I move: "That the Bill be now read a Second Time."
I welcome the opportunity to speak to the Labour Party's Pensions (Amendment) (No. 3) Bill 2017. I welcome my colleague, Deputy Brendan Ryan, who has been pivotal in bringing forward this legislation, which, I hope, will pass Second Stage and progress onwards.
The Labour Party will always support the right of every person to a decent pension and a secure retirement. As a party we made this crystal clear at a recent conference in Mullingar, County Westmeath. Specifically, the Labour Party is committed to pausing the proposed rise in the pension age to give society more time to adjust. It is important to reiterate this as often as necessary given the Government's failure to listen, which was notable last week in the Dáil. The Taoiseach is on the Dáil record in regard to his opposition to our proposal to prevent a rise in the pension age. In short, he says that is unsustainable. This is despite the fact that, as I pointed out, Ireland has the youngest population in Europe and the third highest fertility rate in the EU. In 50 years' time Ireland will still have the lowest proportion of older people in the EU, with approximately 20% fewer than the EU average. Consequently, the percentage of national income spent on public pensions will rise by only three percentage points from its 2016 base of 8% over the next half a century.
In many respects, we should have one of the lowest pension ages in the EU but the opposite is the true. The Minister, Deputy Regina Doherty, might respond that we have previously subscribed to this proposal but as circumstances change we are entitled to change our minds. If we become fastidious and stuck, nothing will get done. We should not become so blinkered that we are not prepared to admit we were wrong. The Government intends to push ahead with the increase in the pension age to 68 by 2028. In contrast, the average EU pension age will rise to 66 years of age by the middle of the century. Many people who have already made 40 or more years of social insurance contributions - the way things are going probably 50 years in some cases - are being forced to retire at 65 years of age due to their contracts of employment. They are being forced to sign-on as jobseekers, when this patently is not the case. Moving the retirement age to 67 in 2021 would create a two-year pre-retirement waiting period, which is simply unnecessary at this time. This pre-retirement limbo is clearly not what the changes to the retirement age were intended to do. I accept that. Society needs more time to adjust, so that contracts of employment will more routinely allow people to work beyond 65 years of age. This is now in process, such that this adjustment to stall the increase in pension age might not be a long-term measure.
The Social Insurance Fund that pays for pensions will have a surplus of nearly €4 billion by the end of this year. According to the Government, it will cost €250 million every year we delay, so we can afford to postpone raising the pension age any further at this point in time. We can see this attitude again with the issue of defined benefit pensions, an issue of equal importance, which I bring before the House in this Bill. There are more than 700 defined benefit pension schemes in the State, covering more than 100,000 people, yet there is a fundamental problem with the regulation of defined benefit schemes, one that this Government has failed to legislate on for nearly four years. The Minister, Deputy Doherty, knows the extent of the problem and she is working on the issue within the Department. One sometimes has to overcome obstacles. The essence of achievement is to overcome those who are always baulking at making progress. The schemes are essentially designed to guarantee pension benefits on the basis of agree levels of contributions from employers and workers. However, the regulations that are currently in place are such that employers can unilaterally withdraw from the funding of schemes, even in situations where they are financially well capable of continuing to support their operation. How is it that two parties can enter an agreement on an issue as important as a pension scheme and one side can pull out, very often for spurious reasons, at a time of its choosing? We saw the consequences of this in 2016 with the pension crisis for workers in Independent Newspapers. It is worth recalling that case. In 2016, management of Independent Newspapers informed the trustees of the defined benefit scheme that it would cease making contributions to the schemes, leaving the trustees of the schemes in a situation where it might have been forced to wind up the scheme, leaving hundreds of active members with substantially reduced pension benefits and the real potential for cuts to existing pensions being paid out. In light of this controversy the Government promised to bring forward legislation to strengthen the rights of workers in defined benefit schemes and to fully clarify the responsibilities of employers. The heads of a Bill were published by the then Minister for Social Protection, Deputy Varadkar, but we have seen nothing from Government since then despite numerous promises that the required legislative changes were pending. It is rumoured that a small number of powerful employers are opposed to any change and they have been actively lobbying Government to prevent the necessary changes from being brought forward. I can assure the Minister that this issue has not gone away. Deputies O'Dea and Brady have introduced Bills along the same lines. I anticipate that they will be supportive of progressing this Bill to Committee Stage and onto the Statute Book. I do not mind who brings forward amendments, as long as what we have at the end of the day is a positive legislation for workers concerned.
When one considers that, why would any worker, after hearing of the cases outlined, take the risk of entering such a scheme when his or her rights and lifetime savings might be drastically cut at any time in the future? This Government should be seriously worried about the precedent these cases have set, and the potential consequences for the 100,000 or more citizens who are saving for their pensions through these schemes. Deputy Brendan Ryan, who represents the very large area of Fingal, spoke about this at a parliamentary meeting. He has a background of working in industry.
Let us be clear about what the Government is doing. It is deterring workers from saving for their retirement, when it should be doing the exact opposite. We all know, including Deputies and spokespersons who are here, how to solve this issue. We are not trying to reinvent the wheel.
We should at our neighbours across the water in the UK. They may have got a lot wrong with the Brexit crisis from our perspective, but we could learn a thing or two from them as regards this issue. In the UK, the law prevents solvent companies from walking away from their obligations to their employees' occupational pension scheme. This should be the standard practice, but the pensions regulation regimes in Ireland and the United Kingdom have diverged in many respects, and particularly as to this essential aspect.
Accounting standards, FRS 102, requires an employer to recognise its liabilities to a pension scheme in its own financial statement. Yet removing those liabilities from the employer's own accounts can have a transformative effect on the company's accounts. The problem here is that an employer's obligation to its pension scheme is not governed by statute law but by the terms of the pension trust deed which the employer will itself have drawn up. As a result, it is rarely a binding obligation. The employers are, therefore, in the dominant position. Most direct benefit trust deeds allow the employer to wind up its pension scheme and to cease contributions, while ignoring any deficit in the funding of the scheme and the resulting inability to pay out the benefits originally promised.
As I mentioned, there are 700 defined benefit pension schemes in the State, covering more than 100,000 people. This will only continue to grow, so we cannot allow this uncertainty to continue. The reality is that the solution has been gathering dust on the Minister's desk for more than two years. There are at least three Bills that I am aware of.
In 2018, the Government's Roadmap for Pensions Reform promised clear action on this matter. In particular, the Government committed that by the first quarter of 2018 it would have advanced legislation to give effect to new controls on the funding of these pension schemes. However, we are now at the end of 2019 and we have heard of no positive action in this regard from the Government.
I have been contacted by the Irish Congress of Trade Unions which has told me in no uncertain terms that it supports the legislation that I am bringing forward this evening and of their frustration with the lack of progress on this important policy matter and it sees my Bill as an effective means of giving workers in defined benefit schemes the comfort that their pension savings are protected. It is time we stopped talking and took some action on the issue. This Labour Party's Pensions (Amendment) (No. 3) Bill 2017 does just that. Some of the other parties also have great ideas and there is no reason we cannot amalgamate and debate them all on Committee Stage.
The Long Title of the Bill reads "An Act to amend the Pensions Act 1990, and to provide for related matters." Specifically, section 1 amends Part IV, the funding standard, of the Pensions Act 1990, by inserting a new section 44A, dealing with employers' obligations in relation to deficiencies in the funding standard. Under this Bill, the new section will apply to relevant defined benefit schemes which are being wound up where the employer concerned is not insolvent, and the scheme does not satisfy the funding standard. To clarify, where the section applies, an amount sufficient to enable the scheme to satisfy the funding standard is deemed to be a contract debt - that is the essential thing - due from the employer concerned to the trustees of the scheme.
In addition, a scheme would be deemed to be wound up where the employer takes any step under the rules of the scheme, other than paying into its resources an amount sufficient to enable the scheme to satisfy the funding standard, which would be clearly exempt, that enables the employer, in accordance with generally accepted accounting principles or practice, to remove recognition of current or contingent liabilities towards the scheme from the employer's own financial statement.
The question of insolvency under the Bill is to be determined in accordance with the Protection of Employees (Employers' Insolvency) Acts 1984 to 2012. This section does not prejudice any other right or remedy which the pension trustees may have in respect of a deficiency in the resources of a scheme, and it ensure that the stated provisions apply to defined benefit schemes that came into operation before its commencement.
This is the least we should expect from employers engaged in such schemes. They should not renege on their responsibilities. When they are solvent, why should they run away from their responsibilities? We have to curtail that emerging trend which will develop further unless we take action. That is why I am proposing this Labour Party Bill in good faith to resolve, or certainly tackle, this issue for once and for all.
I hope everyone in the Chamber will listen to our call and take clear action by supporting this Bill's passage through the House. As I said, I am aware that Fianna Fáil, through Deputies O'Dea and Lahart, and Deputy John Brady of Sinn Féin, have drafted significant Bills in this area, which I acknowledge. On Committee Stage, we can look at amendments that might be necessary to strengthen this Bill. Our party is obviously willing to do so. This is above politics; this about protecting workers' rights and the legitimate expectations of workers who have made a contribution in anticipation of a pension at the end of their working life. This working period is being stretched out because, thankfully, people are living longer. This is an opportunity for us to grasp the nettle, progress this Bill to Committee Stage and get it on to the Statute Book. It is an issue workers and the Irish Congress of Trade Unions are watching carefully. Deputies Brady and O'Dea and myself have met them. They are aware of the situation and are eager that this is progressed. They has been patient but their patience can only last so long.