Muted response to Government plan to deal with insolvent pension funds

GOVERNMENT PLANS to deal with insolvent pension funds have received a muted response from interest groups.

The new scheme introduces a State annuity fund for cases where the employer becomes insolvent and the defined-benefit pension fund is in deficit. This will allow the scheme trustees to pay a sum to the exchequer to cover the cost of paying the pensions of retired members, instead of buying annuities.

The business group Ibec welcomes the Pensions Insolvency Payment Scheme (Pips) but said more reforms were needed.

Its director Brendan McGinty said it was time the Government and the Pensions Board faced up to the scale of the difficulties facing defined-benefit pension schemes.

“Ibec has been saying for some time that unless the funding rules governing defined-benefit pension schemes are urgently reformed, a number will collapse, with benefits being severely restricted,” he said.

According to pension industry estimates, 90 per cent of defined-benefit schemes could not meet the funding standard, Mr McGinty said.

Age Action Ireland said the scheme for insolvent companies was “ a commonsense measure” and would provide peace of mind to people approaching retirement.However, it called on the Government to revise its plans so that pensioners on the lowest incomes did not take the same pain as those on large pensions when benefits were frozen and then shared out.

Ictu general secretary David Begg said the plan was the adoption of an idea proposed by the unions five years ago but it did not go far enough.

“What we need immediately is a pension protection fund as they have in every other country,” he said.

This was echoed by Dublin MEP Proinsias De Rossa, who said Minister for Social and Family Affairs Mary Hanafin could find herself “hauled before the European Court” if Ireland continued to be in breach of EU law by not introducing a national pension protection fund.

Mr Begg said the pensions issue was “absolutely crucial” to the social partnership talks.

Tasc, the think-tank on social change, said the pension plan was limited and failed to address the fundamental problems facing the Irish pension system. Its director Paula Clancy said it had become “abundantly clear that a pension system based on the shifting sands of the market cannot be relied upon to provide a secure retirement income”.

She called for “a complete rethink” of how we provide for citizens in retirement. She also expressed concern that the restructuring of a defined-benefit scheme would cause a growing divergence between the incomes of those at work and pensioners as wages increased.