: I move amendment No. 33:
In page 28, between lines 47 and 48, to insert the following subsection:
"(5) Superannuation benefits granted under schemes under this section to persons who, immediately before the vesting day, were members of the staff of the Minister for Transport, Energy and Communications and the terms and conditions relating to those benefits shall not be less favourable to those persons than those to which they were entitled immediately before that day."
: I move amendment No. 33a:
In page 29, subsection (11), line 33, to delete "7 years" and substitute "one year".
In section 41 (11) it is proposed that the payments which the Minister for Finance would make to the proposed company in respect of the accrued superannuation rights of the transferred staff should be paid not later then seven years after the vesting day. It seems to me that seven years is far too late because quite a number of the transferred staff — I do not know what proportion — would wish to retire or would be forced to retire by age, at some time between the vesting day and seven years later. If they are to retire in those circumstances, there is no proper provision for the payment of their pension.
At present, the staff proposed to be transferred are civil servants and while there is no provision for payment of their pensions, they are able, through funding, to get payment of their pensions from current Government revenue and expenditure in each year which, for the moment at least, guarantees them payment of their pensions. It will be different when those people — I think it is about 550 — are no longer civil servants. If they do not have a funded pensions scheme, they have no guarantees because they will not be paid out of current Government revenue and expenditure.
Therefore, it seems that seven years is far too long for them to have to wait. I am suggesting that "seven years" be deleted and "one year" substituted, which is reasonable. It might be difficult to make the payment on the vesting day because it may be hard to calculate it, but it should be possible to calculate it within a year and to make the payment.
The idea here is that it would be left as long as possible and I would not be surprised if in seven years' time an amendment to this Bill is introduced to try to avoid this because the amount will be substantial. This is not just some small or nominal sum, it involves millions of pounds to fund the pensions of 560 people and it is something like this that focuses on the existing unsatisfactory system in respect of civil servants' pensions. I recall that when I spoke about this five or six years ago and drew attention to it I was accused of not wishing to see civil servants paid their pensions. Of course, the opposite was the truth. I was very anxious that they would be paid their pensions and that provision would be made for that.
If the present system continues, it is calculated that some time early in the next century, Government revenue may not be sufficient to pay the pensions and that is recognised within the public service, where a substantial number of senior civil servants take out insurance to guarantee the payment of their pensions. Like myself, they are nervous that they may not be paid in full at some date in the future.
Since these people are losing the protection afforded to them by being civil servants, they should be given the protection of a funded pension from the earliest possible date and should not have to wait for seven years before they are in that position, which is unsatisfactory. Unlike Aer Lingus, for example, where we were told there were relatively few staff members over 50 years, the staff members who will be transferred under this Bill from the Civil Service would be in all age categories and would not be predominantly young people, a good proportion of them would be over 50 years of age. They deserve protection in this respect and their pensions, which will ultimately be funded properly, should for those being transferred be funded from the start. The Minister for Finance should have to make that transfer within a year.
: I am satisfied that the superannuation position of staff is adequately protected by sections 40 and 41 and by accepting amendment No. 33 which states explicitly that any superannuation scheme devised by the company after the vesting day must offer the transferred staff the same level of benefits to which they are now entitled.
I have listened with interest to the point Deputy O'Malley made on this amendment, but I would refer him to the Bill. Section 41 (9) makes it mandatory for the Minister for Finance to make superannuation contributions. Subsection (10) decides how and to whom it shall be paid and subsection (11) says it must be paid not later than seven years after the vesting day. The whole purpose of this is to take the totality of the superannuation fund into account. It will run in the region of maybe £50 million plus. The Minister for Finance will be expected to make an annual contribution. Each year heretofore the State, the Exchequer, the Minister for Finance and the Oireachtas made an annual contribution to ANSO, but more particularly a special contribution for equipment has been running at an average of £7 million per annum. When the company is now commercialised, it will not be necessary to make that contribution. Consequently, it will be possible for the Minister to make similar contributions which were directly made to ANSO for equipment in the past to be made directly to the superannuation fund.
We have looked at the staff profile, we are satisfied that over the next seven years only about 10 per cent of the staff will be calling on the fund. Consequently, the Minister is obliged under subsection (10) to pay with interest, so there is no intention not to make a contribution to the superannuation fund. Rather it is clearly enshrined that the Minister for Finance on behalf of the Exchequer, the taxpayer and the Oireachtas must make the contribution, to whom it shall be made, the conditions under which it shall be made and the final time for making the contribution. It is a facility to enable a regular annual contribution to be made to the fund which shall be growing with interest therein to protect the pensions which will be required by staff as and when they retire.
(Limerick East): Do I take it the Minister intends that instalment payments of about £7 million a year will be made each year up to the seventh year, making the total pension fund about £50 million?
: That is correct.
(Limerick East): The subsection gives the impression the Minister need not pay anything until the seventh year. Then it would all be paid by way of lump sum. As Deputy O’Malley suggests when the seventh year comes there might be a shortfall in the Exchequer and we could be faced with amending legislation to defer it further. Why can the Minister not specify in the Bill that he is talking about instalment payments over a seven-year period rather than a requirement to pay it all within seven years?
: The purpose of the section is to allow for the necessary flexibility between the two Departments to arrive at a final arrangement satisfactory to the Exchequer, the Minister for Finance, the two Departments and the staff as to contributions to be made. It would be foolish for the Minister for Finance not to make the contribution annually because he would be penalised by interest payments.
As Deputy O'Malley has said, the fund will be required for up to 10 per cent of the staff over seven years so it will be drawn on in the earlier time. Consequently it would not be in the Minister's interest to fail to make the contribution. An annual payment will have to be made. That is almost officially agreed at this stage and we are putting it into the Bill to ensure there is no doubt. The staff are absolutely assured their superannuation fund will be in position.
: Deputy O'Malley, are you pressing your amendment?
: You ask me that about all the amendments.
: That is my job.
: Before Deputy O'Malley says whether he is pressing his amendment and in response to what both he and Deputy Noonan have said, I will examine this to see if I can tighten it up on Report Stage. I think I could insert a word to clarify the Bill. I cannot do this now, because I have not got an amendment before this committee but I will examine it for Report Stage.
: What word has the Minister of State in mind?
: I would insert "final".
: Final payments?
: Yes: "The last payment or the final payment . . . shall be made not later than 7 years after the vesting day". Surely that would be of great help in clarifying the matter.
: What might be of more help would be in subsection (9) after the word "appropriate" and before the word "contribution" to insert the word "annual". While the Minister of State talks about making annual payments nothing in either subsection (9) or subsection (10) says there should be such payments. Subsection (9) says the Minister for Finance shall determine "an appropriate contribution", which is one sum. There is no question of annual payments being made. Subsection (10) says until the contribution is paid in full interest will be payable on the balance outstanding.
There is no obligation on the Minister for Finance to make more than one payment and he need not make that until the end of the seventh year after the vesting day. That is unsatisfactory, particularly if 10 per cent of the staff will have retired by then. That is quite a high proportion. It bears out what I said earlier about the age structure of the staff being well spread. It is not like Aer Lingus where the staff is mainly in young age groups. These are spread up to 64 years of age.
There is no reference in the Bill to annual contributions. There is no obligation on the Minister for Finance to make anything other than one payment at the end of the seventh year. That is not good enough if 10 per cent of the staff have retired by then, and unfortunately some proportion will have died and their widows should be in receipt of pensions. There is no guarantee that they will get them because the fund will not be established until the end of the seventh year.
: No, not at all.
: There is no obligation to establish the fund until the end of the seventh year.
: There is an obligation to pay the pensions.
: It is easy for the Minister of State to say pensions will be paid because he is working by analogy with the Civil Service. If they remained civil servants their pensions would be paid because there is no fund. That is the disadvantage that civil servants have. In the short term they have the advantage that they can call for their pensions to be paid not out of a fund but out of annual Government expenditure while the Government can afford it.
The people who will be transferred employees of this company will not be able to ask for the pensions to be paid out of current Government expenditure, they will have to rely on a funded scheme. The scheme need not be funded by the Minister until the end of the seventh year. What are they to do in the meantime? The company may wish to pay them but there may be no means to do so. That is why I suggest changing it from the end of the seventh year to the end of the first year so the period at which they would be at risk would be minimised. That is reasonable and I ask the Minister of State to accept it.
He may intend the Minister for Finance to make annual payments but those would not be just payments of pension. They should be capital payments to fund his liabilities as an employer in respect of a pension system or scheme which is now to be funded although it was not before.
The amount of money is quite substantial. I said it would be many millions of pounds; the Minister of State says it will be £50 million. That makes it all the more vital because this company could not pay pensions based on the yield of £50 million. It is too big a sum. They would not be able to acquire the power or ability to do that in a short time. This is a serious point because it shows how vulnerable people are in respect of their pensions unless they are in a funded scheme.
: It is a question of the capacity to meet the requirements. The figure for outgoings to staff who will be retiring in the period is calculable. In the setting up of the company the outgoings will have to be met and it appears there is a topping up requirement.
The Minister needs to give the committee the figures to show he will meet the requirements outlined by the previous speakers to ensure the funds will come from the Minister for Finance as the contributions arise from the setting up of the company. That fund may not be adequate so within the seven-year period there will be the possibility of an anomaly. We need reassurance from the Minister on Report Stage that it will be either a guarantee of further borrowings underwritten by the Minister of Finance or a cash transfer from the Department of Finance.
: I refer the committee to subsection (8):
As soon as may be after the vesting day, the company shall establish a fund administered by trustees who shall be appointed by the company from which superannuation benefits payable under a scheme under this section shall be paid.
Obviously, the fund must be created after vesting day. there is an onus to create that fund. I hope Deputy O'Malley, or anybody else, is not suggesting that the Minister for Finance is going to renege on his responsibilities. There are various ways and timescales over which the Minister for Finance could discharge his liabilities to the fund. The recoupment period of seven years is a reasonable timescale especially as provision has been made for interest payments. I agree that the Exchequer should discharge its liabilities as quickly as possible. I have no difficulty with that. Past superannuation liabilities over a one year period could not be regarded as reasonable. The amount of the liability will be identified and a reasonable recoupment plan put in place in the timescale we have mentioned.
In relation to staff, we have a wider age span than Aer Lingus; we have an average service of 20 years. We are satisfied that over the seven year period up to 10 per cent of staff will retire. The Minister for Finance will be obliged to make an annual contribution. We can insert the word "annual" on Report Stage. I have no difficulty with that. How will this strengthen the Bill if the Minister makes a contribution irrespective of the size? He is making an annual contribution. We have to operate under the normal governmental and departmental legislative environment that exists. The Minister is obliged to fulfil his contribution to this supperannuation fund. It will have to be done over a seven year period. I am satisfied that will be done. I will look at this issue again before Report Stage.
(Limerick East): We all accept the Minister’s goodwill on this. The Minister will, as the wheel goes round, pass on to greater or lesser duties. We are talking about the rights of employees, potential widows, widows and orphans to pensions. When staff are being transferred from Civil Service status to semi-State status they need more than the goodwill and guarantees on the record of the House to ensure their pension rights. These rights should be a matter of law rather than a matter of ministerial commitment. While the commitments being given are very strong they are second-hand. Effectively the Minister of State is making commitments on behalf of the Minister for Finance who is not present. The Minister of State before Report Stage should introduce appropriate amendments to guarantee the fund.
I accept what the Minister of State said about section 41 (8) which states, "as soon as may be after vesting day the company shall establish a pension fund". There is no requirement in this subsection that anything other than the normal contributions which would, I presume, be deducted from the staff once they become staff of a semi-State body, would go into that fund. It would become a contributory pension scheme and monthly contributions would be deducted and go into that fund. There is no provision in the subsection for the Minister for Finance to contribute any further amounts. If the fund only contains deductions from pay cheques in the first couple of years then the fund will not be suficient to pay the pensions that the Minister has outlined. the Minister of State is projecting significant retirements in the early stages of the life of the company.
If secion 41 (8) is combined with section 41 (11) I suggest that the latter should be amended to read: "Payments under subsection (9) or (10) shall be made and by way of annual equal instalments and final payment shall be made not later than seven years after the vesting day". That is the type of amendment that is needed, it would meet the problem I have with this. To be fair to staff and to spouses and children there is a need for more than a ministerial commitment. It must be a matter of law which puts it beyond doubt. It cannot be left to the discretion of the Minister for Finance and his successors to give assurances that everybody will be treated correctly. That is not the way to do business. It must be a matter of law and must be put beyond doubt.
: Based on what Deputies O'Malley, Noonan and Lawlor have said, I am prepared to have another look at this before Report Stage and try to clarify and strengthen it.
: In view of the Minister's commitment, is Deputy O'Malley prepared to withdraw amendment No. 33a?
: The Minister of State's commitment is binding on no one other than himself. I would love to hear what the Department of Finance has to say to this. It obviously knows well that it is not in a position to pay over this money. That is why it insisted on this subsection being drafted in this way. Fifty million pounds is a substantial sum of money even in modern conditions and the interest on it over a period of seven years could increase it still further by 60 or 70 per cent depending on the level of interest rates in the next seven years. One may be talking about as much as £80 million. The Department of Finance in any given year will shy away from having to make that payment. The losers will be the people who would be entitled to the benefit of the fund. If they want to make an arrangement of this kind it is perfectly valid for them to do it. If people are transferred to a company from the Civil Service they will have to accept the financial consequences.
With the greatest respect to the Minister of State, if somebody sues in order to obtain his pension which he is not being paid he cannot go to the High Court and read from the record of this committee's debates and say that the Minister of State gave an assurance, and the committee accepted it, that all would be well and he would look at this between now and Report Stage. The only thing that counts is what is in the Bill as enacted, not any verbal assurances, even if they are given in good faith. I have some reservations about this.
I do not want to hold up discussions on these but it is a serious matter. It underlines for those who are interested the precarious position of civil servants at present in respect of their non-funded pensions which I know has given rise to serious concern, particularly among the more senior civil servants who understand what is involved. They have gone to the expense, sometimes not inconsiderable, of trying to ensure their pension entitlements commercially. On the understanding that an adequate amendment will be brought forward by the Minister of State to meet these points on Report Stage l will withdraw the amendment.
