in law it would be disproportionate to take everything over a certain level from them. I advised Members of that on Committee Stage. Such a proposal would not stand the rigors, for instance, of the FEMPI process which the country has been through. There must be proportionality.

I am not in a position to accept the amendments. As I stated, I understand Members' motives in seeking to protect everyone's interests, but we are talking about schemes that have a difficulty and that we are trying to help restructure, and in the event of a double insolvency, we are offering State protection of the interests of members of such schemes. That is what the Bill is trying to do. In that sense, it is consistent with the long discussion on the issue that has gone on in this country for up to 20 years without any changes having been enacted, while increasing numbers of schemes have closed or wound up.

The aim of these amendments is to implement a recommendation by the OECD in a report that was made to the Minister. It is not something that we in the Opposition dreamt up. We understand the problems some companies have, but there were companies that set up DB schemes and dangled them as a carrot to get employees by stating, 20 years or 30 years ago, that employees would be guaranteed a certain income on retirement. It was quite attractive - in fact, so attractive that only a few years ago there were 2,500 such DB schemes in the country.

The Minister mentioned that companies are being bought, sold and whatever else. Any company that bought a company in Ireland knew the liabilities and knew the issues. In fact, the recent strike proposal from the ESB unions related to the labelling of the company's DB scheme as a defined contribution, DC, scheme to make the ESB more attractive either for privatisation or to access funding on the international market. Companies do not want that type of future liability on their books and they are trying to get rid of such schemes. All employers in the capitalist market aim to make as much profit and squeeze as much out of workers as possible, and this is another such occasion. It is right and proper that we ensure in this Bill that employers have a liability to the pension fund that they, along with employees, have set up.

Obviously, there are dangers. That is why my party has used the OECD description of a healthy sponsor.

It states healthy employers could be defined as those with positive net revenues. That means that a company will not collapse if it makes the contribution that it should make to bring the pension fund, as in the case of my amendment, up to the 90% funding standard.

I wish to speak briefly in support of what Deputy Aengus Ó Snodaigh said. The Minister has mentioned two pension reports that preceded the OECD's report. I understand the OECD's report is very specific in recommending that this change be made. The Minister has mentioned that there are differences of scale between the economy and the economies of the United States and the United Kingdom. That is true, but has she examined what is happening in other countries of comparable size? Would she like to comment on this?

The Minister has made the point that if legislation along the lines of that in the United Kingdom was introduced, substantial avoidance measures would be taken. I do not accept that as a valid argument. One might as well say we should get rid of capital gains tax or other taxes because people would indulge in elaborate schemes to avoid them. People have certainly tried to avoid the new pensions legislation in the United Kingdom, but the government there does what a government does in the case of tax avoidance measures - it brings forward anti-avoidance measures to close down such efforts.

The Minister has also made the point that people are being put at a competitive disadvantage. I argue that any company providing a defined benefit pension scheme, for whatever reason, perhaps as Deputy Aengus Ó Snodaigh said, to induce people with the requisite skills to join it, is at a competitive disadvantage because it has an obligation that companies that do not provide a defined benefit pension scheme do not have. Therefore, that argument goes out the door. I notice that the Minister has abandoned the argument about there being an immediate rush to close down defined benefit pension schemes because she is aware that we will conclude our discussion on this legislation today and that it will shortly be signed by the President. In any case, she could make the legislation effective from today.

We must realise that this is the first time we are allowing the pensions of existing pensioners to potentially be reduced. That is a very serious matter. It is being done in the name of fairness, but the point of the amendments is to question if it is fair to allow this against the backdrop of a successful, profitable, viable company. The reality is that some employers have exploited the lack of clarity in order to walk away from their responsibilities. The Minister has said these companies engaged on a voluntary basis. It is true that there was no statutory obligation on them to set up a scheme, but they did and made an obligation; it was not voluntary for their employees. There are people paying into pension schemes who, for every euro they put in, will only get back 32 cent. It is dead money, but it is a condition of their employment; therefore, it was not voluntary for them. There is a legal obligation and the commercial courts have stated it is a contingent liability in these circumstances.

The Minister mentioned that FRS 17 was a factor. While it has been in existence since the 1980s, it was only in the late 1990s that some companies started to use it as an measure. Therefore, it is not an excuse. The Pensions Board has adjudicated on the issue and stated it does not replace the statutory obligation. For the Minister to argue that a defined benefit pension scheme and putting the onus on employers would give a competitive advantage to other companies that do not such schemes is unbelievable. That is a recipe for brute neoliberalism. She is nearly arguing in favour of having a race to the bottom. The same argument could made about providing decent pay levels, sick pay schemes and so on. Is the answer to have none of these employee benefits or decent conditions of work because it might put a company at a competitive disadvantage? Of course, it is not. It is a matter for us to tighten things up to ensure all employers stand by such schemes.

The Minister has made the point that a number of schemes have been restructured, but at what price? Under the new arrangement, the pain is being shared and the Minister is including pensioners for the first time, but if she were to take on board some of the amendments, she could tighten employer responsibility.

There may be no statutory liability on employers in this respect, but employers entered into contracts with their former employees and where a party breaks a contract, there must be consequences for so doing. Clearly, in the world of the Government there are no consequences for employers in that regard.

The Minister has quoted from the OECD's report and boasted about having commissioned it, but what we need is a comprehensive response to the pensions crisis. We need the OECD's report and its recommendations to be implemented in full, not a piecemeal approach adopted, picking and choosing elements of it. It strikes me as incredible that the Minister who at one time would have been up in arms at the notion of spreading bank debt across the population has been complicit in continuing a policy started by the previous Government in that regard. That she would now proceed to spread employer debt across all pensioners turns the notion of fairness and justice on its head. There is no defence to what she is proposing to do.

What exactly is the difference between Ireland and all other European countries? What specifically is the difference between Ireland and the United Kingdom? Why is it that we do not have the same protections for pensioners introduced in other states? The only conclusion one can come to is that the Minister wants to continue in the bailout vein in which the country has been in recent years where the biggest vested interests and those with the greatest access to ministerial decisions can continue to walk away from their financial responsibilities and leave the ordinary citizen to carry the load. This is completely unacceptable.

Those with a pension under €12,000 are totally protected under the scheme. The median pension is €11,000. Second, almost all such pensioners also have an entitlement to the State contributory pension of roughly €12,000.

What if they do not?

That brings their cumulative pension to roughly €24,000 which, in the context of the average industrial wage of around €34,000 to €36,000, is moderately good. I would like to see it higher, which is why I would like to see the OECD's recommendation of a supplementary scheme being implemented in Ireland as economic conditions improve.

Amendment put:
The Dáil divided: Tá, 40; Níl, 73.

  • Adams, Gerry.
  • Boyd Barrett, Richard.
  • Broughan, Thomas P.
  • Calleary, Dara.
  • Collins, Joan.
  • Collins, Niall.
  • Colreavy, Michael.
  • Cowen, Barry.
  • Crowe, Seán.
  • Daly, Clare.
  • Doherty, Pearse.
  • Dooley, Timmy.
  • Ellis, Dessie.
  • Ferris, Martin.
  • Fleming, Sean.
  • Fleming, Tom.
  • Halligan, John.
  • Healy, Seamus.
  • Healy-Rae, Michael.
  • Kelleher, Billy.
  • Kitt, Michael P.
  • Martin, Micheál.
  • Mathews, Peter.
  • McConalogue, Charlie.
  • McDonald, Mary Lou.
  • McGrath, Finian.
  • McGrath, Mattie.
  • McGuinness, John.
  • McLellan, Sandra.
  • Murphy, Catherine.
  • Ó Caoláin, Caoimhghín.
  • Ó Fearghaíl, Seán.
  • Ó Snodaigh, Aengus.
  • O'Brien, Jonathan.
  • O'Dea, Willie.
  • Pringle, Thomas.
  • Ross, Shane.
  • Shortall, Róisín.
  • Tóibín, Peadar.
  • Wallace, Mick.

Níl

  • Breen, Pat.
  • Bruton, Richard.
  • Burton, Joan.
  • Butler, Ray.
  • Buttimer, Jerry.
  • Byrne, Catherine.
  • Byrne, Eric.
  • Carey, Joe.
  • Coffey, Paudie.
  • Collins, Áine.
  • Conlan, Seán.
  • Connaughton, Paul J.
  • Coonan, Noel.
  • Corcoran Kennedy, Marcella.
  • Costello, Joe.
  • Creed, Michael.
  • Deasy, John.
  • Deenihan, Jimmy.
  • Doherty, Regina.
  • Dowds, Robert.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • Farrell, Alan.
  • Feighan, Frank.
  • Ferris, Anne.
  • Fitzpatrick, Peter.
  • Flanagan, Charles.
  • Harrington, Noel.
  • Hayes, Brian.
  • Heydon, Martin.
  • Hogan, Phil.
  • Humphreys, Heather.
  • Humphreys, Kevin.
  • Keating, Derek.
  • Kehoe, Paul.
  • Kelly, Alan.
  • Kenny, Enda.
  • Kenny, Seán.
  • Kyne, Seán.
  • Lawlor, Anthony.
  • Lynch, Ciarán.
  • Lynch, Kathleen.
  • Maloney, Eamonn.
  • McCarthy, Michael.
  • McEntee, Helen.
  • McHugh, Joe.
  • McLoughlin, Tony.
  • McNamara, Michael.
  • Mitchell O'Connor, Mary.
  • Mulherin, Michelle.
  • Murphy, Dara.
  • Murphy, Eoghan.
  • Nash, Gerald.
  • Neville, Dan.
  • Nolan, Derek.
  • Ó Ríordáin, Aodhán.
  • O'Donnell, Kieran.
  • O'Dowd, Fergus.
  • O'Mahony, John.
  • O'Reilly, Joe.
  • O'Sullivan, Jan.
  • Penrose, Willie.
  • Perry, John.
  • Phelan, John Paul.
  • Quinn, Ruairí.
  • Reilly, James.
  • Ring, Michael.
  • Shatter, Alan.
  • Stagg, Emmet.
  • Tuffy, Joanna.
  • Varadkar, Leo.
  • Wall, Jack.
  • White, Alex.
Tellers: Tá, Deputies Aengus Ó Snodaigh and Seán Ó Fearghaíl; Níl, Deputies Emmet Stagg and Paul Kehoe.
Amendment declared lost.
Debate adjourned.