Select Committee on Social Affairs debate -
Thursday, 16 May 1996

SECTION 10.

Question proposed: "That section 10 stand part of the Bill."

Proinsias De Rossa

There is a possibility that it will be necessary to insert a new section before this section on Report Stage. The amendment would be technical, dealing with an amendment to section 33 of the Pensions Act which deals with revaluation years in relation to preservation of benefits. The matter is being looked at by the Pensions Board to see if it can be dealt with by changing the board's guidance notes or if an amendment to the legislation will be required. I intend to give a full briefing to the Deputies in advance of the Report Stage if an amendment is brought forward.

There may also be a Report Stage amendment necessary in section 10 to delete the reference to a "prospective member". We are not sure at this point if it will be necessary. The matter is under consideration by the Pensions Board and it will advise me on the matter. If it is proposed to make an amendment we will give Deputies time to consider it.

Question put and agreed to.

SECTION 11.

Mr. J. Walsh

I move amendment No. 6:

In page 8, between lines 13 and 14, to insert the following:

"(3) Forfeiture of a members' pension in respect of employers' claims arising out of criminal, negligent or fraudulent acts shall be provided for.'.".

If an employee was dismissed from a company for criminal or fraudulent activity the Bill would leave employers in an anomalous position whereby that person could get a pension in the same way as other employees who continue to make contributions.

Proinsias De Rossa

This amendment would allow for the forfeiture of a member's pension in cases arising out of criminal, negligent or fraudulent acts. According to the provisions of the Pensions Act, 1990, forfeiture has been totally forbidden. The provisions in section 11 of the Bill allow for forfeiture only in cases where it would be to the benefit and for the protection of the member that such forfeiture take place.

The provisions of section 36 of the Pensions Act and section 11 of this Bill are designed with the interests of the individual members of pension schemes in mind. The Deputy's amendment proposes to introduce forfeiture in instances where it would not benefit the member. While it may seem reasonable in the first instance in the type of cases the Deputy mentions, I would be concerned that it could be used against individual members where disputes arose with employers. In certain circumstances it could be open to an unscrupulous employer to use such a provision against an individual member of a pension scheme.

The matters to which the Deputy refers can best be dealt with through the courts but it should not affect the pension of the individual member which the Pension Act sets out to protect. It should not be the function of the board or this legislation to deprive a person of their pension rights because they are found guilty of some act by a court. I am not aware that such a punitive measure would be taken under any other legislation. In the public service pension arrangements there has been a practice that a person loses pension rights where they are dismissed in serious circumstances. However, I understand the practice is being varied considerably and it seems an extraordinarily punitive approach to issues of this nature. Effectively it involves denying a person support in their old age for an offence they may have committed in their youth.

Mr. J. Walsh

I came across this matter in a British pensions Bill. Perhaps the Minister and his officials would examine the corresponding UK pensions legislation. When I was a Minister I argued that employees should be left with their pensions if they had committed an indiscretion. I would not want pension rights to be taken from people.

Proinsias De Rossa

Perhaps this is one occasion when we should not follow them.

Mr. J. Walsh

We are not allowed to say what happened at Cabinet but it is at that level that such cases had to be decided. Unless the circumstances were very extraordinary people would not lose their pension as well as their job. I do not think the Minister will have much difficulty with us on this point.

Amendment, by leave, withdrawn.

Section 11 agreed to.

Section 12 agreed to.

NEW SECTION.

Mr. J. Walsh

I move amendment No. 7:

In page 8, before section 13, to insert the following new section:

"13.—(1) It shall be prohibited to deduct State pensions from private scheme benefits.

(2) Where it is the case that pensions accrue over a 30 year period, the annual accrual rate shall be increased by a factor of 40/30, that is, from 1.66 per cent to 2.2 per cent, to reflect current labour market conditions.".

In some cases the promoters of occupational pensions deduct the social welfare pension from the benefits accruing to the pensioner. That should be made clear. In many cases individuals who contribute to pension schemes believe they will have a right to their full social welfare pension and the full benefits from their pension scheme also. In the glossy brochures of pension companies this point is not made clear.

A person's normal working life is no longer a typical 40 year period. The formula used for pensions is forty sixtieths of final remuneration, which gives a person two thirds of their final salary at 65 years of age. A factor of 45 rather than 60 might be more appropriate and fairer. It would be fairer to have 1/45 per year of service to a maximum of 30/45, which would also give two thirds, to take into account the early retirement age and the fact that people typically do not now work in jobs for 40 years.

Proinsias De Rossa

The amendment seeks to prohibit the deduction of State pensions from private scheme benefits and to change the annual rate of accrual for pensions which accrue over a 30 rather than a 40 year period. As outlined in the final report of the Pensions Board, it is now a common feature of most defined benefit schemes that they are co-ordinated with the social welfare pension. This type of co-ordination is generally aimed at giving the member two thirds of final salary based on a combination of the social welfare pension topped up by an occupational pension. As occupational pension schemes are voluntary arrangements, the main result of Deputy Walsh's proposal is likely to be a change in the rules of each individual scheme which would result in reducing occupational pension entitlement so that, in the end, the situation would remain unchanged.

The major survey of occupational pensions being undertaken by the Economic and Social Research Institute on behalf of the Department and the National Pensions Board will be of significance in considering the development of pension systems and informing us of the present level of cover and current issues arising. With regard to the accrual amendment put down by the Deputy, I am informed there is nothing to prevent such a rate of accrual currently applying. It would be a matter for the rules of each pension scheme. We do not legislate for benefits in individual schemes, which would be the effect of his proposal. As far as the Revenue Commissioners are concerned, once there is ten years service, there is nothing in the Revenue rules or practice to prevent a person from qualifying for a full pension subject to the rules of the individual scheme to which they belong. Accordingly, the Deputy's amendments are not appropriate and I do not intend to accept them.

Amendment, by leave, withdrawn.

Question proposed: "That section 13 stand part of the Bill."

Dr. Woods

Has the Minister any information about the current volume of defined contribution schemes? There has been a switch from defined benefit to defined contributions, especially in the case of newer schemes. What impact does this have on the total volume?

Proinsias De Rossa

I do not have the information sought by the Deputy to hand but I will obtain it for him before I conclude.

Question put and agreed to.

Section 14 agreed to.