Pension legislation is welcome and long overdue
Despite its flaws, the Bill helps create a leveller workers’ playing pitch
Former Waterford Crystal workers, at the UNITE rally outside Leinster House, calling on the government to protect the workers’ pension entitlements.Legislation is a welcome and long overdue effort by State but will no doubt face legal challenges
Over four years after Waterford Crystal closed its doors, leaving its workers without a job or most of their pension benefits, the Government finally took steps yesterday to recognise the injustice of their position – at least in part.
Having lost a European Court of Justice ruling that said it had not done enough to protect the pension rights of 1,700 workers at the glass-making plant – and others in a similar position – the Government was told future legislative provision for such workers must ensure they received no less than 49 per cent of their pension benefits.
In the event, Minister for Social Protection Joan Burton’s new measures propose they should receive 50 per cent.
Whether that’s the end of the matter remains to be seen. On first sight, it looks to be one of several areas in what is a radical reform of the defined-benefit, or final salary, private pension sector that is likely to face legal challenge at some point.
The measures approved yesterday by Government do not just deal with the Waterford Crystal/ECJ case. They are far more ambitious – looking to address some of the most intractable problems in a defined-benefit pension model designed for a very different age and struggling to survive at all under the pressure of people living for longer in retirement, increased regulation and underperformance of investments.
That perfect storm has seen employers in the private sector move increasingly to a defined-contribution model where all the risk of the defined-benefit pension promise is transferred to the employee. Unsurprisingly, the benefits are generally less than they would have been traditionally under the defined-benefit model. The most fundamental change is in the “priority order” – the rules which state that people who have already retired from a private pension scheme must be fully catered for before any other members are taken care of.
This has become all the more sensitive in an environment when working conditions have become tougher and pension benefits have diminished.
Where there were 2,500 private sector defined-benefit schemes a decade ago, now there are just 800 still open. Some of the rest still exist but are closed to new members or contributions, but many have been wound down altogether. A parallel problem is that where 80 per cent of schemes were fully funded at the turn of the century, just four in 10 now are – and that is a notable improvement on the position just a couple of years ago.