Social Welfare and Pensions Bill 2014

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Dáil Debates, Social Welfare

Clare speaking on the second stage of the Social Welfare and Pensions Bill:

This legislation has many aspects to be considered but I will concentrate on the changes to the Pensions Act rather than the social welfare provisions which have been addressed by other Deputies. I agree with the points made by Deputy Pringle about our obsession with alleged social welfare fraud which has been shown in most cases to be incidents of error when it occurs. The Minister proposes to second 20 gardaí into a virtual hit squad to pursue social welfare fraudsters. This is unbelievable when white collar crime is one of the biggest problems in our society. This is an attempt to scape-goat some of the most vulnerable sections of society by turning these allegations of fraud into something they are not because the statistics show that the instances of fraud are quite minor. In any case, we can deal with that issue later.

I will concentrate in my contribution on the amendments to the Pensions Act. Pensions have become a very important issue. There is an expectation that in retirement one will be able to live out one’s life comfortably, to attain a certain standard of living, something to which we should all aspire. However, this expectation has been undermined by pension insecurity in many of the schemes. This Bill will introduce amendments to the provisions dealing with defined benefit pension schemes. We need to sound a note of warning. The problems in those schemes are not caused, as we have been told before, by people living longer, as if that was somehow a bad thing when it is a very good thing. The reasons these schemes were under-funded has been as a consequence of the casualisation of labour, the undermining of the idea of a secure permanent pensionable job and instead those jobs being replaced by outsourced contracts and so on, with the result that the lifeblood of pension schemes has been eroded. A number of management decisions also undermined that system. While recognising that there have been problems with defined benefit schemes, I am very worried about the volume of piecemeal changes to the Pensions Act impacting on pensioners. I do not think we are taking a holistic or a proper view on it.

Less than six months ago in the run-up to Christmas, radical changes were implemented to defined benefit pension-holders and which were rushed through in the final sitting week before Christmas, with the consequence that existing pensioners of defined benefit schemes experienced a huge reduction in their standard of living in some of those schemes. I refer to the scheme to which I belong which is a major defined benefit scheme, the Irish Airlines Superannuation Scheme, IASS, which has 15,000 members, roughly divided between active, deferred and existing pensioners. As a result of the changes put forward, the pensioners in that group took a hit of €7 million which was taken out of the pockets of thousands of pensioners. This has an immediate impact on the surrounding areas and the purchasing power of those individuals. That legislation failed to take into account employer responsibility and the Bill is not doing enough in this regard either. In the UK, people who formerly worked for Aer Lingus and what was formerly Aer Rianta, will have all their pension benefits secured but their Irish counterparts who worked in the same companies will not and are experiencing major losses in that regard. I do not have time to deal with all the details but the Minister is aware that many of the groups in similar schemes have had to organise and seek recourse to legislation and potentially to the courts, to exercise their rights. We should not be tinkering with pensions legislation while significant changes are taking place behind the scenes because it is not desirable to do it in that way.

The Minister is probably aware of a very important UK case last month which defined in law the notion of a reasonable expectation. This case related to a defined benefit scheme in IBM and it is deemed potentially to have a significant impact on Irish pension schemes. The UK High Court ruled that the changes proposed by IBM to its pension scheme confounded the reasonable expectations of the scheme’s members which were for benefit accrual to continue into the future. The judge in that case said that the key aspect of the decision was the development of the concept of reasonable expectations of employers and scheme members and that this would potentially affect an employer’s duty of care. This case law has the potential to have an impact on the scenario here in Ireland. It is interesting that we are discussing this legislation after the Queen’s speech to Parliament yesterday in Britain which announced major changes to the UK’spension scheme, a new idea to deal with defined benefit schemes for the modern era which is called Dutch-style collective pension funds. Rather than workers saving into individual pots which are more vulnerable to variations on the Stock Exchange, it is proposed that workers would pool their investments into a mega-fund which would then pay them an income in retirement. It has been alleged that these changes could, by minimising the risks, see pensioners secure a post-retirement income of greater than 30% of current levels.

I note that critics will issue a caution and the Dutch are looking at ways of moving away from that scenario. I am not saying it is a panacea but it is interesting that different methods of dealing with thepensions crisis in a more holistic way are being put forward in other jurisdictions. It is ironic that we are discussing legislation to unilaterally restructure defined benefit schemes at the direction of the PensionsAuthority, yet it has sounded warnings about over-reliance on investment in equities. I ask why we do not consider a plan similar to the British model and why we do not consider the taking over of schemes such as the IASS by the NTMA, as is the case with some public service pensions. I ask why we are not exploring the concept of pooling risk rather than some of the changes being put forward. Alarm bells are ringing about some of these changes. Why is the onus on trustees in the schemes? Does this not allow thePensions Authority off the hook? How will the trustees inform all the members? The IASS has 15,000 members. While pushing through this legislation, the Government has not yet introduced the changes suggested by us during the discussions on the previous Bill, about giving the deferred pensioners groups and the existing pensioners groups a right to sit at the table and to be consulted on these changes.

The argument is made that pensioners have the right to go to the High Court in these cases, as if that is somehow a bonus – I do not think that is a bonus. Most pensioners are on average 72 years of age and their average pension is approximately €16,000 a year. It is not that easy at that age on such an income to access the High Court to get justice. The experience has not been that favourable. Why are we not looking at different ways, such as allowing the industrial relations machinery of the State to be accessed by people who have left their employment? We have raised these issues previously. During the discussion on the previous Bill, the Minister said she would deal with some of these issues in the guidance notes but they were not dealt with. Here is another legislative change which also impinges on the State Airports (Shannon Group) Bill. There are too many things happening on the sidelines which will undermine the integrity of these schemes and they are not being properly examined. We will pay a heavy price for this. We are moving legislation to allow existing pensioners and deferred groups to have a seat at the table which they should have anyway.

Many other issues should have been addressed in the Bill. Unfortunately, I do not have time to discuss them.

People are asking why the Minister is not looking at the bigger picture and introducing pension legislation to address the issues I have raised and provide for greater protection. One of the key flaws in the current arrangements is that the pension pots into which people have paid can be eroded and reduced. While the legislation purportedly gives such persons access to a remedy, in reality it erects another barrier. Tens of thousands of workers have retired from the companies to which I referred and many others continue to pay into the pension funds of these companies. This is creating a minefield for the future. I will table amendments to give pensioners greater access to justice in this regard.

I appeal to the Minister to step back and take a much more holistic and planned approach to pensionsbecause the current arrangements open the floodgates to further legal cases. Only recently, hundreds of airport workers attended a meeting in a hotel at which they collected tens of thousands of euro for a fund that will enable them to take a legal challenge against pensions legislation. They have a reasonable expectation that was the subject of a ruling in case law in the Commercial Court last year. The Government is making a serious mistake in failing to take account of a number of rulings in legislation.