Léim ar aghaidh chuig an bpríomhábhar
Gnáthamharc

Dáil Éireann díospóireacht -
Wednesday, 13 Mar 1996

Vol. 463 No. 1

Pensions (Amendment) Bill, 1995: Second Stage.

I move: "That the Bill be now read a Second Time."

The Pensions (Amendment) Bill amends certain provisions of the Pensions Act, 1990, and introduces some new provisions. The Bill incorporates a number of mainly technical amendments to the Pensions Act which have been proposed by the Pensions Board. I see this Bill as being the completion of a cycle that began in 1990 when the Pensions Act was introduced in this House.

At the time of introducing the 1990 Pensions Bill, the then Minister said it was the most important legislation concerning occupational pensions to have come before the House since the foundation of the State. Events in other jurisdictions since that time confirm the wisdom and foresight in bringing in the Pensions Act.

In this regard it is proper to praise my predecessors for their commitment to the process of protecting the individual pensions of members of occupational pension schemes, a process which I have continued and of which this Bill is a part.

The purpose of the Pensions Act, 1990, is to regulate occupational pension schemes, ensure that they are properly administered and that, above all, the pension rights of members and their dependants are and continue to be adequately safeguarded. My primary aim and intention at all times is the protection of individual members who are entitled to be secure in the knowledge that, when their day of retirement comes, their occupational pension is safe and the standard of living they planned for themselves and their partners in their retirement, by contributing to their occupational pension fund, will be realised.

This was achieved by setting down minimum standards in key areas and by creating a framework for the regulation and supervision of schemes. The Act provided for minimum preserved benefits for members who leave a pension scheme — for example on changing employment; the introduction of a minimum funding standard for certain funded schemes; the mandatory disclosure of information to scheme members with requirements for periodic actuarial valuations, annual reports and audited accounts; equal treatment for men and women in occupational pension schemes; and the establishment of a new statutory body called An Bord Pinsean, or the Pensions Board, to monitor and supervise the new arrangements.

At present the board is comprised of a chairperson and 12 ordinary members. This Bill will extend the ordinary membership from 12 to 14 and I will explain the reasons when I outline the specific provisions contained in the Bill. The board includes representatives of trade unions, employers, Government and the various professional groups involved with occupational pensions. The board has a chief executive and other staff to manage its affairs. The administrative expenses of the board are financed by fees payable annually by pension schemes.

The board can act on behalf of any member of an occupational pension scheme who is concerned about the failure of those responsible for administering a scheme to adequately protect his or her pension rights.

The Pensions Board has proved its effectiveness over its first five years and I have no doubt it will play a continuing and important role in ensuring that the occupational pensions of individual members are safeguarded. As Members will be aware, the first board completed its term of office the week after this Bill was published last December. I take this opportunity to thank the first board's chairperson. Mary Broughan, the members of that board, the chief executive, Gerry Mangan and his staff, for their hard work over the past five years, which has helped to ensure that the provisions of the Act have been successful, and in assisting me in formulating the provisions of this Bill. Indeed this Bill is a fitting testament to the hard work they put in over their five year term.

I also take the opportunity of thanking the new Chairperson, Eamon Heffernan, and members of the current board for agreeing to serve for the next five years. Many of the members of the current board also served on the first one, and I trust that their willingness to continue means they consider the board's work to be valuable and worthwhile.

The pensions industry is of major importance to the economy. The total asset value of pension funds is estimated to be in the region of £16 billion, equivalent to almost 50 per cent of GNP. When one considers the magnitude of this figure, one realises the economic and social significance of these funds, the importance of them being fully safeguarded, and the contribution to investment that they make.

In recent months my colleague, the Minister for Finance, has had discussions on the subject of increasing pension fund investment in the economy with the Irish Association of Pension Funds and the Irish Association of Investment Managers. Arising from these discussions, the three parties have agreed that a new study should be undertaken on the scope for increasing pension fund investment in the Irish economy. The aim of the study is to identify commercially viable investment opportunities in the domestic economy and the potential for increasing the participation of Irish pension funds in the financing of such opportunities. The study will also examine whether there are gaps in capital markets in terms of meeting economic needs for long-term finance and if so, what mechanisms or instruments can be developed to iron out such imbalances. In carrying out the study, the consultants will have full regard to the commercial and fiduciary responsibilities of pension fund trustees.

For much of our history old age, widowhood and permanent incapacity brought with them poverty, deprivation and dependency. The progress that has been made in developing the overall social welfare pensions system has meant that a reasonable, basic level of pension is now avaiable. The old age contributory pension and retirement pension rates are well in excess of the main target rate recommended by the Commission on Social Welfare. The increases in this year's budget will bring them to 110 per cent of that rate. This year's increases also bring all remaining social welfare payments to at least 92 per cent of this main rate. This year, the widow's and widower's contributory pension will reach the main rate for the first time, while carer's allowance will reach 99 per cent of it and invalidity pension 97 per cent. The bulk of the remaining payments will then be at 95 per cent or more.

Economic performance has been very strong in recent years and the economic outlook remains very positive. It is most important that we take advantage of this opportunity to put in place adequate levels of income support for those who need it. While it is clearly necessary to bring the remaining payment levels up to the main target rate recommended by the commission, it is also appropriate to review from time to time what constitutes a minimum adequate level of income. To this end, and in line with the commitment in the Government programme, I have initiated such a review which is being undertaken by the Economic and Social Research Institute. The report will provide an objective basis for assessing the adequacy or otherwise of the current levels of social welfare entitlements. The review will also discuss how the proposed rates could be indexed in future years.

In December 1993 the National Pensions Board brought forward its final report, Developing the National Pension System. As Deputies will be aware, the National Pensions Board had already completed four valuable reports prior to this one. All of those reports were published and many of the recommendations implemented. This final report is a very comprehensive one which deals with all issues relating to social welfare pensions and also deals with the relationship between social welfare pensions and occupational pensions. The issues this report raises, while not directly linked to this Bill, nonetheless will have a bearing on the future direction of pensions both in social welfare and the occupational area.

I take this opportunity to thank the members of the National Pensions Board for their hard and dedicated work which produced five valuable reports. Their efforts are very much appreciated by the Government.

I hope to bring forward proposals based on the recommendations of the National Pensions Board report in next year's budget. The question, for example, of the introduction of pro-rata pensions falls to be considered in the context of this report and, of course, taking account of the overall future funding of pensions.

A major survey of occupational pension schemes, which was recommended by the National Pensions Board, has been commissioned jointly by my Department and the pensions board and a report will be available by the middle of this year. The last major survey was carried out in 1985 and the results of this new survey will give essential up to date information on occupational cover, which will be of considerable assistance when proposals in relation to pensions are being formulated.

I have stated frequently in recent times that demands to abolish or significantly reduce contributions to the social insurance fund are short sighted given the demands which are currently being placed on it and which will grow in the years ahead. I reiterate my views that we must preserve the principle of solidarity embodied in the social insurance system if we are to guarantee pensions needed in the future due to the ageing of the population.

I stress that there is no danger to anyone's current pension entitlement. However, as I pointed out earlier, demographic and labour market changes are issues which we cannot afford to ignore. Provided we face up, over the next few years, to the needs which we know will arise because of these changes, we can plan to deal with them in an orderly and effective way.

A sub-committee of the pensions board undertook a major review of the Pensions Act with a view to recommending the necessary changes to complete the cycle that began with the introduction of the Pensions Act, 1990. Both the Department and the pensions board were well aware that teething problems were likely to arise with the Act. However, after a period of five years it is now considered desirable, if not essential, that a period of certainty should ensue. Accordingly, this Bill results from a comprehensive review of the legislation with a view to making the necessary amendments so that no further amendments will be necessary in the short-term. This may not be entirely possible in the area of equal treatment where final clarification of a number of European Court cases and directives on equal treatment as regards pensions are being considered and may necessitate further changes in our pensions legislation. These matters will be considered in conjuction with the pensions board in due course and, if necessary, amendments will be made through a future pensions Bill.

Overall this Bill reinforces the safeguards already in place in relation to occupational pensions and it is my hope and belief that it will stengthen the certainty that when the individual members or schemes come to retirement age their pension will be waiting safely for them to ensure their continued prosperity in retirement.

I will briefly go through the provisions contained in each section of the Bill. Section 1 simply defines the Pensions Act, 1990 as being the Principal Act. Section 2 provides for certain definitions to be amended or inserted. Section 3 corrects an anomaly that exists by expanding the grounds for the defence of a person being prosecuted for an offence under the Pensions Act or its regulations. This will particularly benefit trustees of schemes provided, of course, they act in an honest and honourable fashion. This section also extends to two years, from the date of an offence, the time within which a summary prosecution can be brought.

Section 4 extends the power of the pensions board to enable them to provide guidelines on the operation of the Pensions Act generally as, at present, their powers only allow them to issue guidelines on the duties and responsibilities of trustees. Section 5 strengthens the powers of the pensions board in carrying out investigations. It particularly authorises that a person other than an employee of the board can carry out such an investigation. This person would, of course, have to be authorised by the board to act on their behalf. Section 6 extends confidentiality and prohibition on disclosing information to those serving on committees of the pensions board. These had been inadvertently omitted from these provisions.

Section 7 clarifies procedures in relation to the determination of disputes by the pensions board. As I stated, I will be bringing forward oral hearing regulations when this Bill is enacted. Section 8, 9 and 10 are technical amendments. Section 8 clarifies the situation in relation to calculating preserved benefits in specific instances. Section 9 deals with an anomaly in relation to a situation that could possibly arise where a person could receive a refund of his or her contributions without terminating his or her employment and then qualify for a preserved benefit as well, if he or she subsequently left employment. Section 10 clarifies the position of a death benefit in the calculation of a transfer payment where a preserved benefit is involved. It also clarifies certain matters in relation to the transfer of preserved benefits.

Section 11 allows that forfeiture of a preserved benefit may occur, at the discretion of the trustees, in a situation where a member assigns or charges his preserved benefit and where in the circumstances it would be to the benefit and advantage of the member to have this forfeiture of his perserved benefit take place.

Section 12 is another technical amendment. This allows regulations to specify how a preserved benefit should be calculated where, within a particular scheme, a member's benefits are calculated partially on a defined benefit basis and partially on a defined contribution basis. Section 13 allows for the payment of a preserved benefit later than normal pensionable age, but only in a situation where the member requests it to happen.

Section 14 gives the pensions board an option, in certain circumstances, to modify the provisions in relation to the production and submission of an actuarial funding certificate. This would be in a situation where it could be in the best interests of the members of the scheme to do so.

Debate adjourned.
Question again proposed: "That the Bill be now read a second time."
Barr
Roinn