Pension Provisions

Dáil Éireann Debate, Tuesday - 16 April 2013

Tuesday, 16 April 2013

Questions (525)

Terence Flanagan

Question:

525. Deputy Terence Flanagan asked the Minister for Public Expenditure and Reform the number of pension schemes that have applied to PIPS to date; the number of those applications that have been approved by him; the rates quoted by the National Treasury Management Agency for each of the applicants; the date of the NTMA quotation; the way those rates compared to the long-term borrowing costs of the Irish State on the date the application was first received by him; and if he will make a statement on the matter. [16954/13]

Written answers

Minister for Public Expenditure and Reform

The Pension Insolvency Payment Scheme (PIPS) was introduced on 1 February, 2010. Under PIPS the State offers to sell annuities on an Exchequer cost-neutral basis to certain defined benefit pension schemes where the scheme is winding-up in deficit and where the parent company is insolvent (the double insolvency condition).

Normally when a scheme winds up the trustees buy annuities in respect of current pensioners from an insurance company. Under PIPS the trustees of a defined benefit scheme that satisfy the double insolvency condition are given the alternative of buying out the pensions with the Exchequer. The Exchequer should be able to provide pensions at a lower cost than an insurance company. The saving from this lower cost would then go to reducing the shortfall of those members who have yet to retire.

The technical calculations involved in PIPS are carried out by the National Treasury Management Agency so as to make PIPS cost neutral to the Exchequer. Once a pension scheme has applied, my Department requests the NTMA to quote a cost for providing annuities to existing pensioners. Under the SI governing PIPS the appropriate interest rate for this quote is set by the National Treasury Management Agency based on the long-term cost of borrowing to the State at the time.

To date seven pension schemes have applied to participate in PIPS. The NTMA have provided quotes for six schemes. Two schemes – the Waterford Crystal Staff and Waterford Crystal Factory Schemes - have paid the quoted price and have entered PIPS. The following sets out the dates of calculations and interest rates used for the two Waterford schemes:

Scheme	Date of Calculation	Interest Rate for Quote
Waterford Crystal Staff Scheme	27/08/2012	5.849%
Waterford Crystal Factory Scheme	27/08/2012	5.849%

The NTMA have provided quotes for a further four schemes. These quotes have been given to the trustees of the schemes in question and they are now under consideration by them.

The remaining scheme is in the process of finalising its application to PIPS. When this application is finalised the NTMA will be asked to provide a quote for this scheme.