IRELAND – The Irish government has been told that under no circumstances should it introduce a new pensions levy to help secure benefits in the instance of company insolvency.
The warning from IBEC came the same day as the employer lobby group once again criticised the government’s lack of action on changing the priority order upon wind-up in a joint statement with union umbrella group ICTU, Ireland’s actuarial association and the Irish Association of Pension Funds (IAPF).
Releasing its submission for the current coalition government’s third budget later this year, IBEC warned against extending the current 0.6% pensions levy on private sector funds – something the Department of Finance has repeatedly said is not on the cards.
“Under no circumstances should the existing pensions levy be extended beyond 2014,” the submission said, “nor should any new levies be introduced in the context of pension scheme insolvency.”
Concerns over an additional levy were sparked by minister for social protection Joan Burton’s recent unwillingness to rule out the introduction of a second levy – by which the UK has sought to fund its pension lifeboat scheme, the Pension Protection Fund.
Guaranteeing greater security for pension benefits has become a necessity in Ireland in the wake of a European Court of Justice (ECJ) ruling, which said the country’s inability to protect at least half of a worker’s pension benefits upon insolvency was a “serious breach” of its responsibility as an EU member state.
Separately, IBEC, ICTU, the Society of Actuaries in Ireland and the IAPF released a joint statement urging changes to the current priority order upon wind-up, as the current system grants pensions in payment absolute priority over the accrued benefits of active and deferred members.
The statement said it hoped the “seriousness of the situation” was underlined by the “unprecedented step” of the four diverse industry groups and union representatives urging action.
However, cooperation between the four is not unheard of, as they backed joint proposals for changes to the wind-up order announced at an IAPF conference last year.
The group argued that the “absence of clarity” on how the government would address the ECJ ruling meant DB funds would “unravel in an inequitable and disorderly way”.
“This will, in turn, only add to the pensions bill facing the state,” it said.
“We recognise the government now awaits a [Irish] High Court decision on the Waterford Crystal case.
“However, the ECJ judgement has implications beyond that case, and the sooner the government signals its intentions in this regard, the better for all concerned, including the state.”
It continued that if no “practical measures” were forthcoming to address the speed at which defined benefit (DB) funds are closing, then “immediate” action was needed to allow for a more equitable distribution of assets on wind-up.
“If the government continues to defer reform of the ‘priority order’, the simple truth is that, in the unfortunate event of a scheme winding up in deficit, people of working age continue to risk losing everything before pensioners can be asked to give up anything,” the group said.
Calculations by one of the country’s largest funds found that, in the unlikely event of the ESB superannuation fund winding up, its active and deferred members would only be left with 5% of benefits, with a similar situation reported by the Irish Airlines Superannuation Scheme.