Ombudsman highlights pension theft

Employers in the construction industry and the health and education sectors have been singled out for criticism by Pensions Ombudsman Paul Kenny on the launch of his first annual report.

The Ombudsman has signalled a tougher stance against construction industry employers, saying he will refer complaints where the law has been broken so that prosecutions can be taken.

In 2004, Mr Kenny found against two construction industry employers where employees who had died were not, but should have been, covered by the Construction Federation Operatives' Pension Scheme (CFOPS). In both cases, Mr Kenny found the employer to be liable for a mortality benefit under the terms of the scheme, which at the time was €20,000.

The mortality benefit has since been increased to €63,000, but despite this Mr Kenny said that construction industry employers were systematically failing to comply with CFOPS.

Complaints received include failure to register employees; failure to pay over contributions already deducted from employees' pay, which Mr Kenny described as "theft and nothing more"; and unethical practices in which workers are forced to pretend to be self-employed. Internal disputes resolution (IDR) procedures, which pensions members must approach before taking their complaints to the Ombudsman, are not being conducted within the statutory three-month time frame.

Mr Kenny said public service employers in the education and health sectors appeared to be the worst offenders and he blamed this on a shortage of pensions administration resources.

He is now seeking a regulatory change that would allow him to proceed with an investigation where it is clear that the IDR process will not be completed within a reasonable time frame.

Since its establishment in April 2003 up until the end of 2004, the Ombudsman's office received over 450 official complaints and his office handled over 1,500 telephone queries. In 2004, the Ombudsman made 23 determinations, but only upheld seven complaints. So far this year, he has made 46 determinations, upholding 12 complaints.

A further 43 cases were also settled by mediation last year, with 33 per cent ending in some concession to the complainant.

Poor communication was the root cause of many of the complaints, according to Mr Kenny.

Speaking at the launch of the annual report, Minister for Social Affairs Séamus Brennan said the review of pensions strategy currently being completed by the Pensions Board would be published in "a matter of weeks".

Mr Brennan said he had asked the board to consider an opt-out pension scheme modelled on a New Zealand system called the KiwiSaver account.

Under such a system, employees would be automatically enrolled in a pension scheme on starting work and would have to make a formal written application to end their membership. "I might be on my own here but I don't believe that just tinkering with [the pensions system] is enough," he said.