New reforms could lead to pension cuts
It was announced yesterday that the Government has given the all clear to a plan to introduce intergenerational equity into defined-benefit pension schemes that run into difficulty. According to the Pensions Bill 2013, those who are actively paying money into defined-benefit schemes are to be given more protection if the scheme is wound up or runs into difficulties.
This means that if the scheme does face problems, retired members who earn above a certain level might not be entitled to their full payment. It was outlined at a meeting at the Department of Social Protection that the bill was structured to counter act against this problem but that it might not arise. The stipulations apply to around 80,000 people who are currently members of defined-benefit funds and it will not apply in retrospect if schemes are wound up.
Currently if a scheme is restructured or wound up, pensioners will receive their full entitlements and whatever is left over will be divided among those who are yet to retire or people who have left a company and have decided to defer the receiving of their pension. The new legislation will meant that the Government will guarantee the paying out of all existing pensions that are worth €12, 000 per year.
Those who receive annual benefits of more than €12,000 and up to €60,000 will retain 90% of their pension and those whose benefits exceed €60,000 will retain 80%. If both an employer and a pension scheme become insolvent, active and retired members who receive more than €12,000 will be able to retain 50% of the money entitled to them.
Minister for Social Protection Joan Burton said the measures were about “fairness in the first instance” and were to make sure that those working are able to receive a larger share of their pension benefits if their current scheme is restructured or dissolved.
Ms Burton said yesterday “The State could not be expected to solve employers’ funding problems given the financial implications it would have for taxpayers. However, the State can intervene to ensure a fairer deal for workers and sufficient protection for pensioners, while allowing employers to get to grips with their pension problems.”