A Government bailout of Waterford Crystal’s pension scheme has been ruled out by Tanaiste and Enterprise Minister Mary Coughlan, despite industry predictions that current employees are likely to suffer sharply reduced pension entitlements if the scheme is wound up in deficit as a result of it going into receivership.
Though negotiations to purchase some of Wedgwood’s assets are continuing with a number of interested parties, chances are slim that any potential buyer will be willing to treat the company as a going concern. New York-based private equity firm KPS Capital Partners, which signed a letter of intent last week, is understood to be interested in purchasing only certain assets of the company and is not expected to buy the business itself, or take on the pension fund. Crystal workers, many of whom have over 40 years service and pension contributions, are devastated at the news.
A delegation led by ICTU president David Begg had an hour-long meeting with the Tanaiste on Monday afternoon to discuss the company’s pension scheme, which is over €100m in deficit. Unite representatives, who were also present at the meeting, said a number of proposals were put to the Tánaiste, including the creation of a State-backed fund to protect workers’ pension contributions.
Their appeal for the State to respond to any potential shortfalls in the Crystal pension was rejected by the Tanaiste, who later told the media the Government was not in a position to invest in any pension fund. The Minister denied Ireland would be in breach of EU directives and court rulings on state intervention for company pension schemes. However some pensions experts are warning that a 2007 ruling by the European Court of Justice, which found that the British government had a duty to compensate workers whose pension fund went bust, could have implications in this country. The European court did not specify how much compensation should be paid, referring the matter to the British High Court to determine, but some observers believe it set a precedent that could be applied here, particularly as Ireland has no state protections for pensions while Britain now has a Pension Protection Fund.
The 2007 Green Paper on pensions examined a number of options, such as a guarantee on contributions or a protection fund designed to meet such shortfalls, but to date, no such measures have been adopted into law. Under the terms of the existing Pensions Act, current contributors to Waterford Crystal’s pension scheme are the last in priority in the allocation of the assets if that scheme is wound up. If a buyer is not found for the business itself, trustees of the pension fund have the option of keeping it open in the hope that market conditions will improve and the fund can recover some of its losses. The more likely outcome is that the scheme will be wound up, the costs of which will have first priority from the scheme’s assets.
The next priority will be those who have made additional voluntary contributions to the scheme or transferred contributions from another scheme. Those already drawing a pension, or those who have passed pensionable age but whose pension has not yet commenced, are next in line, while existing employees will be the last to receive any assets from the scheme. Hence, if the scheme is wound up in deficit, they will undoubtedly suffer some losses in their pension entitlements.