I welcome the Minister for Transport, Tourism and Sport, Deputy Leo Varadkar.
State Airports (Shannon Group) Bill 2014: Committee Stage (Resumed)
SECTION 31
Question again proposed: "That section 31 stand part of the Bill."
I also welcome the Minister. Section 31 provides for the renaming of the Dublin Airport Authority, DAA, to "daa". When I made my point on this matter previously, I was assured that no taxpayer's money would be spent in the renaming. I had asked whether it would be possible for an indication to be given from the DAA of what costs it would incur. Does the Minister have anything further to add before we decide on the section?
I have checked with the DAA since we previously debated this issue and very little is involved. There will be new headed paper as paper runs out and a sign must be replaced at the airport, but it is only intended to do this as part of natural maintenance works. It is not anticipated that there will be an added cost.
Question put:
The Committee divided: Tá, 27; Níl, 11.
Tá
- Bacik, Ivana.
- Barrett, Sean D.
- Brennan, Terry.
- Coghlan, Paul.
- Comiskey, Michael.
- Conway, Martin.
- Crown, John.
- Cummins, Maurice.
- D'Arcy, Michael.
- Gilroy, John.
- Hayden, Aideen.
- Heffernan, James.
- Henry, Imelda.
- Kelly, John.
- Landy, Denis.
- Mac Conghail, Fiach.
- Moloney, Marie.
- Moran, Mary.
- Mullen, Rónán.
- Mullins, Michael.
- Naughton, Hildegarde.
- Noone, Catherine.
- O'Donnell, Marie-Louise.
- O'Neill, Pat.
- Quinn, Feargal.
- Sheahan, Tom.
- Whelan, John.
Níl
- Byrne, Thomas.
- Cullinane, David.
- Daly, Mark.
- Leyden, Terry.
- MacSharry, Marc.
- Mooney, Paschal.
- O'Brien, Darragh.
- O'Donovan, Denis.
- O'Sullivan, Ned.
- Power, Averil.
- Wilson, Diarmuid.
Tellers: Tá, Senators Paul Coghlan and Aideen Hayden; Níl, Senators Ned O'Sullivan and Diarmuid Wilson.
Question declared carried.
SECTION 32
Government amendment No. 11:
In page 23, between lines 17 and 18, to insert the following:
“(iii) by substituting for the definition of “Shannon Airport Authority” the following:
“ ‘Shannon Airport Authority’ has the meaning assigned to it in section 2 of the State Airports (Shannon Group) Act 2014;”,”.
Amendment put and declared carried.
Government amendment No. 12:
In page 24, to delete line 23 and substitute the following:
“(i) daa, public limited company, and”.
Amendment agreed to.
Government amendment No. 13:
In page 24, line 24, to delete “daa,” and substitute “daa, public limited company,”.
Amendment put and declared carried.
Government amendment No. 14:
In page 24, to delete lines 28 and 29 and substitute the following:
“(i) daa, public limited company,
(ii) Shannon Airport Authority (within the meaning of section 2 of the State Airports (Shannon Group) Act 2014), and”.
Amendment put and declared carried.
Question, "That section 32, as amended, stand part of the Bill", put and declared carried.
SECTION 33
Government amendment No. 15:
In page 28, line 14, to delete “subsections (2) to (6)” and substitute “subsections (3) to (10)”.
Amendment put and declared carried.
Government amendment No. 16:
In page 31, line 3, to delete “does” and substitute “does not”.
The amendment involves the correction of a typographical error.
Amendment agreed to.
Question proposed: "That section 33, as amended, stand part of the Bill."
If the Minister was going to bring about the changes proposed in the section, he should have introduced separate legislation. Having section 33 included in the State Airports (Shannon Group) Bill means it will bring about the most sweeping changes to private pension arrangements in the history of the State. It is the first time a Government has proposed legislation to change pension benefits in a private pension scheme. In my contribute on Second Stage, I spoke about the 15,000 members of the IASS pension scheme, made up of Aer Lingus, DAA and some former SR Technics workers. It is split in three, with approximately 5,000 active members, 5,000 deferred members and 5,000 retired members. Through the Department, an expert pension group has been set up and it is seeking feedback and interaction with the three groups. This relates to the deficit in the IASS pension scheme. Every Member is aware of the significant budgetary deficit within the scheme.
The Minister for Social Protection, Deputy Burton, introduced the Social Welfare and Pensions (No. 2) Bill and the Bill signalled what the Government was about to do to the pension scheme.
This pension scheme was one of many pension schemes whereby effectively people who had joined this scheme - by the way, they joined under compulsion - had to contribute to it. As a result of the deficit run up within the pension scheme, the Government is now proposing a drastic reduction in benefits and payments. This is a private pension scheme but, without any agreement having been made, the Minister is bringing forward legislation in this Bill which will allow him - I will quote some items within the relevant section - to transfer members out of existing pension schemes to wherever he wishes them to go. It will allow the Minister to vary the benefits or promised benefits in payment.
Let us all recall that this is a defined benefit pension arrangement. People signed up for this on the promise of receiving certain benefits at retirement, including a guaranteed percentage of final salary and a guaranteed lump sum. I have a major problem with this because over the course of the years - I mentioned this on Second Stage - and during the terms of successive Governments, Aer Lingus has used this pension scheme as a vehicle to entice people to retire early from the company. Following my research into the matter it is my view that the company was offering unco-ordinated pension benefits at early retirement. This meant the company was not deducting the social welfare, old age pension or contributory pension amounts, worth anything up to €12,000 to people who retired early, to encourage them to retire early from the pension scheme. In no way have any of the benefit statements - I will discuss the benefits statements, the actuarial valuations and so on - shown that any specific payments were put into this scheme to cover the early retirements of staff who remain part of the scheme from Aer Lingus, the Dublin Airport Authority or SR Technics. The company has benefited from the early retirements by reducing staff costs to the detriment of the pension scheme.
Certain Government proposals are not in this Bill but will be copper-fastened by what the Minister for Transport, Tourism and Sport and his Fine Gael and Labour Party colleagues are proposing to do. Let us suppose someone who is within a year of retirement - I have received cases and I imagine the same people have written to the Minister - has paid into his or her pension schemes for 38 years and is expecting a certain amount at retirement. Now, based on the proposals of the Government, such people will have a 50% reduction in the pension benefits and retirement benefits they are due to receive in the next year or two.
Valid criticism has been made by the Retired Aviation Staff Association, RASA, and the deferred pensioners committee. They do not have a seat at the table, they have not been represented by the employer and they certainly have not been represented by the unions. These are people who are no longer employed by any of the three companies to which I referred and they are no longer union members. Therefore, they have no one to speak up for them.
This is the purpose of our opposition to the section. At the least we believe this section is premature because the Minister has not come to a final arrangement with regard to what he will do with the Irish airlines superannuation, IAS, scheme. This section will be the biggest stick to beat anyone at negotiations.
The proposed section 32A (11)(b) states, "The consent of the members or of a company or other employer participating in the IAS scheme or of any other person referred to in any provision of the IAS scheme shall not be required by the trustees for the exercise of the powers conferred on them by this subsection." This means the members need not give consent to be removed from the IAS scheme. No consent is required. This has never been done to any private pension scheme. Never has such Government legislation been brought in. This is a Government Bill to vary the benefits and remove the perfectly legal pension entitlements of thousands of members of this scheme. Now, we are removing their consent. The Government is conferring on the trustees the absolute power to remove members from these arrangements.
The Minister will have received correspondence, as will his colleague, the Minister for Social Protection, Deputy John Burton, who brought about these changes in the Social Welfare and Pensions (No. 2) Bill.
Why this is important is that the Minister is allowing a scheme to be wound down in a single insolvency where there is a solvent and profitable company. Aer Lingus is a solvent and profitable company, thank God, but because it has an insolvent pension scheme the Minister is allowing it to wind down the scheme, without insisting on any real payment to deal with the arrears and the deficit in the scheme, even though it is a profitable company. At the time the Social Welfare and Pensions (No. 2) Bill was brought before this House I put the Minister, Deputy Burton, on notice that this would happen with the Aer Lingus IAS scheme. That Bill was actually prepared over 18 months ago but the Minister pulled it at the time because word emerged that that was going to happen. My point is that the employer had advance notice that this was going to happen.
By passing this section the Government is giving free rein to the employer and to the Minister, as a major shareholder within the company, not to deal with the deficit in the pension scheme or, at the very least, to deal with only a small part of it and to write off the rest of the deficit. It will be written off, first, by reductions in payments to retired people. These are people in their 70s and 80s who have paid into the scheme and are retired and who have no ability to earn additional income. Second, the Minister is saying to the people who paid into the scheme over the years that despite what was promised to them under the laws of this country and under the rules of the pension scheme to which they signed up and contributed, the benefits due to be paid to them can be reduced by up to 50%, as some claim. Whatever the final figure is, the Government can insist on that happening. Not only that, the Minister can remove them from the scheme because he is setting up a new scheme for the existing members. The new scheme will be put in place and approximately 10,000 people, who have nobody to represent them at the table, will be left with this.
Can the Minister name one other private pension scheme where the Government has introduced legislation to remove the entitlements of its members? I cannot find any. I believe this is setting a really dangerous precedent. It is also causing immense distress to thousands of people who live in Dublin and in Shannon and who were expecting a certain level of income at retirement but now, based on the proposals we are hearing, it will be less than 50% of that.
When a person is a deferred member of a pension scheme, he or she is entitled to access to the trustees' annual report. The deferred pensioners committee and many of those deferred pensioners have told me that over the years they have not received copies of the trustees' annual report. They have also not received the benefit statement to which they are entitled under the Pensions Act 1990. The actuaries for part of this scheme were KPMG and one of the individuals who was an auditor of the scheme is heading up the Minister's expert committee in respect of the restructuring of the scheme. I will not mention the person's name and I am not impugning that individual at all. I am sure that individual is well capable and has the experience to do this. However, consider where the suspicion lies with people who say they never got a benefit statement when they were deferred members and did not get access to the trustees' annual report. The company will still not tell them how much money was paid out for early retirements and whether any requisite payment was made by the company to fill the hole made by the incentives for early retirement for people from this scheme.
The company used this scheme as a vehicle to reduce its own costs. It has done that successfully and I welcome the fact that the company is a profitable company. We all want that to be the case. However, who is paying for this now? It is the retired members and the deferred members. I am anxious to hear the Minister's logic for proposing this. This is such a major change that, in my view, it should have been proposed in a separate Bill. I ask the Minister, even at this late stage, to withdraw section 33 in its entirety. It is premature to include it now while discussions are still ongoing as to how the deficit in the IAS scheme can be dealt with.
I, too, object in the strongest possible terms to section 33. As Senator Darragh O'Brien said, this section represents a huge interference with the pension rights of members of the Irish airline superannuation scheme.
Essentially, it will give the trustees the power to wind up the scheme without fulfilling the minimum funding standard - as Senator Darragh O'Brien noted, the company remains profitable and, as a result, it just involves a single insolvency - and to transfer the members to a lesser scheme without their consent. In the context of said scheme, the members will receive far fewer benefits than they have been given a legitimate expectation of. These are entitlements for which the staff have paid by means of contributions from their wages and they were a key element of their terms and conditions. Staff who were made redundant from SR Technics were given assurances as part of their redundancy agreements and the pension scheme was used as an incentive to encourage former staff of both Aer Lingus and the Dublin Airport Authority to retire early. It is incredibly unfair, therefore, that legislation designed to unilaterally throw these agreements and the assurances given by the Government and the company out the window has been brought forward. It is particularly offensive that this is happening at a time when negotiations are taking place, when the expert panel is examining the scheme and the deficit relating thereto and when attempts are being made to reach agreement with everyone involved. It shows incredibly poor faith on the part of the Government to bring forward a section such as that before us while the negotiations to which I refer are ongoing. As a result of its actions, the pensioners are virtually going to have no negotiating position because the rug is being pulled from under them. The industrial relations environment within Aer Lingus is already incredibly sensitive and there is a further strike threat in respect of rosters and other issues. The Government has ridden into the middle of all of this and inflamed the situation unnecessarily by interfering with people's pension rights.
What is being done is ill-advised and incredibly unfair and the section should be deleted. The Minister should be setting aside what is proposed and allowing the negotiations to continue. The 5,000 people who retired early and have a right to deferred pensions are not represented at the negotiations and there is no one present at the expert panel discussions to speak on their behalf. The negotiations should be allowed to continue; the deferred members should be represented and the section should be withdrawn. If it is not, we will be opposing it and pressing the matter to a vote.
I am covering for Senator Kathryn Reilly who is unavoidably absent and previously participated in the debate on the Bill. I was obliged to get up to speed not only with the substance of the overall legislation but also with the section under discussion. I concur fully with the previous speakers. If one considers the matter impartially, it is very clear that the section has no relevance to the Bill. If any of us as an Opposition Member tabled an amendment similar in tone to section 33, it would be ruled out of order because it would not be in keeping with the substance of the Bill.
As we know, the legislation involves a merger of two entities into the Shannon Group. It is representative of the pattern followed by the Government in ramming through the contents of its agenda without proper scrutiny or debate. I would have been of the view that the recent election results would have taught those in government a lesson. Unfortunately, that has not proved to be the case.
I agree with Senators Darragh O'Brien and Averil Power that, as a result of the sweeping changes to pension schemes to which section 33 will give rise, this matter should have been the subject of separate legislation. Had that been the case, Government and Opposition Members would have had the opportunity to properly probe, discuss and even amend the relevant legislation. Tacking section 33 onto the Bill before us is both sinister and completely unacceptable. It is unacceptable for a number of reasons: first, because it bears no relation to the substance of the legislation; second, because it will make sweeping changes to pension schemes; and, third, because the pension scheme to which it relates is the subject of an industrial relations process. What the Minister is trying to do is pull the rug from under those involved in the negotiations that are ongoing, which is both reckless and reprehensible. He will be obliged to account for this at a future date.
We should remind ourselves what section 33 intends to do. I want to see the section removed from the Bill and if the Minister was of a mind to come back with a separate Bill, we could examine its merits but not as something that is tagged on to this Bill.
Section 33 introduces changes to the contentious Irish aviation superannuation scheme which is in the middle of an industrial relations process. In March of this year, the Minister for Jobs, Enterprise and Innovation and the Minister for Transport, along with IBEC, the Irish Congress of Trade Unions and a number of experts, were tasked with seeking a solution to the stand-off between the employers and the trustees on a way forward to deal with the pension deficit of €700 million. That expert group still has not reported back, yet the Minister is asking us to support this section today, which essentially could pull the rug from under that process. I will not give the Minister support in his efforts to do that.
The Bill as currently drafted repeals a provision from the Aer Lingus Act 2004, which provided that members transferred out of the scheme should not have less favourable terms than the new one. I have no doubt, given that Fine Gael's fingerprints are all over this section, that if it is passed this Bill will not be in the best interests of the workers or their pensions. To be frank, something stinks about this and I am far from impressed by the Minister's stunt in tagging this onto this Bill. I concur fully with what previous speakers said. There are very strong objections and reservations to what the Minister has attempted to do here. If he really believed in what he was doing he would have brought forward a separate Bill. That he just tagged this on is despicable, but the Minister can account for himself. I will account for what I believe is the right thing to do and the right way for legislators to behave. This is not the way to do business. It is the same old, same old from this Government in terms of not allowing for proper scrutiny and debate because if that were the case, we would have this as a separate Bill.
I listened to Senators O'Brien, Power and Cullinane and I agree with some elements of their contributions. There are many people based in Shannon, Limerick and along the west coast who took retirement in good faith. They made serious life decisions on the basis of an expectation that they had going forward and it is regrettable that the airport authority has not included people with deferred pensions in the negotiations. It seems that those with deferred pensions have been thrown to the wolves. Neither the unions nor the company care about them because they deferred their pensions but they did that at a time when the company was losing substantially and required significant cost-cutting. Those people were given options, and based on those options they made life decisions.
An intervention by the Minister to ensure there is a level playing pitch in the ongoing negotiations with those with deferred pensions is required. It is a badge of honour, so to speak. People fulfilled their side of the bargain by taking retirement. Many of them were probably close to retirement but they exercised the option outlined to them by the Government and the company at the time. It is unfair that they have no representation in the ongoing negotiations.
Another issue arises about people who transferred from the Department of Transport to new authorities in 1974. There is not many of them involved but they were given assurances at the time that they would receive Civil Service pro rata pensions and apparently that has not happened. I am aware the Minister has responded in parliamentary questions to others on this issue.
No more than the pensioners who deferred pensions in the middle of the last decade and exercised that option in good faith, these people entered contracts in good faith. I understand some of the people who did not take the Government at its word back then are now enjoying the pensions as outlined to them at the time, but their colleagues who accepted the word of the Government at the time have suffered. That anomaly needs to be addressed.
Senator O'Brien referred to the serious issue of the deferred pensions. There is a question to be asked in regard to a company honouring its commitments and I would like to hear the Minister's comments in that regard. I have no doubt the issue will be resolved, but it must be resolved fairly and equitably for everybody. If there are cuts to be made, the group on deferred pensions should not suffer a significantly larger cut than those who are already on pensions. The cuts should be the same across the board. I agree there should be cuts. All of society has faced cuts, but these cuts should be fair.
This is a State Airports Bill which mainly deals with Shannon Airport, but also deals with a number of other issues, including aviation security and the use of lasers to blind pilots. It is not just a Shannon Bill this matter has been tagged on to. If that had been the case, the Bill would not have been cleared by the Attorney General. Therefore, I cannot accept Senator Cullinane's charge in that regard. The Bill will get plenty of scrutiny, both in this House and in the Dáil. This is the third occasion on which I have been in this House on this Bill and I may well be back, if necessary.
In regard to Senator O'Brien's question, I am not aware of similar legislation pertaining to other private pension schemes, although similar legislation may well exist. I note his acceptance that this is a private pension scheme, not a State or public sector scheme. However, some people do not seem to realise this.
In regard to the extra panel, it is important to point out this is not involved in negotiations per se. It is not a round table negotiation and the panel has more of an arbitration role and will meet individually with representative groups. It has already met the group representing some of the deferred pensioners and I have asked it to do so again. For what it is worth, I agree the trustees' proposal was disproportionate in its recommendations for the deferred pensioners. However, that was the trustees' proposal, not my proposal and it is not what is being debated now in this House. It may well be the extra panel's proposal, when we see it, will be different again.
It is important to recap on this topic because it is of great importance and is a major part of the Bill. I gave an overview on Second Stage of the intentions behind section 33 of this Bill, in particular the proposed section 32A to be inserted into the Air Navigation and Transport (Amendment) Act 1998. I listened carefully to the views of Senators at the time and welcomed their views. I fully appreciate that Senators have a keen and genuine interest in the subject and assure them that my interest is no less. We all share a common desire. Like Senators, I want to see the parties to the IAS scheme - the members, employers and trustees - reach an agreement to resolve the serious and long-standing problem with that scheme.
I must also ensure that if and when an agreement is reached, the parties have the tools available to them to implement that agreement. What will happen if an agreement cannot be reached by the parties? Should we completely ignore that possibility? Should we not provide for some fallback mechanism other than a forced wind-up of the scheme in that eventuality? In a nutshell, these are the basic considerations behind the provisions in this section of the Bill, particularly the proposed new section 32A to be inserted into the 1998 Act.
It would be helpful and useful to remind ourselves of the current situation regarding the IAS scheme and how the proposals in this section are intended to assist the parties to implement whatever solutions are agreed by them to the serious problems in the scheme.
As I said on Second Stage, the provisions of section 33 do not anticipate or pre-empt any solution the parties formulate. If the serious deficit in the scheme were to somehow disappear and the IAS fund were to find itself in a healthy surplus as soon as the Bill were enacted, the possibilities under the legislation would include the continuation of the scheme. The Bill does not preclude that as a possible outcome. One of the central problems with section 32 of the 1998 Act is that it currently provides only for that particular outcome. In short, it provides that any separate pension scheme that the DAA establishes for IAS scheme members must include pension benefits and terms and conditions relating to those benefits which are no less favourable than those which are currently applicable. In other words, if DAA was to establish its own separate pension scheme for those of its members who are in the IAS scheme, it would have to be a replica of the IAS scheme with which there is such a problem. All of the current scheme's problems and inflexibilities would transfer to the new scheme.
The DAA and SAA do not have a mandate in the current legislation to introduce any other type of scheme for the members of the IAS scheme, which is a potentially serious barrier to the implementation of whatever agreed solution emerges on foot of the problems in that scheme. We could find - and I very much hope we do - that a compromise solution to those problems is arrived at over the coming weeks. Even if it is, the current legislation precludes the DAA from implementing it. The DAA will not be able to implement that solution unless the flexibilities provided for in the Bill are passed by this House and the Dáil.
It was suggested on Second Stage, and again here today, that the provisions are premature and that we should wait for the current discussions among the parties to reach a conclusion. The implication of that suggestion is that I would bring a separate Bill to the Oireachtas at that stage to provide for the legislative tools to implement whatever compromise solution has been arrived at by the parties. Leaving aside the prospect that the Houses may not even be sitting, as the summer recess is almost upon us, it would be a very inefficient use of Oireachtas time and resources when there is absolutely no need to take that course. We can provide the necessary provisions here and now in the Bill which I hope can be enacted before the recess. In addition, any further delay to the implementation of a solution to this most complex of problems, which has been ongoing for years, is not one that should be attractive to any of us. It would certainly be grossly unfair to the parties involved.
Section 33 of the Bill contains two subsections, the first of which amends the superannuation provisions applicable to the State airport authorities that are currently contained in section 32 of the Air Navigation and Transport (Amendment) Act 1998, as amended by the State Airports Act 2004. The second subsection repeals section 9 of the Aer Lingus Act 2004. Subsection (1) proposes to substitute two new sections in place of the existing section 32 of the 1998 Act. There are new sections 32 and 32A. Most of the provisions of the new section 32 are similar to the provisions contained in the existing section 32 which it will replace. For the most part, it contains the standard provisions governing pension schemes which appear in legislation governing commercial State companies. Such provisions include the power of airport authorities to establish superannuation schemes for staff, a requirement for ministerial approval for such schemes, and provision for any proposed subsequent amendments to them. Powers to establish a fund associated with each approved scheme from which benefits can be paid, a requirement that an appeals mechanism be provided for in each scheme, and provision for the laying of the schemes before the Oireachtas are further such provisions. The new section 32 also future-proofs the section, having regard to any future Government decision to separate Cork Airport from the DAA.
The new section 32A contains a number of different provisions to facilitate amendment by the trustees of certain provisions of the IAS scheme, in the context of current discussions to find solutions to the problems in the scheme. As emphasised on Second Stage, the provisions do not pre-empt or anticipate any particular solution that may emerge from those discussions, nor are they intended to undermine the terms and conditions of the employment of staff.
It would assist with a better understanding of the new section if I grouped the relevant subsections together for ease of reference. Subsections (1) and (2) will allow IAS scheme members who become members of another pension scheme to cease to make contributions to the IAS scheme, which many of them would like to do at this stage. The airport authorities will, of course, be required to submit that other pension scheme for ministerial approval in the normal way under section 32, which I have just mentioned. The employer contributions to the IAS scheme in respect of such a member would cease simultaneously and no further superannuation benefit would accrue under that scheme for that member.
This is entirely voluntary and there is no obligation on IAS scheme members to cease contributing to the scheme. The problem with the IAS scheme will still remain to be solved by the parties. However, it does address the desire expressed by many employees who currently have no option but to make contributions in respect of future service to a pension fund other than the IAS fund where there is a prospect of a better future benefit. SIPTU had a vote on this issue last February and the overwhelming majority voted in favour of withholding contributions to the IAS scheme pending a solution to the problems in the scheme. The provision in the Bill are providing them with that option if, on a purely voluntary basis, they wish to avail of it.
The provisions in subsections (3) to (10), inclusive, are very much in the nature of a fallback position. In the event that general agreement on the IAS scheme cannot be reached, they will facilitate each individual employer in negotiating its own pension solution with its own employees as an alternative to a wind-up of the IAS scheme. We must provide for all eventualities, including the possibility that, despite our best efforts, it may ultimately prove impossible for the parties to the current discussions to agree to a resolution. We must, therefore, provide some back-up mechanism because, in such a scenario, the only other likely alternative would be a direction from the Pensions Authority to the trustees to wind up the scheme altogether. Continuing with a scheme with an unresolved substantive deficit is clearly not tenable.
A winding up of the IAS scheme would constitute a very serious situation for the members and be likely to have very serious industrial relations implications at airports and Aer Lingus also. In a wind-up the trustees would have to purchase annuities for the pensioners - an expensive exercise - and reduce their benefits in line with the provisions of the Social Welfare and Pensions (No. 2) Act 2013. Whatever little funding would be left would be distributed to the deferred and active members. In the Bill I am providing for an alternative to the winding up of the scheme, if it comes to this. This will keep a measure of control with the employers and their employees.
Subsections (3) to (10), inclusive, provide for what is called a "replacement scheme". A replacement scheme is one which can be established by an employer for the specific purpose of receiving a transfer of assets from the IAS scheme in respect of that employer's members of the IAS scheme. Essentially, we are providing for the break-up of the IAS scheme but in a circumstance that would be very different from that originally envisaged under the 1998 Act. These provisions will allow for the employers to take members out of the scheme and they can then each negotiate directly with their own staff representatives on a solution without the multi-employer constraints and inflexibilities inherent in the current scheme. It is true that these subsections do not provide for consent by employees. In the scenario about which we are talking, namely that the IAS scheme is about to be wound up by the Pensions Authority, that would not be appropriate. However, the replacement scheme put in place will, of course, have to involve discussions with staff representatives.
The remaining subsections of the new section 32A stand on their own and I will deal with them individually. Subsection (11) provides the trustee of the IAS scheme with power, without the need for the consent of members or employers, to amend the provisions of the scheme in order to cease contributions to the scheme by both members and employers and, of course, to cease the corresponding accrual of further benefits under the scheme. This will facilitate the implementation of an overall solution to the problems in the IAS scheme, be it along the lines of the Labour Court recommendations of May last year or some variation thereof.
In deciding whether to exercise power the trustees must consider what is in the best overall interests of scheme members and have due regard to the interests of the different categories of member and any other matter they consider relevant, including the funding deficit and the implications of the deficit for all members. Clearly, an agreement among the parties will make the trustees' job a lot easier. The trustees of the most modern pension schemes would, in conjunction with the schemes' employers, have this power. Obviously, there would be a requirement for the new pension scheme under which the IAS members and new employees would accrue benefits in respect of their future service and such new scheme would be subject to ministerial approval under section 32(1), to which I referred.
Subsection (12) is to clarify that the IAS scheme trustees have the power to amend any provision of the IAS scheme that is necessary in order to comply with the directions of the Pensions Authority pursuant to section 50 of the Pensions Act 1990, as amended. While it may seem strange that there should be any doubt about the power of the trustees to institute rule changes without seeking the consent of members and employers on foot of a statutory direction issued by the Pensions Authority, there is potential nevertheless owing to the inflexible nature of the scheme for a challenge to any such action taken by trustees. This subsection is designed to remove any doubt that there may be in any quarter that in order to implement statutory directions from the Pensions Authority, under section 50 of the Pensions Act, the trustees may make any necessary change to the provisions of the scheme without any requirement to seek the consent of members or employers.
Subsection (13), the final subsection, provides a number of definitions for terms used in the new section, the most importance of which is perhaps the definition of a replacement scheme. I have explained this definition.
Section 33(2) repeals section 9 of the Aer Lingus Act 2004 which is similar to the existing section 32 in the 1998 Act applying to airport authorities. It allowed Aer Lingus to set up its own replica IAS-type scheme for its own staff. That section of the Act was never commenced and, thus, the provisions were never used. Replicating the significant structural issues inherent in the IAS scheme does not make any sense. Hence, retention of section 9 of the Aer Lingus Act 2004 makes no sense either.
This section of the Bill, particularly the proposed new section 32A, is very complex. While I have taken a fair bit of time to explain it, it is important that we all appreciate the background to it and its intentions. Why should we not let the employees who have expressed a wish to do so to voluntarily cease making contributions to the IAS scheme if they so wish? The section provides for this. If the parties to the scheme can reach agreement on a way forward, surely it makes sense and is imperative to ensure the legislative tools are available to them to implement that agreement. This section gives them these tools. If, on the other hand, the Pensions Authority is about to move to wind up the scheme, does it not make sense that we should provide for that eventuality and an alternative that holds out a better prospect for those members? Thus, they would at least get to hang onto something in such an awful eventuality. This section allows for that to be the case.
I hope the Senators will appreciate that there is nothing sinister whatsoever behind these provisions. Nevertheless, I will take note of what they have to say. On Friday last the expert panel stated it was entering what it believes is now the final phase of engagement with the various parties. It expects to complete its work and make a final report by the end of next week. I will have regard to the outcome of its work in any further consideration of the provisions of this section when I return to the Seanad or the Dáil thereafter.
I thank the Minister for his comprehensive response. I wish to address a couple of points mentioned.
It is welcome that the Minister agrees that the trustees' proposal was disproportionate in its effect on deferred and retired members. His statement, following my question, that he is not aware of any other private pensions scheme that actually had its own legislation to remove pension entitlements that members legally held is indicative of the truth. He is admitting this as the Minister responsible for transport. Let us examine the matter from the outside. In many instances, he has actually said he cannot become involved in the commercial running of Aer Lingus as a company. I happen to agree with him. The State is a minority shareholder in the airline, yet the Government and the Department are getting as actively involved as is humanly possible in the retirement fund and pensions scheme in that they are introducing legislation, particularly the new section 32A, of a kind that has never been introduced before in respect of a private pensions scheme. I find it really difficult to understand that there is nothing sinister in this but that is not a personal slight on the Minister.
The publication of the expert panel's report is but one week away. While we all hope agreement will be reached, does the Minister not realise the problem is that what the Government is teeing up is such that it does not really matter whether there is agreement? Should this legislation be passed into law, agreement will not be required and it will not matter. For the first time ever, legislation is being brought forward by a Government which will mean that agreement will not be required regarding a private company and a private pensions scheme.
It would make much more sense to withdraw this section of the Bill, insert another section or draft other legislation if, I hope, there is agreement. Can one imagine what the discussions will be like next week should this Bill be passed? It will effectively mean that what a swathe of probably 10,000 of the 15,000 members say, does not really matter. The Minister referred to the SIPTU vote of existing scheme members who do not want to make further payments into the scheme. Of course, I can understand this because the scheme has effectively been wound down in the past three years because everyone knew this day would come. All the employees and active members of the pension scheme see is their money going into a big black hole because nobody has taken charge of dealing with the deficit. If I am making a contribution, I will look after my own best interests. I am saying the Minister is giving them a vehicle to transfer out and have a new scheme with no deficit. He and his Department are dividing and conquering. They are making distinctions between the different types of member and telling the active members working in the company that there is a much better way forward for them and that they can enter into a new scheme. The Minister constantly refers to employers being allowed to bring their members into a new scheme. What about the two thirds of members of this scheme, particularly the deferred members, who do not have an employer? They are not being listened to. I want agreement on how we move forward. The active, deferred and retired members all want agreement.
The Minister spoke about the Pensions Authority winding down the scheme which both he and the Minister for Social Protection facilitated through the passage of the Social Welfare and Pensions (No. 2) Act. They have brought it about through a very clinical, step by step approach because the Social Welfare and Pensions (No. 2) Act deals with the priority order in order that those who are already retired do not get priority in the payment of annuities. The position has changed completely; there has been a massive change in private pensions legislation. The irony is that the only changes the Government seems to make to pensions relate to private pensions and that there is no move to fund public pensions properly; this is not lost on many members of this pension scheme. We are still paying public pensions for politicians like us and civil and public servants from current revenues. We have not yet moved towards funding a separate pensions scheme. The only changes being made are to private pension schemes. With the passage of this Bill and the Social Welfare and Pensions (No. 2) Bill, there will be wholesale changes in what were State and semi-State companies, Government-sponsored pension schemes and defined benefit schemes, as we are seeing already. The passage of this Bill will mean that if they so wish, employers will start to run their schemes down. As the Minister knows, even though the trustees are a separate legal entity under law, they are heavily influenced by the employer who is the major contributor. He or she plays a very influential role in the operation of the pensions scheme.
I cannot accept the bona fides of the Government in bringing forward this section of the Bill. If it really wanted agreement from the parties involved and stakeholders, it would not hold back on this section. If there is agreement, I put it to the Minister that it does not matter whether the Houses are in recess. We recalled the Seanad last year, which means that both Houses could be recalled to deal with this issue which is very important nationally. I agree with what he says about potential industrial relations issues and strikes in the future. We all want agreement, but he is effectively telling people that it does not really matter what they think and say or whether they agree because he, the trustees and the Government have all the cards and he is going to go ahead with the changes anyway. I strongly oppose this section on that basis and ask the Minister once again to reconsider removing it. I put it to him that it is premature at this stage.
I will touch on some of the Minister's closing remarks. He has said the reason this section is being brought forward is that if agreement is reached, the tools will be available to implement it. I share the same concerns of my colleague. What the section does is provide that if agreement cannot be reached, the trustees will have the power to unilaterally bring down people's benefits and transfer them to a less advantageous scheme. It is impossible to see it as anything other than this. It seems to assume that agreement will not be reached and that it is a stick with which to beat pensioners and deferred pensioners. How can they have any faith in supposedly ongoing talks when legislation such as this is being brought forward? If agreement cannot be reached and the situation is unsatisfactory for them, the trustees can do whatever they want, which is incredibly unfair.
The Minister has stated one of the reasons for the section is to give trustees an alternative to winding up the scheme. He has pointed out that under the current arrangements and the changes made in the Social Welfare and Pensions (No. 2) Act, this would be disadvantageous and result in people losing out on their benefits in line with the new priority order introduced. When that legislation was going through the Houses, I raised the following issue with the Minister for Social Protection. Whatever about a case involving a double insolvency, where the pension scheme and the company are insolvent and there is simply no money within the company to be transferred to the pension scheme, the Social Welfare and Pensions (No. 2) Act provides for situations where an extremely profitable company can wind up its pensions scheme because it is going through temporary financial problems, as the markets have dropped as they have in the past few years, and walk away from it, regardless of any commitment previously given to staff. This is unfair, which is why we have tabled an amendment to apply the OECD's recommendation that in a case involving a single insolvency where a company is still solvent and profitable, it should be unable to walk away from a scheme where pensions form a key part of its employees' and former employees' terms and conditions. It should not be able to tear up these entitlements, unless the scheme has reached the 90% funding standard.
The Minister spoke about how the need to have an alternative to the winding up of a scheme was the reason for this section. I suggest a better way of dealing with the matter is to accept our amendment which would ensure that in a case involving a single insolvency, employees would not end up in such a disadvantaged and unfair position.
I covered almost everything in my earlier remarks, but I will comment on one or two other issues.
While we all agree that this is very much a private pensions scheme, it is slightly different from other private pension schemes in the sense that it is provided for in legislation. Therefore, any agreement to resolve the difficulties in the IAS pensions scheme would probably involve some legislative change. That is the only reason I am here. It is not because we are trying to get involved in the management of companies or anything like this. It may well be the case that in the past superannuation schemes or semi-State body pension schemes have been amended by legislation. I do not know for sure whether this is the case.
Senator Darragh O'Brien said one thing about public sector pensions that was incorrect. He said there had been no changes or that nothing had been done in legislation to change them. That is far from being true. Public servants now pay a pension levy which the Senator may see on his own pay slip. It is very substantial and goes a very long way toward funding public sector pensions on a pay-as-you-go basis. It is probably the case that public sector employees pay more towards their pensions than many of the people about whom we are talking in the aviation sector ever did. In some cases, contributions are up to 16%. There is a new scheme for new entrants to the public sector that offers very different benefits from those than were offered in the past. In addition, public sector pensions have been cut twice - once by the previous Government for almost everyone with a pension over €12,000 or so and once by the Government for almost anyone with a public sector pension over €30,000.
Ironically, the Government has done a lot more to put its house in order when it comes to public sector pensions and the public sector pension deficit than the companies behind this scheme have done. If they were to copy the Government example - both the previous and current Governments - they would have been a long way by now towards resolving their issues.
Essentially, this section of the Bill contains three main elements. First, it allows members to leave the scheme voluntarily if they so wish. They cannot do that now. I think that should be supported. Second, it allows for any agreement to replace the IAS scheme to be realised and made a fact and it makes sense to do that now. Finally, it provides some backup in the event that the Pensions Authority forces the scheme to be wound down so that at least the staff and former staff can salvage something. The alternative which is being proposed by Fianna Fáil is one that I cannot accept, namely, to put it off again, maybe to the recess or for another few months or even years. That is the approach that was taken consistently by that party when it was in government - to hope there will be an agreement, that the Pensions Authority will not close down the scheme and to kick the can down the road for another few years in the hope that it will sort itself out. To me, that would be an irresponsible way forward so I am taking the opportunity presented by this Bill to provide for this long-standing problem, once and for all, to be solved.
May I make one brief comment? I thank the Minister for his response. There is no question of anyone trying to kick the can down the road from my perspective or that of Senator Power. What we are trying to do is to protect peoples' legal entitlements. I am not going to go over the arguments again but I want to clarify that point with the Minister. We want an agreement but we do not feel the environment for an agreement is actually helped by the Minister passing this legislation because after its passing, no agreement is required.
Question put:
The Committee divided: Tá, 22; Níl, 15.
Tá
- Bacik, Ivana.
- Brennan, Terry.
- Coghlan, Paul.
- Comiskey, Michael.
- Conway, Martin.
- Cummins, Maurice.
- D'Arcy, Michael.
- Gilroy, John.
- Hayden, Aideen.
- Henry, Imelda.
- Keane, Cáit.
- Kelly, John.
- Landy, Denis.
- Moloney, Marie.
- Moran, Mary.
- Mullins, Michael.
- Naughton, Hildegarde.
- O'Donnell, Marie-Louise.
- O'Neill, Pat.
- Sheahan, Tom.
- Whelan, John.
- Zappone, Katherine.
Níl
- Barrett, Sean D.
- Byrne, Thomas.
- Crown, John.
- Cullinane, David.
- Daly, Mark.
- Heffernan, James.
- Leyden, Terry.
- MacSharry, Marc.
- Mooney, Paschal.
- O'Brien, Darragh.
- O'Donovan, Denis.
- O'Sullivan, Ned.
- Ó Clochartaigh, Trevor.
- Ó Domhnaill, Brian.
- Power, Averil.
Tellers: Tá, Senators Paul Coghlan and Aideen Hayden; Níl, Senators Paschal Mooney and Ned O'Sullivan.
Question declared carried.
I ask Senator Darragh O'Brien to report progress.
I assume the Bill will resume next week.
Yes.
Every day is a school day.
Progress reported; Committee to sit again.