Dáil Éireann Debate, Tuesday - 4 November 2014
111. Deputy Aengus Ó Snodaigh asked the Tánaiste and Minister for Social Protection if she will introduce further legislation to afford greater protection to deferred members during the restructuring or wind-up of defined benefit pensions schemes. [41664/14]
View answerThe Pensions Act provides for the preservation of benefits for members of occupational pension schemes who leave employment before their normal pensionable age for any reason, other than death, provided they satisfy certain qualifying conditions. The preserved benefit is a proportion of the long service benefit to which the member would have been entitled if he or she had remained in employment until normal pensionable age. The preserved benefit which is payable from a defined benefit pension scheme will normally be revalued annually by the lower of 4% or the rate of change in the Consumer Price Index.
Section 50 of the Pensions Act provides for the restructuring of the benefits in a defined benefit pension scheme in situations where the scheme does not satisfy the scheme funding requirement as set out in the Pension Act. In the event that the trustees of a scheme are considering a restructure of scheme benefits under this provision, they can consider adjusting the benefits of both active and deferred scheme members. The Social Welfare and Pensions (No. 2) Act 2013 extended the provisions in section 50 to include a portion of benefits payable to pensioners.
These provisions in section 50 of the Act essentially provide for the sharing of the risk of scheme underfunding across all scheme members. The issue of how these changes might be applied is a matter for the trustees of a scheme who are required under trust law to act in the best interests of all scheme beneficiaries.
Section 48 of the Pensions Act sets out the order (wind up priority order) in which the assets of a defined benefits pension scheme are distributed in the event of the wind up of a scheme. The wind up priority order was amended by the Social Welfare and Pensions (No.2) Act 2013. Prior to these changes pensioner benefits were given priority over the benefits of active and deferred scheme members. The recent changes to the wind up priority order essentially de-prioritises a portion of pensioner benefits in the manner in which the resource of a scheme are distributed on the windup of a pension scheme. These changes make more resources of the scheme available in the initial distribution of assets to active and deferred scheme members The impact of these changes will be determined by the level of funding in a pension scheme at the time of the wind up.
These recent changes to the Pensions Act are underpinned by additional measures which have been put in place by the Pensions Authority to assist pension schemes achieve a sustainable funding position. It is the medium term objective that all defined benefit schemes will achieve a level of funding which will include a funding risk reserve to protect the rights of scheme members against future volatility in financial markets.
There are no plans at this stage to bring forward amending legislation to enhance the present provisions in the Pensions Act in relation to deferred scheme members.
