No doubt, the Minister will move onwards to higher and better things.
The legislation has been hugely important and stressful for many airport workers. It must be considered in the context of other issues and the backdrop to it, including the uncertainty and the vulnerability of people in facing their retirement years because of the mess that is the Irish airlines superannuation scheme, IASS. We disagree on the roots of it, but a number of issues must be raised again. If we are discussing what is supposed to be a solution that affects people in their retirement, we first have to identify the problem to establish whether we are dealing with it properly. However, we are looking at it the wrong way round. We appreciate, as do many of the pensioners, that on Committee Stage the Minister amended the provision giving the trustees the power to make decisions without the consent of scheme members. There is a little relief that this provision has been deleted, but it is still necessary to delete the section in its entirety, particularly where it impacts on the IASS. I will briefly recap the reasons.
There is a problem with the funding of the scheme, for which the overwhelming responsibility rests with the employers and their inability to adequately fund the scheme during the years and other managerial decisions they took which impacted and put a strain on the scheme, yet the people who are being asked to pay the price are the pensioners and existing workers in these companies. I am not the only one saying this. There is a great deal of evidence to support this position, not least the judgment of Mr. Justice Murphy in the High Court. He deemed the IASS to be a contingent creditor in Aer Lingus when the company tried to move some moneys. That court ruling states Aer Lingus owes the IASS €500 million, with a contingent liability of €475 million. That is only the Aer Lingus element. The company is delivering a much smaller amount to the scheme. Will the Minister comment on the fact that neither of the companies involved is putting money into the IASS? The scheme, therefore, is only receiving money from the pensioners who have retired. They are doing this while experiencing cuts to their benefits. The employers are not putting money into the scheme. They are putting money aside in a separate contingency fund to benefit deferred and active members in the event of future problems. This will be ring-fenced for them and there will be nothing for the pensioners who have retired.
We should consider them because many of them contributed to a pension scheme for 40 years or more and were given a reasonable expectation that they would have a certain standard of living when they retired. The scheme was set by the actuary and the workers' contributions were increased approximately seven times during their working lives, while the employers' contributions were reduced approximately three times during the same period. Notwithstanding this, the proposal is that the pensioners will take a cut of approximately €40 per week initially and again in the new year and there is no fund to mitigate the losses. The money is not being put into the fund but a separate one, despite the fact that the people concerned paid for their full unco-ordinated pensions.
The courts have deemed the employer liable to fund the scheme. The workforce had no choice; membership of the scheme was a condition of their employment. It is a bitter irony that those who worked for the Irish national carrier in the United Kingdom will have all if their benefits ring-fenced and secured and that the commitment made to them will be honoured because of how pensions are dealt with in Britain, while the Irish workers of the same airline will face an insecure future. It is galling for them, given that they had no choice but to make the contributions.
It is an insult that the amendment proposes to give the trustees even more powers. One of the key reasons there is a problem with funding, for which the pensioners, deferred and active members are being asked to pay, is the appalling investment decisions made by the trustees. Although on Committee Stage the Minister said he was not interested in examining the issue and that it was a matter for the Department of Social Protection, it needs to be examined critically. The trustees made some ill-judged, ill-timed and, to put it mildly, peculiar decisions. Some €1.4 billion in assets were sold off as part of a freeze and de-risk strategy at a time when property portfolios were increasing. Essentially, they gave away a prime site on Molesworth Street which within ten months had increased in value by a further €10 million and generated an annual rental income of €6.5 million. One could not get such a portfolio anywhere in Dublin today, yet the IASS divested itself of it for very little and the pensioners are paying the price.
The trustees invested the money from the sale of the assets in an Irish Life fixed income fund. They tied up hundreds of millions of euro with very low yield returns and invested the rest in sovereign bonds also with very low yield returns. There are many questions to be answered about this and if the Department of Transport, Tourism and Sport is not interested, the Department of Social Protection should be. Jones Lang LaSalle, property adviser to the IASS, was also the selling agent for the property and the valuation agent for the company which bought it, IPUT. It was also located in one of the buildings of the proposed office redevelopment and, therefore, had a vested interest. Irish Life was the investment adviser to the IASS and one of the trustees was a former long-standing employee of Irish Life, in which the pension scheme invested more than half its funds. There are many questions to be answered. Last year it was reported that the investment adviser, Irish Life, received a weekly management fee of €20,000 which came from airport workers' pension contributions. We must examine this issue because it is a major cause of the problem and it is very risky to include provisions in the legislation linked with it.
The deferred members believed they had no voice in the process and mobilised to give themselves one. Although it is welcome that the pot put aside for them has been increased marginally, it does not solve their problem. As Deputy Dessie Ellis said, it is believed long-standing members of the scheme will lose 50% to 60% of their expected pensions based on the fact that they will lose the unco-ordinated element which represents approximately one third of their expected benefits. Given that the average IASS pension was approximately €30,000, there are major implications for living standards. We must put the responsibility where it lies. In 2001 Aer Lingus employed 6,833 people. Some ten years later it had halved its workforce to 3,491. That came at a cost, which Aer Lingus had not calculated. It benefited from a very healthy and buoyant cash reserve financial position as a result of reducing its wage bill, but it has put the cost onto the pensions scheme. One of the reasons workers were enticed to give up their secure, permanent, pensionable jobs was the prospect that they would receive an unco-ordinated pension. While the company benefited from payroll savings, the employees are paying the price.
Many of the deferred members were very upset by Minister's comments on Second Stage when he said the workers who had been enticed to retire early had received "generous exit packages" negotiated with their trade unions and that they should be taken into account. Workers believe they absolutely should not be taken into account and I agree with them. A severance payment results from managerial decisions in the company at the time and is irrelevant to a person's prospective pension. Taking it into account would have the effect of introducing means testing, which would be very disingenuous because it was an entitlement of the workers based on their contracts of employment. To include it in that way would be unacceptable.
On Committee Stage, the Minister made some comments to justify the inclusion of the new section 34. He said it was necessary to facilitate people who were in the airport companies but not members of a pensions scheme. He also said it was necessary in order to allow people to cease their contributions to the scheme. When I said a rule change could have the same effect, the response was that a rule change would require all 15,000 members to agree and, therefore, would be impractical. However, this does not apply. The trustees and worker groups previously put forward rule changes which were rejected by the employer. Rule changes have happened. In 1975 there was a rule change which resulted in people increasing their contributions.
In 1970, the scheme changed in terms of co-ordination with social welfare payments. At that time, workers were given the option of co-ordinating with the State pension. All new employees had to co-ordinate with the State pension, but if a worker was in employment before 1970, he or she had an option. That was a rule change which was capable of being implemented. It is not necessary, therefore, to secure the agreement of everybody.
In this case, what is obvious is that the companies have chosen not to allow new employees to join the IAS scheme and have opted instead for new pension schemes with lesser entitlements. That is what the issue is all about. It is about a less beneficial pension scheme which is being set up and the defined contribution schemes that are in existence. The companies do not need this Act to establish pension schemes for their workers as they already have new pension schemes in Aer Lingus and, I believe, the DAA. My second amendment allows the companies to do that also should they so choose. It is based on the model of section 9 of the Aer Lingus Act 2004 which provided for the Aer Lingus IPO. I will deal with that further when I discuss my second amendment. The overwhelming reason people still want section 34 deleted is that it creates a detailed legislative provision which potentially interferes with the pension entitlements of 15,000 very worried people. While they appreciate the improvement that was made on Committee Stage, it is not enough. The feeling is that this should still be removed. The deletion of section 34 in its entirety is people's preferred option. We will push for a division on that. People would feel a great deal more comfortable if it was eliminated.
The further amendments in the grouping arise if the proposal to delete section 34 is not accepted and the provision is left as is. There is a concern that the Minister is proposing to delete section 9 from the Aer Lingus Act. While it is true that the provision has never been invoked, it was included at the time of the IPO as a carrot to get the unions and staff to agree to that initiative. Section 9 represented an assurance that their pension scheme would not have lesser benefits. That it never had to be invoked is fine. However, there is no harm in leaving it there. The problem occurred after the IPO when SRT went to the wall. As a consequence of that unanticipated eventuality, hundreds of members of the IAS scheme became unco-ordinated overnight which placed an enormous strain on the pension scheme. It had a major impact. It is not that there is a need for legislation to set up new schemes. What happened subsequent to the IPO was that rather than allow workers to join the IAS scheme, the company opted instead to establish a new defined-contribution schemes with lesser benefits. Keeping section 9 for Aer Lingus is one of the options. What I propose is to rewrite section 9 and to keep it in this Act as an alternative to the Minister's proposal which could be used as a starting point or basis for discussion of the other airport companies. The DAA or the new Shannon company could set up a scheme based on the model that was there. That is the first alternative in the event of the preferred proposal not being agreed. If we are not successful in that alternative, the proposal in the third amendment relates to section 9 itself. Section 9 needs to be maintained in the Aer Lingus Act, notwithstanding that it has not been invoked before. What harm is there in leaving it in place?
One of the reasons there is a problem here is that people feel some of the measures the Minister is seeking to put in place could be implemented by way of a rule change or section 50 order, which would take precedence over a rule change. Legislation trumps section 50. People believe that what is really happening is that this is being done to bypass the trust deeds and rules and empower the creation of a de facto scenario. That is not desirable in the circumstances. There are other ways to achieve what the Minister said he wants to achieve. This is not doing it and I will move amendment No. 4 in the event that amendment No. 3 falls. I will maintain the other one also.
As there will not be an opportunity to do so while the Minister is still in office, I raise a related but separate issue on the national aviation policy which is under review and causing considerable concern to workers in all the airports. The mechanism and the draft the Minister has on display currently allows for the first time the possibility of airlines based outside the EU and the USA being granted access by the Government to pick up passengers in Irish airports and fly them directly to the USA. This is a significant worry. Currently, US and EU airlines operate on the basis of an open skies agreement with reasonable terms and conditions of employment, including minimum wages and certain standards of regulation. Deregulating the market will most definitely undermine the conditions of Irish workers. Will the Minister comment on that while he is here? We have seen very worrying developments in aviation in this regard. The Minister may have seen the feature in The Economist which referred to one of the Pacific carriers which is operating as a very low-cost carrier and crams 440 people into an aircraft type which only carries 220 people when operated by other airlines. A race to the bottom is very much developing there.
Can the Minister confirm whether the US carriers have been in touch with his office to say that if the market is opened to carriers from outside the EU and USA they will pull out of Ireland? That would have a dramatic impact. We have already seen Ethiopian Airlines announce that it will travel to Los Angeles using Dublin as a pick-up point. That would be a major departure in aviation policy. While the policy note set out on the Department's website says the proposal will take into account EU criteria on fair competition, people are very worried that is not going to be enough. In bilateral agreements, Ireland is very well served through connectivity with the USA by Irish and US airlines and it would be a retrograde step if we were to open it up any further. I would appreciate the Minister's comments on that.
