Pensions reform put on hold by Government as costs escalate
Ministers consider comprehensive package of reforms in wake of Waterford Crystal judgment
It is understood Minister for Social Protection Joan Burton will postpone changes to pension schemes
Measures to spread the financial burden of failed pension schemes more evenly on members will not be included in legislation being published today.
The Social Welfare and Pensions Bill had been expected to announce changes to the priority order, which currently means that people who have already retired have prior call on the assets of an insolvent pension fund ahead of colleagues who are still working.
However, it is now understood the Minister for Social Protection Joan Burton will postpone changes to pension schemes while the Government digests the full implication of a recent adverse ruling in the European Court of Justice which could see it landed with a bill for €300 million.
Instead, the Government is likely to look at more wide- ranging reform later in the year. Among the options understood to be under consideration are l forcing employers to make good on any funding shortfall in a defined benefit, or final salary, scheme. The shortfall would effectively become a debt on the employer. A similar scheme in the UK makes such a liability a high- priority debt against the sponsoring employer.
l Also being considered is the introduction of a pension guarantee fund, which would inevitably be paid for by a levy on the falling number of defined benefit schemes in existence. A similar facility was established in the UK since it lost a judgment similar to the Waterford Crystal case back in 2007.
Another option is a change in the priority order, which would see the current absolute protection of people already receiving a pension from an occupational scheme watered down to provide more security for the benefits built up by those who are still working.
It is likely any package would include elements under all three headings. Such dramatic changes, if eventually introduced, will raise further doubts on the long-term sustainability of defined benefit schemes in the private sector.
It had been widely expected that the Government would announce changes in the priority order within such schemes in today’s legislation following concerted lobbying on the issue from the Irish Congress of Trade Unions, the employers group Ibec, the Irish Association of Pension Funds and the Society of Actuaries.
However, the European Court of Justice ruling last month that the Government must compensate up to 1,700 former Waterford Crystal workers has forced a rethink.
The High Court is expected to consider the ruling next month. Although the original case involved only 10 former Waterford Crystal workers, it is expected that former colleagues will join the claim for compensation from the State. It is also possible that members of other schemes that have failed since 2007 will also look to be joined to the action.
The Government is still expected to proceed today with plans to restructure the Pensions Board which regulates the sector, replacing its 16 members with a three-person Pensions Authority.
In addition, a Pensions Council, appointed by the Minister for Social Protection and representing industry and consumer interests, will be established to advise on policy. The roles of the pensions ombudsman and financial services ombudsman will merge.