Dáil Éireann Debate, Wednesday - 28 November 2012
137. Deputy John Lyons asked the Minister for Social Protection if she will urgently respond to the critical issues outlined in the attached letter (details supplied) relating to a workers' pension scheme; and if she will make a statement on the matter. [53385/12]
View answerThe Deputy will understand that I am not in a position to comment directly on any ongoing discussions or negotiations being undertaken by the trustees of private pension schemes with employers, employees and their union representatives.
However, it is acknowledged there are significant structural and affordability problems with defined benefit (DB) pension schemes in Ireland due to a range of factors such as an under-estimation of longevity, poor investment returns, the impact of the downturn in financial markets and increased annuity rates. The 2008 downturn in the financial markets put in excess of 90% of DB schemes into an underfunded position, and while there has been some recovery since in the markets, the situation is still volatile and many schemes remain in a difficult funding position. These schemes face serious challenges in restoring their funding levels to enable the scheme deliver on the pension promise.
Ireland’s Funding Standard provides a benchmark against which the ‘health’ of a scheme can be tested and is the regulatory mechanism for ensuring that a scheme can live up to the promised level of pension benefits. If the scheme does not satisfy the funding standard the trustees of the scheme must prepare a funding proposal to restore scheme funding within a three year period. The Pensions Board recently revised the timeframe for DB schemes with funding deficits to submit funding proposals to the Board. This decision was made to allow trustees additional time to fully explore all options available to address scheme funding deficits. Trustees of all schemes required to submit funding proposals will now have until 30 June 2013 to submit their proposal to the Board.
In relation to the wind-up of schemes, my Department is currently finalising a review of Section 48 of the Pensions Act (commonly referred to as the ‘Priority Order’). The objective of the review is to determine to what extent, if any, the provisions of Section 48 might be revised to provide for a different approach to the distribution of assets in the wind up of an underfunded scheme.
On a more general note, in an effort to help schemes better match their liabilities, legislation to enable the issuing of sovereign annuities has been introduced to provide pension schemes with an additional option, not previously available to trustees. The NTMA have issued just over one billion of sovereign amortising bonds to pension schemes to date. Pension schemes that purchase sovereign annuities or the underlying bonds will benefit from a reduction in their liabilities under the Funding Standard to the extent that they actually make those purchases. The nominated bonds underpinning these annuity policies can also be bought by investors or by pension scheme trustees who wish to pay pensions directly from the pension fund.
