Irish employers critical of 'appalling failure' of pensions policy
IRELAND – Employer organisation IBEC has criticised the "mess" successive Irish governments have made of pensions policy, arguing that the current administration's inaction on the 'priority order' was hard to fathom in the wake of a European ruling on pension protection.
Brendan McGinty, director of industrial relations and human resource services at IBEC, said the current rate of defined benefit (DB) scheme wind-ups – which he said stood at seven per month at the end of last year – was only set to accelerate in future.
He told a pensions conference hosted by the organisation that future scheme closures would leave "large numbers" of members in difficulty, referencing the current wind-up order's priority for pensioner benefits over payments to active and deferreds.
"Against that backdrop, the failure of the government to take practical measures to slow the rate of scheme closures, or to ameliorate the worst effects of scheme closures, is appalling," he said.
McGinty noted that, contrary to assurances from the government, recent legislation to reshape the Pensions Board into the Pensions Authority failed to address the order.
Discussing the retention of the status quo, he added that members with modest pensions would "pay a heavy price for [the] failure".
"The injustice of this situation is unquestionable," he said.
IBEC, together with unions and the country's pension and actuarial associations, agreed last year on details of a revised wind-up order that would cap the size of a pensioner's benefits on closure, aiming to target a minimum level of income for all – regardless of status.
Mc Ginty said it was "particularly difficult" to understand the lack of change in the wake of the European Court of Justice's ruling that the lack of protection for pensions at insolvent manufacturer Waterford Crystal was a "serious breach" of the government's responsibility under EU law.
"The essence of that judgment was that the state must do more to protect the position of scheme members who have not yet retired," he said.
"Changing the priority order would have done exactly that.
"The government's inaction not only hurts the interests of working people, it also hurts the state's own financial interests."
He also criticised recent comments from minister for social protection Joan Burton, who said she would not rule out an additional pensions levy in the wake of the ruling.
The current 0.6% levy on pension assets is set to end next year, but were the government to opt for a pension protection arrangement similar to Germany's Pensions-Sicherungs-Verein or the UK's Pension Protection Fund, it is likely it would be funded by income from the industry.
McGinty said Burton's inability to rule out a new levy had "enormous" negative consequences.
"The message it sends is that any scheme that travels the difficult road to making a funding proposal this year may have to revisit the issue sooner rather than later because the government may again hit the softest of targets – pensions savings," he said.
He added that the minister's comments would place further pressure on employers to withdraw from the DB market entirely.
"This will lead to schemes winding up in deficit in circumstances where, as I mentioned earlier, active members must bear the entire burden of a wind-up," McGinty said.
"This is a vicious circle from which many pension savers will be unable to escape without negative consequences."