Dáil Questions: Social Protection

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Dáil Issues, Social Welfare

To ask the Minister for Social Protection the consideration he has given to a review of the provisions of the Social Welfare and Pensions Act 2013, including single insolvencies and their effects on pensioners
– Clare Daly.
* For ORAL answer on Tuesday, 22nd November, 2016.

R E P L Y

In Ireland, occupational pension schemes are generally set up under trust and are maintained by the employer on a voluntary basis. The trust deeds and rules of a scheme differ from scheme to scheme, and as with any contractual situation, reflect the level of obligation of the parties involved. While the Pensions Act provides a framework for the regulation and supervision of occupational pension schemes, it does not impose any requirement on an employer to fund scheme benefits or maintain an existing scheme.
The Social Welfare and Pensions (No.2) Act 2013 provided for a fairer and more equitable distribution of scheme assets in the event of the wind up of an underfunded scheme. It also facilitated a greater sharing of the risk between all the beneficiaries when a scheme is underfunded, while still providing for priority protection of pension benefits. Prior to the introduction of this Act, pensioner benefits were given priority over the benefits of active and deferred scheme members which meant a situation could arise whereby pensioners received all or almost all of the pension fund and members who had contributed but not retired received considerably less than expected.

When an underfunded pension scheme is winding up (and when the employer is still solvent), the existing 100% priority given to pension benefits was changed to provide for a reduced priority for higher pensions. It is important to note that the changes introduced in the 2013 Act still give high priority to existing pensioners in the discharge of the liabilities. For pensioners this is:
(i) 100% priority will be given to the first €12,000, if the annual pension is €12,000 or less;
(ii) the lesser of €12,000 or 90% of the annual pension if the annual pension amount is over €12,000 and less than €60,000;
(iii) the lesser of €54,00 or 80% of the annual pension if the annual pension amount is €60,000 or more.

After that the next priority will be to secure 50% of current and former employee’s benefits. Then any remaining funds will be used to secure pensioner benefits to the extent that they have not already been discharged and after that, current and former employees benefits to the extent that they have not already been discharged.
This change in the order of priority when a schemes winds up redistributes funds to the current and former employees. If the pension scheme is sufficiently funded the pensioner will get back further funds as the scheme moves through the order set out above.
I have no plans to review these provisions as the changes made provided for a fairer and more equitable distribution of scheme assets in the event of the wind up of an underfunded scheme.
I hope this clarifies the matter for the Deputy.