Unions and experts call for defined benefit pensions reviewMonday 08 July 2013 17.34
Employers unions and the pensions industry have united in calling for Government action to deal with what they call a crisis facing the pensions of thousands of workers.
This follows the failure of a number of pension schemes to meet a 30 June deadline to submit proposals to address deficits that may threaten their viability.
Around 200,000 workers belong to defined benefit schemes, which have traditionally been viewed as advantageous for workers.
The employer undertakes to guarantee a fixed proportion of final salary as a pension under defined benefit schemes.
However, many such pension schemes are in serious financial difficulty.
In some cases, workers have lost significant amounts of their pension entitlements.
More than 400 schemes covering 65,000 workers have been shut down since 2008.
Some employers have moved staff into defined contribution schemes, which carry no guarantee of a return.
The pensions regulator imposed a deadline of 30 June for trustees of defined benefit pension schemes to submit proposals to address deficits.
The measures used by some pension schemes to date included increasing contributions by employers and/or workers.
Other measures include reducing benefits and in some cases even closing schemes.
However, in a joint statement, IBEC, the Irish Congress of Trade Unions, the Irish Association of Pension Funds and the Society of Actuaries in Ireland noted that a large number of defined benefit pension schemes covering around 30,000 workers had failed to submit recovery plans to the regulator by last week's deadline.
It describes this as a "clear wake-up call" to the Government that the crisis facing the pensions of thousands of workers cannot be ignored any longer.
Describing their joint intervention as "unprecedented", they say they expect further schemes to close over the coming months.
It said that most could be prevented if the Government took immediate action.
Under current legislation covering the "priority order", if a defined benefit scheme is wound up, members who have already retired enjoy full protection for their pension entitlements.
But people who are still working can be left with little or no pension rights.
The joint statement calls for reform of the priority order to give better protection to those who have not yet retired.
The group said onerous new regulations and recent changes to the funding standard rules had exacerbated the situation for may schemes.
The new regulations require employers to increase the pace of funding for schemes at a time when they can least afford it.
There is also a lack of clarity about how the Government intends to respond to a recent European Court of Justice ruling relating to former Waterford Crystal employees.
The ECJ ruling found that the workers' pension rights had not been properly protected by the Government.