The chief executive of the Pensions Board says the implications for Ireland arising from a European Court of Justice ruling against the British Government over its failure to provide protection for private pension funds won’t be known until such time as someone here brings a law suit.
Brendan Kennedy was responding to a letter from local Fine Gael TD John Deasy concerning the financial position of members of the Waterford Crystal pension scheme.
The Pensions Board CEO confirmed that with regard to the protection available to scheme members in the event of their scheme being wound up on their employer’s insolvency, under EU legislation, protection for members’ pension benefits is provided for under Article 8 of the Insolvency Directive.
The Robins case was made in relation to the Insolvency Directive in January 2007. It involved a UK pension scheme, which, following the insolvency of the employer, was wound up, with a deficit. Some of the members ended up with only a fraction of the benefits they expected to receive. The Court ruled that the UK did not have sufficient mechanisms for protection in place.
However, Pension Board CEO Brendan Kennedy told Mr Deasy that “it is difficult to assess the impact of this case on the [Irish] State’s liability in regard to underwriting pension provision. Until a similar case is taken in this jurisdiction, it will not be possible to predict reliably the State’s liability, if any, regarding this issue.”
Before last weekend’s dramatic developments at Kilbarry, Mr Deasy had asked a series of similar questions of Minister for Social and Family Affairs Mary Hanafin, also wondering whether she planned to take to protect the pension entitlements of current and former employees on deferred pensions, in the event of Waterford Crystal’s pension fund being wound up; and referred to the Robins case.
She told him: “The pension rights of scheme members are protected through trust law and by provision in the Pensions Act 1990 as amended. As supplementary pension schemes are usually established under irrevocable trust, the assets of the scheme are legally separate from the assets of the employer and are not available to any other creditors where the employer becomes insolvent.
“Under trust law, trustees of occupational pension schemes have the principal responsibility for ensuring that the entitlements of the members are adequately protected and that they receive the pensions due to them.
“In addition to the safeguards provided by trust law, the Pensions Act 1990 also provides for the regulation of pensions schemes in Ireland. Under the Pensions Act, defined benefit pension schemes must meet a minimum funding standard which requires that schemes maintain sufficient assets to enable them discharge accrued liabilities in the event of the scheme winding up.”
The Minister went on to say that “where schemes do not satisfy the Funding Standard, the sponsors/trustees must submit a funding proposal to the Pensions Board to restore full funding within three years. The Pensions Board can allow a scheme up to ten years to meet the standard in certain circumstances.
“Should a scheme be wound up by its trustees, the Pensions Act 1990 (as amended) specifies how scheme assets are prioritised. In short, schemes first prioritise benefits that have accrued to members by way of additional voluntary contribution or transfer of rights from another scheme. Benefits being paid to retired members come next in the priority list, followed by benefits to current and deferred members of the scheme.”
In relation to the Robins case, Ms Hanafin said: “I should point out that, in its review of the transposition of that Directive, the Commission gave an assurance that Ireland had adequately transposed the provision in that Directive.
“The Government is currently considering a number of options in relation to the ongoing security of occupational pensions. Any decisions made in this context will be considered as part of the development of a long-term framework for pensions.
“Our overall objective is to deliver a pensions system which will provide an adequate income in retirement for everyone, while at the same time being affordable in the immediate and long-term future – a key consideration in the current economic environment.”
Minister Martin Cullen said this week that a State guarantee of all pensions “would never be possible” here, saying they’d tried to do so in the UK but are left looking at a potential liability of stg£220billion “and growing.”