Dáil Éireann Debate, Wednesday - 28 March 2012
12Deputy Charlie McConalogue asked the Minister for Transport; Tourism and Sport the status of Aer Lingus’ pension deficit upon privatisation; if he will ensure that the taxpayer will not have to fund the deficit as a condition of the sale of the 25% stake; and if he will make a statement on the matter. [16886/12]
Amharc ar fhreagra42Deputy Clare Daly asked the Minister for Transport; Tourism and Sport If the deficit in the Dublin Airport Authority/Aer Lingus/SR Technics pension scheme was a factor in the Government’s decision to sell its stake in Aer Lingus; and if he will make a statement on the matter. [16542/12]
Amharc ar fhreagraI propose to take Questions Nos. 12 and 42 together.
The Deputies' questions relate to the Irish airlines superannuation scheme, IASS, and its relationship with the proposed sale of the Government's minority shareholding in Aer Lingus. The pension deficit in the IASS, the multi-employer scheme involving Aer Lingus, the Dublin Airport Authority, DAA, and SR Technics, was not a factor in the Government's decision to sell its minority shareholding in Aer Lingus. The State's minority shareholding is not considered to be a strategic asset and the Government has decided to include it as part of its disposal of State assets programme.
As the Deputies will be aware, the McCarthy report also recommended that the Government dispose of its shareholding in Aer Lingus "as soon as is opportune". The exact timeframe for any sale has not been decided and it will only take place when conditions are favourable and at an acceptable price.
Full information concerning Aer Lingus's pension schemes was set out in the IPO prospectus prior to the flotation in September 2006. Regarding the IASS, it stated that based on that last actuarial valuation of the scheme with an effective date of 31 March 2005, the scheme had a surplus of assets over liabilities in the region of €140 million. As the Deputies are aware, a great deal has changed in the financial markets since 2005 and the IASS now has a substantial deficit. This is clearly very worrying for the members and I urge all parties with an involvement in the matter to address the matter expeditiously.
There is no question of the taxpayer funding this deficit. Resolution of the funding difficulties in the scheme is a matter for the trustees, the companies participating in the scheme and the members. I understand that the parties are participating in discussions with the assistance of the Labour Relations Commission, LRC, in an effort to find a solution to the current difficulties. The Department is not a party to these discussions.
I thank the Minister for his clarity. While I accept the role of the trustees, I am disappointed that the Minister is not taking a more hands-on approach. He was right, in that the people who depend on these pensions are concerned. The belief was that the State would be involved as long as it retained a 25% shareholding in the company and that it would be prepared to ensure the pensioners' protection. Many of those in question worked hard and were responsible for building Aer Lingus and the airport authority, which has been successful domestically as well as overseas through Aer Rianta International, ARI. People had a legitimate expectation when they retired - some of them were quite young when they took packages - that their pensions would be secure and have been deeply traumatised and concerned by this situation.
Will the Minister take the earliest possible opportunity to provide certainty and security to people who worked for the State for many years? Having provided a great public service, they are now faced with significant levels of uncertainty.
I have not taken a hands-on approach because I do not want to create the impression that the State, Exchequer or taxpayer is in any way liable in this case. The taxpayer and the Exchequer are not liable for deficits in semi-State companies' pension funds, be that company the ESB, CIE or Bord Gáis. In this case the company is not even a semi-State. In this three-employer fund, one employer is entirely private and another is 75% private.
Responsibility for devising a proposal to address the deficit in the pension fund lies with the trustees. Many of those involved, from pensioners to members of the scheme who have not yet retired from the Dublin Airport Authority, DAA, Aer Lingus and SR Technics, are my constituents. I want them to get their pensions and the situation to be resolved, but responsibility for devising a viable scheme lies with the trustees, not the Government.
There has been engagement between the trustees and the Department of Social Protection in respect of some important changes to pension legislation. I hope that Department will waste no time in making whatever changes are necessary to allow the situation to be resolved.
I welcome the Minister's explanation for his stance. He indicated that, since he did not expect the taxpayer to have a liability, he should remain at some remove from the situation. The people in question were effectively State employees. I understand the legislation underpinning the separation of the pension fund but the State ultimately has a liability. This will need to be addressed in some manner. If and when the Minister privatises Aer Lingus in line with the Government's decision, the capacity to raise revenue for the fund will be stripped from the trustees. It appears there will be a requirement for somebody to make good on the expectations of these individuals and I hope the Minister can provide certainty for the pensioners who currently are feeling very aggrieved.
The individuals in question are not State employees or public servants. The contributions they made through their working lives went into this pension fund. Public servants and officeholders make their pension contributions directly to the Exchequer, which subsequently pays their pensions. As the contributions in this case were made to a pension fund rather than the Exchequer, the responsibility falls to the fund's trustees to come up with a solution.
I believe the State has a responsibility to them because it is not right that people who are about to retire are being left high and dry. I have always been opposed to the sale of Aer Lingus and it is in our national interest to retain the remaining 25% of the company in State ownership. The airline has been a flagship for this country. Is the Minister aware of the newspaper reports on plans to sell slots in Germany to make up the pension deficit?
To clear up any confusion that may have arisen, there is no connection between the State's minority stake in Aer Lingus and the pension deficit. The size of the State's stake in Aer Lingus has no bearing on the situation. The taxpayer is not liable for deficits in private pension funds. That applies equally to CIE, Irish Rail, Cork Port and the other bodies which we are not considering for privatisation. As the contributions were not paid into the Exchequer, these are not public service pensions. The employees paid into a pension fund in the same way as one contributes to a private pension fund.
There are no slots in Germany or Dusseldorf. The Deputy may be referring to the possible sale of DAA's stake in Dusseldorf airport but I have no information on that. It was reported in a newspaper that trade unions favoured the sale of that State asset in order to replenish the pension fund. It is interesting that trade unions support the sale of State assets to replenish pension funds but not to invest in the economy.
The Minister argues that the individuals were employed by a State owned company rather than direct employees of the State. In truth, however, they were employees of the State, albeit at a remove created by the commercial semi-State structure. Another group of workers transferred from the Department of Transport to the DAA in the expectation that they would be employed on the same terms and conditions but, unfortunately, that did not apply. This is a separate issue of which the Minister will be aware through correspondence to his Department. It should have been addressed by the previous Government but it remains unresolved.
The State has a duty to these individuals because, like CIE, at the end of the day these are State companies. While the pension fund should have been able to cover their pensions, it is insufficient. One can argue this is an issue for the trustees to address but the State had control over the boards of these companies. I accept pension trustees operate outside of boards but the companies concerned invested insufficient money into their funds. As the companies failed to honour their obligations because of poor actuarial advice or other reasons, the funds are unable to meet the expectations of the workers. That was the fault of the companies and their boards. The blame cannot be heaped on the trustees, who are in the difficult position of dividing the loaves and fishes. I accept the Minister's points about legal responsibility but there certainly is a moral obligation on the State.
The reason for setting up State companies is because they can operate on a commercial basis. The State is the shareholder but they are not part of the public service and their workers are not State employees. The Exchequer is no more liable for their pension costs than the shareholders in Tesco or any other private company. The pension contributions were not paid to the State. They were paid into the pension fund.
There is an upside as well as a downside to working for a semi-State company. Employees of these companies do not have to pay the pension levy and they pay considerably less for their pensions than public servants. They were not bound by the pay cuts imposed on public servants or retirees from the service. They cannot have it both ways in terms of enjoying the benefits of State protection without taking the pay and pension cuts that come with being a public employee.
Written Answers follow Adjournment.
