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Wednesday, 21 Sep 2005

Aer Lingus Pension Scheme: Presentation.

Has the submission from RASA, Retired Aviation Staff Association, been circulated?

I understand it has. I welcome Ms Mairead Hayes and her colleagues from the Retired Aviation Staff Association, Mr. Paddy Kilduff, Mr. Antoin Daltún and Mr. Con Clarke. I draw the attention of witnesses to the provision that members of the committee have absolute privilege, but that this same privilege does not apply to witnesses appearing before the committee. Members are reminded that they should not comment on, criticise or make charges against any person outside the House or an official either by name or in such a way as to make him or her identifiable. I invite Ms Hayes to introduce her colleagues and make her presentation. It has been agreed by the committee that she will have five minutes to make her submission and there will then be a 15 minute question and answer session.

Ms Mairead Hayes

I thank the Chairman. Mr. Paddy Kilduff is secretary of the pensions action committee of the Retired Aviation Staff Association. I am chairperson of the association and the pensions action committee. Mr. Antoin Daltún is a pensioner and an expert on some of the matters that we may be discussing. Mr. Con Clarke is also a pensioner and expert on some of the issues.

We sent a submission to the committee and I would like to thank the committee secretariat for its assistance in making the submission available to the committee members. In the submission we set out what we are seeking as pensioners of the Irish airlines general employee superannuation scheme, IAGESS. We are looking for guaranteed pension increases for members in line with the established practice in the public service, major semi-State commercial companies and so on. We wish that the increases be linked to the national index of hourly earnings. Despite some discretionary increases in our scheme, since 1990 pensions have fallen behind by approximately 50% when compared to public service pensions and others. The recent actuarial evaluation of the scheme has indicated that 17% contributions are required for past service and 21% for future service. This is in contrast to the present combined contribution rates of 11.5%.

The scheme is a defined benefit scheme which was set up in 1954. Its two sponsoring employers are Aer Lingus and the Dublin Airport Authority and there are also three participating companies: Aer Rianta International, SR Technics and Santain Developments, formerly Aer Lingus Shannon. The active members represent 42% of the total membership of the scheme. A total of 4,124 pensioners are members and there are 3,392 with deferred pensions. Pensioners and people with deferred benefits now comprise 65% of the membership of the scheme. All of the employees of the participating companies are covered in the scheme except Aer Lingus pilots who have a separate scheme.

The pensions payable are 40/60ths of the final salary based on years of service with no lump sum. Members may commute up to 25% of the pension and take a reduced pension. The average pension payable at 31 March 2005 was €14,000, which represents 39% of the average salary and falls far short of two thirds of the average salary. The spouse pension is 50% of the member's pension and there are also child benefits. There is no provision for increases and the trustees may, in accordance with the rules, award pension increases from any accrued surpluses. These increases cannot exceed the consumer price index. In 2004, the increase paid to pensioners was 1.7%. Based on the average pension at that time, this meant that pensioners got €2.54 per week each. The increase in 2005 was 2.2%, which meant that for this year they got €5.92 per week. I am sure members appreciate that such an increase would not go very far for anyone.

The consumer price index has been paid during the years since the inception, except in the 1980s when inflation was exceptionally high. There are two categories of members within the scheme which must get increases each year. Under UK legislation, pensioners must get the UK annual retail price index. The Irish Pensions Board rules state that deferred pensioners must have the CPI applied to their preserved benefit. These categories now comprise 50% of the pensioners. This is interesting because 50% of the members are now getting guaranteed CPI, while the other 50% are not getting it, even if they have got it in effect during the years.

An actuarial evaluation of the scheme took place in March 2005, which was brought forward by one year due to concerns about the scheme. Based on a number of industry measurements, there is a view that the scheme is in serious difficulty. The actuary stated that it is difficult to see that the past practice of increasing pensions in line with inflation can be maintained without limitation. He has also stated the present levels of contribution are inadequate to continue to pay CPI. The present combined contribution is 11.5% of payroll, while in most other companies it is between 17% and 21%, with most employers paying at least 10%. A large number of comparable companies can pay between 11.9% to 19.5%, or they may pay a particular amount and pay the balance of cost. The recent actuarial evaluation, which is of major concern to our members, shows that just to meet the current benefits, the fund needs a contribution rate of about 17%. To guarantee future benefits of CPI, it should be 21.5%. Aer Lingus management will continue to state that the pension scheme is currently within the rules and that it meets the minimum funding standard. We know that it meets the minimum standard but that standard does not take the CPI into account.

Ms Hayes is one minute over time.

Ms Hayes

I originally thought we had ten minutes.

We have submitted to the committee a letter from Aer Lingus management which tries to distance itself from any responsibility for the scheme. We do not accept that Aer Lingus has no responsibility for the scheme. As pensioners, we are very concerned that in discussions which are ongoing in both Aer Lingus and the Dublin Airport Authority solutions may be reached which may not take account of existing pensioners. We do not want this to happen.

We are satisfied, as members of the public service, that we have been denied rights by our employers with the support of successive Administrations. As proof, we draw the joint committee's attention to Appendix A of our submission and to page 2 in particular. When granting the scheme in 1969, the then Department of Transport and Power stated "the grant of potential service in these cases is a substantial benefit for the public service and the Minister does not see any strong case for further enhancing the benefits for Aer Lingus employees". The point is that further on in the letter, the Department noted that the widows' pension was breaking new ground and was out of line with the rest of the public service. Our point is that we should be considered in line with the rest of the public service.

On page 3 of the submission we reply to some of the stock answers which we have received over a period in response to our lobbying efforts on behalf of pensioners. The members of the joint committee have probably read some of them. For example, the Government states it has no role to play. Our assertion is that this is clearly untrue. I have just referred to the example in Appendix A of our submission. The submission also states that in notices to staff in 1969, Aer Lingus stated it had been directed by the Department to equalise the employer and employee contributions, unlike the situation in some comparable companies where, in some cases, the contribution of the employer is twice that of the employee.

The submission also states pensions at Aer Lingus and the Dublin Airport Authority were kept artificially low at a time when the public service pensions took off. However, we continued to be constrained and nothing further happened. The submission also states this is not simply a matter for the trustees and mentions the issues associated with a multi-employer scheme. I can elaborate on this if any member wishes.

Let me draw the joint committee's attention to the issue of privatisation. We are very concerned. As a committee, we have not taken a view on privatisation.

That is irrelevant.

Ms Hayes

However, we are very concerned that anything on privatisation might——

That is irrelevant to this discussion.

Ms Hayes

Very well.

I thank Ms Hayes and welcome the delegation before the joint committee. It seems the association's campaign has been going on for some time now. It has been in touch with all Members of the House about it on a regular basis. However, there has been little or no movement. I note the letter received by the association from the former chief executive of Aer Lingus, Mr. Willie Walsh, in January 2004 in which the company appears to be distancing itself from any responsibility in this area and states it is a matter for the trustees. Has the association received legal advice in respect of the role of the trustees? In essence, is the association proposing to amend the terms of the scheme or does it believe a new scheme is needed?

I also have a question concerning the actuarial report. I am unsure why copies of the report could not be furnished to the joint committee. The joint committee's members should pursue this. It is a complex area but we should be entitled to see a copy of it to see what is predicted.

The association had much difficulty in setting up a meeting with the company. Questions had to be tabled in the Dáil, which is very unfortunate. In terms of industrial relations within the company, it does not help if pensioners cannot meet senior management. The association has also pursued the Department of Transport. What kind of response has it received? Has it received any positive signals? In the context of the possible sale of the company, the Department could control that issue and could decide whether the association's concerns would be addressed. Has the association received any indication from the Department as to the view it is likely to take?

Ms Hayes

I will attempt to answer some of the questions and may ask some of my colleagues to come in on others.

On the role of the trustees, it is true to say the scheme was set up under a trust deed. The situation is that it is an irrevocable trust deed. However, the sponsoring companies can change the rules of the scheme and introduce better benefits at any time. At any stage within the scheme they can bring forward plans to incorporate and change the benefits. Effectively, that is what happened in 1969, when they were ahead in terms of some areas such as widows' pensions. I will ask Mr. Con Clarke to comment on that issue.

I cannot comment on the actuarial report mentioned by the Deputy. We have met representatives from the Department of Transport. Since I have been involved, we did not meet the previous Minister for Transport, but officials. We have met the current Minister for Transport, Deputy Cullen, and it is fair to say he was positive in those discussions. However, in the letters we received in response to lobbying on the part of Deputies and Senators, we found his position was much less favourable than that presented at meetings with us. We felt he had indicated that there might be some windows of opportunity to do something about the scheme. However, a particular letter more or less infuriated us — I have it with me somewhere — in which he appeared to be closing off avenues rather than aiding us. If my colleagues cannot find it, we can forward it to the joint committee at a later time. Nevertheless, the Minister for Transport did meet us and has met us twice. Previously, we were not as successful in getting to meet people.

We had difficulty in meeting the previous chief executive. We are about to ask to meet the current chief executive. We have allowed him a brief bedding-down time. Since I have held the chair of the association, the chief executives have been changing quite a lot. It has been somewhat difficult to keep up with them. I am unsure if I have left anything out. Perhaps Mr. Clarke will now comment.

Mr. Con Clarke

As Ms Hayes has stated, the scheme is an irrevocable trust. The members and the sponsoring employers can, collectively and jointly, change the rules at any time, once there is a sufficient majority of votes to so do. The employees cannot change the rules on their own. It must be approved by the employers because ultimately, a pension is a promise to pay and it is the sponsoring companies — there are a number of them — that meet those regards and pay the subscriptions.

In addition, as far as the trustees are concerned, they manage the scheme within the rules as laid down. They cannot, despite what everyone seems to think, either raise the issue of new benefits or decide on new benefits. They can only pay benefits out of any surplus in the scheme subject to the limitation of the consumer price index. They can only pay benefit from the available funds. They have no duty to spend money that is not provided for in the fund. They cannot add a cost to it and the company is not involved in a benefit of costs.

There is a rule which can be seen in both the airline's annual accounts and the accounts for the scheme which states that in the event of a surplus, the trustees can decide what to do with it. They may also keep it in case of a need to pay benefits in the future. If there is a deficit, they are obliged to inform the employers and must inform them exactly what they think is necessary to fund the deficit in the form of additional contributions. However, no one can oblige the employers to provide for the deficit and the previous managers of the airline stated that this meant they had no obligation to fund the scheme. They were saying they were meeting their obligations by paying the present subscriptions and benefits that were agreed and that they had no other obligations. The scheme was funded during the great days of paternalistic management. The reason the statement was made that one could not oblige the employees, the members or the company to pay decent subscriptions until they knew what they were was because everybody had to sit down and have a communications forum or meeting to reach some agreement. However, those days are long gone, which is one of the reasons behind our fear that nobody is interested in the scheme. Perhaps it is just an element of the belief that Aer Lingus is concerned with the return to shareholder value and nobody else counts.

Ms Hayes

Everything connected with the scheme is also subject to departmental approval. We would say that perhaps there has been undue influence over the scheme.

I join my colleagues in welcoming the delegation.

We will return to the normal format of taking three contributors together.

I will be as brief as possible in light of the time constraints we face. Regarding the member companies, Mr. Clarke mentioned Aer Rianta International, SR Technics and a Shannon company whose name I did not catch. Is there membership from Cork?

Mr. Clarke

Yes, Cork is included, in addition to membership from the United Kingdom.

Under which banner is it included?

Ms Hayes

It is included under Aer Lingus and Dublin Airport.

Is Aer Rianta Cork included?

Ms Hayes


My next question was to have been whether any attempts had been made to meet the new chief executive but Ms Hayes has already answered it.

Have any meetings been held with the senior administrative staff with responsibility for administering the scheme, regardless of the ins and outs of chief executives over Ms Hayes's term as chair? I take it that there has not been the same change at management level dealing with the administration of the scheme. Have any meaningful discussions been held at that level, regardless of the comings and goings of chief executives?

There has been much talk about actuarial reports, trustees' roles and legal advice. What is the position regarding the responsibilities of the trustees and the rights of the members? Has the Retired Aviation Staff Association taken legal advice as to the validity of the scheme? Ms Hayes mentioned that the scheme was originally set up under the terms of an irrevocable trust, yet it seems to have the capacity for flexibility at the will of the management. It does not say much for the irrevocable nature of the trust that the scheme appears to be entirely one-sided in favour of management. Will Ms Hayes elaborate on any legal advice received by the Retired Aviation Staff Association about whether there are any possible legal stipulations which can be pinned on the scheme with a view to getting the association out of the hole it is in currently or are we simply talking about a moral responsibility on the part of the Department of Transport? This is what it appears to be coming down to.

I join colleagues in welcoming the delegation which has brought a very serious issue to our attention. The kind of advance warning we have been given is welcome because we have seen instances in the past where a crisis eventually arose with regard to the funding of particular schemes. These kinds of advance warnings are helpful and the committee should continue to investigate them.

I have access to the actuarial valuation report and in trying to tease it out, I realised that it is quite a complex document and something that we need to further examine. Would it be fair to say the restructuring of companies and the fact that there will be a smaller worker base in most of them will have a significant impact on the fund? I am no mathematician but it appears the fewer the number of people paying into the fund, the greater difficulty it will experience in dealing with people taking early retirement or those already drawing their pensions.

Regarding what appears to be a lack of obligation on behalf of the sponsoring companies, to which I think Mr. Clarke referred — I thought his explanation was fairly clear — surely they have an obligation. Is there anything in terms of the contract and conditions of employment of employees that might be used to force companies to shoulder that obligation?

I welcome Ms Hayes and her group here today. Perhaps one of the staff who were involved in the company could explain for the benefit of the committee how the situation arose in the first instance. Why are aviation staff in Aer Lingus and Aer Rianta different from staff in other semi-State bodies and why is the scheme not pay-related? Will Ms Hayes give us an historical overview of it because part of any pension trust deed involves the agreement between the sponsoring employer and the employees? It appears that the deed, agreement and scheme involved the agreement of the employees in the first instance, which is why I am interested in finding out why pay-related schemes in other semi-State bodies are different. Perhaps it does not provide us with a solution but I am interested in finding out the answer.

In terms of figures, how much is currently managed by the trustees? If there was an agreement between employers and employees to convert the scheme into a pay-related scheme, with the consent of the Department, what sort of funds would be necessary and how does the association envisage that being funded?

Will Ms Hayes set out specifically the solution which is being proposed by the association? What does the association think should be done by the Department or Aer Lingus?

Ms Hayes

Mr. Clarke will answer some questions, Mr. Daltún will answer Senator Dooley's questions and Mr. Kilduff and I will deal with the remaining questions.

Mr. Clarke

To return to the question about why everybody else seems to move on, one must look at the history of the scheme and the letter from 1969 that Ms Hayes mentioned. One must also take into account the fact that Aer Lingus did not just restructure today or yesterday. Restructuring in some form takes place every five years in the airline business. For Aer Lingus, it involved trying to get finance from the Government on the one hand and having serious cost problems on the other. All the Government would do, even in the most difficult times during the 1970s and 1980s, was tell Aer Lingus that it could borrow money and the Government would stand by it. However, at that stage, Aer Lingus was paying 17% and 18% interest to borrow that kind of money. Part of the reason the Minister then stipulated that contributions to the scheme were to be equalised and why he would not allow the scheme to go any further was because the Government during the 1970s had a grandiose idea of a national pension scheme which was to go through the PRSI system. We were the guinea pigs at the beginning of this process but it did not affect anybody else. We were left to languish in the pension scheme we had with no improvements while everybody else merrily continued on a balance of cost basis. The balance of cost means——

How did that happen and why was the situation different for everybody else?

Mr. Clarke

We had very few pensioners and nobody argued on the pensioners' side. There were only 200 or 300 people in the pension scheme at the time. Right up to the middle of the 1980s, there were only between 200 and 500 members. Now there are 7,000. The fact remains that if one examines the finances of the scheme about which Deputy Power and Senator Dooley asked, the large number of pensions in the scheme means that the past is not so bad but to cover the benefits, even to pay normal benefits within the rules without any cost of living indexation, the contribution level of funding is too low. The past surplus generated when there were not many pensioners in the scheme is subsidising the future. If one includes the CPI, one needs significantly more money. To meet ordinary benefits, figures such as a 17% contribution rate are needed. From the point of view of the trustees and funds, it does not matter who pays the 17%. If it is 9% from the members and 8% from the company or 10% from the company and 7% from the members, as long as 17% comes in, it meets future needs. To meet any sort of indexation, approximately 20% or 21% is needed.

On the basis of normal historical schemes, where the employer paid €2 and the employee paid €1, which has been accepted across the board in many schemes, there would be an adequate amount in the scheme if everyone met their payments. Something the members will find if the committee ever gets the actuarial report is that many of the people who managed the scheme from its inception, the trustees, were senior officials in the trade unions, members of staff, members of management and outsiders. They have managed the scheme very well. To be able to pay a level of CPI throughout its history with the low level of contributions is phenomenal. No other pension scheme has achieved this. This has nothing to do with the fund, as it has done well by its members, but it does not have enough money to do more.

The solution we are asking for in the letter's conclusion is that there should be a contribution rate of up to 21%. Whether this must be negotiated in order that the members pay so much while the company pays another amount, somebody must pay. The committee's members can lobby the Department to try to influence the company's management or other people who have duties to us. Many of us have given 40 years service, which is now down to 15 or ten years. The pension itself is constrained even though the company has paid much money in for early retirements. As the people concerned come on stream, it becomes more difficult to pay any additional money and may possibly lead to even less money. Investments are volatile and if we get another clout like that between 1999 and 2002, God knows where we will be. Is the matter clarified for the Deputy?

Do current employees have a role in this matter?

Mr. Clarke

They have a major vote in any proposal made to change the scheme. Generally, the active members have votes while the pensioners do not. The problem is that until we got together, we did not have a voice. We have tried to raise that voice as best we can.

It is fair to say current members will be pensioners at some stage.

Ms Hayes

Would Mr. Daltún like to add anything?

Mr. Antoin Daltún

Senator Dooley asked about the maturing membership and its implications. There are two levels of implication. First, the scheme is changing rapidly. In the current actuarial report, 60% of the people in the scheme are pensioners or deferred pensioners and only 40% are active members or contributors. In the previous actuarial report, which was two years before the current report, 60% were contributors and 40% were, if one likes, beneficiaries. The balance is moving quite quickly. The scheme's ability to improve benefits by over-performance within the scheme clearly diminishes as the number of beneficiaries increases and the number of contributors declines. The scope for getting matters right internally is diminishing. Second, because there is much money going out of the scheme as well as coming in, the trustees must take a more cautious approach in their investment policies. Therefore, the expected return is under a degree of pressure.

The Senator also mentioned the question of litigation and legal advice. On principle, legal advice costs an awful lot of money and one cannot be sure of the results. We are not suggesting that anyone is defrauding the scheme, running away with the money or anything like that. We think it is better addressed through other channels. Obviously, if it were developing in a way that seemed particularly invidious to us, we would have to take up the matter. We are being squeezed slightly. As Ms Hayes said, there are some groups that enjoy indexation as a right and there is also the inadequacy and weakness of the contributions. The people who tend to get squeezed the most by these factors would be actual pensioners.

Mr. Clarke replied that there was a small number of pensioners initially. Were any discussions held with the trustees and members of management concerning financial forecasting at that stage, taking into account there would be an increase in the number of pensioners? If so, what response was given? In the trustees' report, a number of pensioners are partly paid by the Department of Defence. From this, I assume they are former employees of the Department. If so, would they already have pensions from the Department? I do not wish to go into any of the other details.

I welcome the Retired Aviation Staff Association representatives and thank and commend association members for their work. This is an opportune moment to compliment and thank the staff of Aer Lingus for their years of dedicated service, in bad times as well as good. It is important that this should never be forgotten when they attend a parliamentary committee.

I have a few questions on the pensioners issue. Our guests say there are 4,124 people involved. On a personal level, we all have a duty to support the people concerned but is this the final figure for payments on the issue? The point was made that the average pension is €14,000. For me, this stands out as being very low. As was mentioned in the submission, it falls short of the two thirds salary. This is a disgrace. On the second page under "Other Issues", the submission states that Aer Lingus tried to distance itself from any responsibility for the pensions of its employees. Is this a bad reflection of the state of management at Aer Lingus in recent years and why did it not respond?

In their submission, our guests state they have been lobbying for seven years and that most people agreed they had a just case, including Ministers, politicians and all sorts of people, yet nothing happened. This is a totally disgraceful situation. The stock reply, as stated on page 3 of the submission, was that successive Governments said they had no role to play, it was a matter for the trustees and that it was a multiplier scheme.

Will the Deputy put a question rather than make a statement?

I am trying to highlight in a positive and constructive way that the people concerned had to hang around for seven years. Have they found it frustrating trying to represent pensioners in this situation? Regarding the privatisation issue, it is mentioned in the submission's conclusion that the delegates express their concerns about——

The Deputy will not put questions to the delegates on the privatisation issue, which has nothing to do with the pensions.

It concerns the pension issue. If our guests have problems at present, pensions will be a major problem under privatisation. On behalf of the Independent group, we strongly support the pensioners.

That is the Deputy's final question.

In welcoming the delegation to the committee, will the delegates accept that in the context of a solution to this particular problem, which has been with us for well over seven years and it amazes me that some of the members did not seem to realise there was one——

Will the Deputy put a question the delegates? As he has been allowed to attend the committee, he should abide by the rules, as we are ten minutes over the time allocated.

I am not prepared to accept that. The Chairman allowed me to attend the meeting to make a contribution. All Members of the Houses are allowed to attend any committee and make contributions.

Nobody will disallow any Member to do so.

Will the Chairman allow me to pose the question?

Will the Deputy put the question?

In the context of the situation being discussed, this matter must be resolved before Aer Lingus is privatised. Is that accepted? In debates on the Aer Lingus legislation, I highlighted this matter and put on record the views of Aer Lingus pensioners concerning the privatisation of Aer Lingus.

Will the Deputy put a question?

In this context, is it accepted that the Department, the Minister, the company, the trade unions and the staff must make a commitment? Unless all parties agree to reach a settlement of an injustice we are going nowhere. Is it accepted that this is required? In the context of pending negotiations that may arise concerning the privatisation of Aer Lingus, the pensions of existing pensioners and staff must be a major issue on the agenda.

Mr. Daltún

I will respond to the question raised by Deputy McGrath concerning Aer Lingus distancing itself from responsibility. It put a strange phrase in an annual report when it referred to the scheme as a target benefit scheme rather than a defined benefit scheme. This was challenged by ICTU and brought to the Pensions Board. Everyone, except Aer Lingus and including what was then Aer Rianta, made submissions to the effect that it was a defined benefit scheme. This was accepted by the Pensions Board and its legal advisers. We were concerned about this matter and that gives a flavour of the issues we face.

Ms Hayes

We are here principally in respect of Aer Lingus but the scheme incorporates other companies. In our submission we have mentioned the intentions of other companies. When the Dublin Airport Authority was in discussions with the regulator concerning charges at Dublin Airport, costings included an element for increased pension contributions and means to meet the deficit in the scheme. The documentation is available. The main sponsoring companies, Aer Lingus and DAA, and in 2000 the then chief executive and chairman of the board of Aer Rianta, stated that the intention was to set up a new scheme.

In response to Deputy Glennon and Senator Dooley, Aer Lingus was in discussion to set up a new scheme prior to 11 September 2001. There was a will to implement this but that changed dramatically after 11 September 2001. This continued up to the letter received from the then chief executive which was viewed by our pensioners as over the top. Pensioners are concerned about the possible change in structure of the main sponsoring companies.

Some members of RASA are based in the United Kingdom and have seen the situation that transpired when the London handling service was sold to Swissport, which is now in the ownership of a Spanish railway company. That spectre is in the minds of some members and while we accept that it may be difficult, results can be achieved if there is the will. We did not rehearse some of the interventions that took place during the years. We seek to look forward rather than go back over what happened.

In response to questions from Deputies Ryan and McGrath, we ask for no fettering by the Department of Transport on what will happen. In particular we ask that decisions taken on the change of structure of the companies take account of resolving the matter of the pensions of our members. While we do not take any view on the change of structure, which is a matter for the Oireachtas, we still have a problem with a perceived deficit in the fund. I note that the Chairman is smiling.

Deputy Ryan has me smiling.

Ms Hayes

We would like the support of this committee to deal with issues in the pension fund.

Mr. Clarke

In reply to Deputy Ryan's question, there must be willingness from the Departments of Finance and Transport to accept that there is a problem and that something will be done. Perhaps the Minister and the Department of Transport cannot act alone. The Department has an influence over all semi-State and commercial semi-State bodies, though it will deny that. Collectively, trade unions have a role to play in agreeing to certain measures. Whatever happens to the commercial structure of the company, the Departments of Finance and Transport have major roles to play in terms of protecting RASA and the pensions.

I have two final questions. When was it first noticed that the pension funds had a deficit and what was done at that stage? While I am aware that members of the delegation are not trustees, they might be able to tell us when this problem was first noted. How do they envisage this being resolved and who will foot the bill?

Ms Hayes

RASA set up the pensions action committee to look for indexation of pensions at a time when there were no perceived deficits in the pension fund. Aside from the fund's performance, the action committee was set up as an offshoot of the RASA to lobby for indexation in line with public service pensions. The situation has been overtaken by perceived deficits within the fund and some hold the view that actions of the employers have helped to create this situation by large-scale early retirement and because the salary structure is lower or less people are contributing. This point was made earlier.

The major exodus from Aer Lingus took place in 1994 under the Cahill plan and some of those pensioners are on pensions as low as €8000 per annum.

Mr. Clarke

Since the early 1990s there has been a view from the actuary that this would not be an issue.

The stock market crisis probably did more damage than any other matter.

Mr. Clarke

What also exacerbated the problem was the view of actuaries in the mid-1990s that we would all live to the ages of 78, 82 or 85 years. That is a serious liability on any fund. Moreover, the income from long-term bonds is extremely low and buying in annuities is expensive.

Although no papers have been published on it, I also know that successive financial controllers recognised the need for additional contributions to the fund until the attacks on 11 September 2001 caused a serious crisis. I will not state how I know just that I was part of the organisation. However, every time informal discussions were held with the Department of Finance, there was a refusal.

At this stage I thank Ms Hayes——

One of my questions was partly answered. With regard to the Defence Forces members——

Mr. Clarke

The Superannuation and Pensions Act 1963 covers transfer of pensions from the public service to semi-State and State companies and one can get one to one for years of service when switching between them. Some companies will pass on an amount of money for the number of years service an employee has measured on the transfer value. The Department of Defence does not pass that on until the employee is actually drawing the pension. Therefore the amount it owes as part of an employee's pension is paid to the airline scheme when the employee draws the pension, and the airline scheme then pays out the pension to the employee. A proportion of that pension comes from the Department of Defence under the 1963 Act.

At this stage I thank Ms Hayes and her colleagues for informing the committee on how they view the situation with regard to Aer Lingus pensioners.

I ask the delegation to withdraw. I have no doubt committee members will discuss this at a later stage. Before they leave, I ask members of the delegation to answer my question about who they envisage will foot the bill to bring this into line. Is it Aer Lingus?

How much is that bill?

Mr. Clarke

There is no simple answer.

Mr. Daltún

There is no simple answer to either question and nobody is expected to write a cheque tomorrow. It requires a design. We are happy with a design that gives us an acceptable answer. It would not be appropriate for us either to design it or state exactly how much it will be. It would not be insignificant.

On a point of order, I propose the committee set aside some time to deal with the significant information we received today and to take into account other considerations vis-à-vis offering an opportunity to or requesting the Department of Transport, Aer Lingus and the Dublin Airport Authority to come before us at a later stage.

We will deal with that matter in private session before we finish the meeting.

Mr. Clarke

It would be wrong of us to come here and put figures of hundreds of millions on the table and frighten everybody. A pension is not about a payment of millions today. It is an amount of money paid out over time. It is about contributions and percentages guaranteed by members and the organisation, and perhaps the State, in a restructuring of the company. It is not a simple answer.

There is a general acceptance that these issues must be addressed quickly. The opportunity to address them is in the context of the sale of the company. If they are not addressed prior to that and if the Minister does not take responsibility for it prior to the sale, we will have no control over what happens in a private company. I hope the committee discusses that with the Minister.

I hope the workers use their shareholding in Aer Lingus as muscle which is necessary in the ongoing situation to ensure that pension rights are protected. I would expect that and would be surprised if they do not.

They may not have much muscle with 15%.

It is better than nothing.

The Government has 85% and can exert its muscle if it wishes.

Ms Hayes

The latter point is one that seriously exercises our minds. We have reams of correspondence which show that at one stage the Department of Public Enterprise appeared willing to move on an issue and was stopped by the Department of Finance. We want everything to work together. Mr. Daltún's statements must be supported. We do not seek a big bang solution but we want commitments as well as money.

I thank the delegation.