David Cullinane
Question:538. Deputy David Cullinane asked the Minister for Social Protection the consequences for workers who pay into a pension scheme that has been directed to be wound up by the Pensions Authority. [41043/16]
View answerTuesday, 17 January 2017
Questions (538)
Written answers
Sections 50 and 50B of the Pensions Act, respectively, give the Pensions Authority the powers to direct trustees of defined benefit (DB) schemes to reduce benefits under a scheme or to wind up the scheme. These powers may be exercised by the Authority where a DB scheme fails to meet the statutory funding standard under the Act and where a sustainable funding proposal is not put in place.
The impact of the exercise of these powers on pension schemes and members’ benefits is considered carefully by the Authority in reaching any decision to direct the wind-up of a scheme. It is essential that schemes meet the funding standard so that benefits promised to scheme members can be made. If a sustainable recovery plan is not put in place then the benefits of members, particularly non-pensioner members, may be at risk and steps must be taken to prevent further erosion.
This distribution of the scheme assets by the trustees must be carried out in accordance with the priority order set out in the Pensions Act. Section 48 of the Pensions Act sets out the wind-up priority order in which the assets of a DB 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 in 2013 to provide greater protections to active and deferred scheme members.
When a scheme is being wound up, trustees must transfer each member’s benefits into a new pension scheme; or purchase an approved assurance policy with a life assurance company on behalf of each member (a buy-out bond for active members and deferred members or an annuity for pensioners); or transfer each member’s benefits into a PRSA, subject to certain conditions.
It is important to note that the powers given to the Pensions Authority to reduce benefits or wind up a pension scheme are to protect pension scheme members whose schemes are not sustainable.
To date, the Pensions Authority has not used powers under Sections 50 and 50B to reduce benefits or wind up a pension scheme.
I hope this clarifies the matter for the Deputy.