IRELAND - Last-minute amendments to the Social Welfare Bill introducing measures to support members of defined benefit (DB) schemes, including a state annuity scheme, have been criticised by opposition political parties for being “rushed through” the Oireachtas.
In a debate on the Bill, to be known as the Social Welfare and Pensions Bill 2009, Mary Hanafin, minister for social and family affairs, asked members of the Dáil Éireann to co-operate in approving the measures that aim to “provide some additional protection to the workers concerned”. (See earlier IPE article: Ireland unveils pensions insolvency ‘state annuity’ scheme)
She told the Dáil “the reality is that insolvent companies with pension funds are winding up as we speak” and argued the measures “must be introduced as quickly as possible to ensure that those companies in gravest difficulty can benefit from the proposed changes”.
Hanafin admitted the measures had originally been intended to be ready by the time the Social Welfare Bill was published - after the supplementary Budget statement earlier this month - but pointed out that the proposed changes “took considerable time to prepare”.
However, Róisín Shortall, a member of the Labour Party, argued the unexpected introduction of new legislation had left opposition parties unprepared and there had been no explanation for the urgency of the amendments.
Shortall said: “There are rumours around that some big scheme is about to collapse. I do not know whether there is anything in those rumours. If there is, the minister should at least have given us an off-the-record briefing. If there is not some pressing reason, there is no justification for rushing this Bill through the House.”
Instead, she argued the measures should have been included in a separate Bill to be brought within the next fortnight, adding, “Having waited 10 years for pension reform, she [Hanafin] really has a nerve to come into the House and ram through proposals in the space of four hours. If we could wait 10 years for these changes, why can we not wait another week or two and at least give this legislation the kind of consideration it requires?”
However, Hanafin dismissed speculation about the speed of the legislation and confirmed the measures “have not been introduced for any one company. It is not about any particular emergency situation that is about to arise”.
The minister also revealed the proposed Pension Insolvency Pension Scheme (PIPS) would be established on a pilot basis and reviewed after three years, but emphasised it is “not a bailout of pension schemes in deficit”.
Under the terms of the scheme, the National Treasury Management Agency (NTMA) would actuarially assess each scheme qualifying for the PIPS, and “the costs and savings will depend on the age profile of the scheme, the prevailing interest rate and other relevant factors,” said Hanafin.
She also admitted the money paid to the government for ‘state annuities’ through the PIPS would not be placed into a separate fund and instead the money “will be absorbed into the Exchequer but the pensions will be paid on a pay-as-you-go basis for the pensioners”.
Meanwhile, members of both Fine Gael and the Labour Party also questioned whether the provisions would apply to SR Technics and Waterford Crystal, particularly as the PIPS will only apply to insolvent employers, which is not the case for SR Technics.
Shortall added: “These provisions still allow companies to walk away and leave pension liabilities behind them and that is at the nub of the matter. The minister is tinkering at the edges, as she did in December. The fundamental point that there is no legal responsibility on companies to ensure there is adequate pension provision is not dealt with. That is very regrettable.”
In response, Hanafin confirmed: “Obviously there is a process through which every company must go. Companies that need to get certification must go through a legal process. It is not for me to say who is in and who is out but there is a well-known company that is in receivership, for example, and its pension scheme is in deficit. If it goes through all the requirements for winding up obviously the measure would apply to that company.”
Following a short debate, the move to add the measures to the Bill was approved by 81 votes to 69, allowing the proposals to be discussed further at the Committee stage, however it is not just TDs that have criticised the plans.
Mercer and the Irish Business and Employers Confederation (IBEC) have echoed calls by the Irish Association of Pension Funds (IAPF) to extend the PIPS to all private sector DB schemes, while the Think Tank for Action on Social Change (TASC) warned the measures “failed to address the fundamental problems facing the Irish pension system”.
In addition, Mercer pointed out with the government white paper expected in the “near future”, and pensions tax relief under review by the Commission of Taxation, “it is extremely difficult, arguably impossible, for pension schemes to develop funding proposals with a view to securing their long-term viability, without full knowledge of the regulatory and tax structures that will apply”.
It argued: “The many pension schemes that have a deadline of 30 June 2009 to put funding proposals to the Pensions Board should be granted a further extension”.
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