PENROSE BILL TO ADDRESS DEFINED BENEFIT PENSIONS

Labour Party spokesperson on Social Protection, Willie Penrose TD, has drafted a bill aimed at protecting and defending the pension rights of workers in vulnerable situations.

His Bill would amend the Pensions Act by protecting workers when their defined benefits scheme is being wound up, and/or if their employer remains solvent.

Deputy Penrose will seek to introduce this Bill when the Dáil returns in January, and he said:

“We have seen with the recent decision by INM to wind down its defined benefit pension scheme the urgent need for the pension rights of workers to be defended and protected.

“More than one hundred thousand people are covered by the 700 plus defined benefit pension schemes in this state. These are workers who have felt safe in the knowledge they had money put aside for their retirement.

“But they must now be seriously worried that a precedent, whereby profitable companies can walk away from their pension obligations while simultaneously paying out dividends to their shareholders, is being set.

“And where is the incentive for workers to save for their retirement if they cannot be guaranteed their rights and lifetime savings will be protected in the future?

“In seeking to amend the 1990 Pensions Act, the Bill the Labour Party is proposing would include employers’ obligations when it comes to funding issues, including when a relevant scheme, i.e, a defined benefits scheme) is being wound up and when the employer has not become insolvent .

ENDS

Notes to Editors:

The Bill can be downloaded here: http://www.labour.ie/download/pdf/pensions_bill_2016_and_memo.pdf

Explanatory Memorandum of Pensions (Amendment) Bill.

Purpose of Bill
The decision of a major news company to wind down its defined benefit pension scheme highlights the need for the pension rights of workers to be defended and protected. Fair-minded persons would agree that it is wrong that shareholders will profit from a corporate restructuring while employees people have their pension entitlements severely reduced.

There are over 700 defined benefit pension schemes in existence, covering more than 100,000 people. These workers will have thought they had made provision for their retirement who must now be seriously worried at the precedent that is sought to be set. From a public policy perspective, it is also a dangerous precedent if it deters workers from saving for their retirement because of a belief that their rights and lifetime savings might be drastically cut at some future point.

The pensions regulation regimes in Ireland and the United Kingdom have diverged in many respects. In the UK, the law prevents solvent companies from walking away from obligations to an occupational pension scheme.

Provisions of Bill
The Bill is by its long title an Act to amend the Pensions Act 1990, and to provide for related matters. Section 1 amends Part IV (“Funding Standard”) of the Pensions Act 1990, by inserting a new section 44A, dealing with employers’ obligations in relation to deficiencies in the funding standard.
The new section applies where –

· a relevant scheme (i.e., a defined benefits scheme) is being wound up,
· the employer concerned has not become insolvent, and
· the scheme does not satisfy the funding standard.

Where the section applies, then an amount sufficient to enable the scheme to satisfy the funding standard is deemed to be a debt due from the employer concerned to the trustees of the scheme.

The question whether, and the time at which, an employer has become insolvent shall be determined in accordance with the Protection of Employees (Employers’ Insolvency) Acts 1984 to 2012. The section does not prejudice any other right or remedy which the trustees have in respect of a deficiency in the resources of a relevant scheme.

Section 2 provides in standard form for the short title and collective citation and construction of the Bill.