Seven company pension schemes 'fold each month'
Defined benefits packages are facing wipeout, says IBEC
MORE than seven company pension schemes are closing every month, with this number set to surge, leading employers' body IBEC said.
The prediction of a large-scale closure of defined benefit schemes came as workers at Permanent TSB said the closure of its schemes would mean their promised pensions being halved.
Some 1,400 people who have yet to retire will be impacted by the decision of the bank to stop funding its three defined benefit schemes, according to the Unite trade union.
Defined benefit schemes promise a set level of pension payments depending on the years of service and the salary at retirement.
But eight out of 10 of them are in deficit, with those members of the schemes who are yet to retire facing massive cuts in what they expected to receive.
Unite's Niall Sweeney said the union would fight the move to seek cost savings by shutting the Permanent TSB schemes.
"If this decision is allowed to go unchallenged, it will set a dangerous precedent that will encourage other employers to force the wind-up of defined benefit schemes," he said.
IBEC's Brendan McGinty is set to tell a seminar today that 800 defined benefit schemes are in deficit. These schemes have to tell the regulator, the Pensions Board, by Sunday how they are going to plug the holes.
He said seven schemes a month were being wound up last year, but this figure is set to rise.
"That figure will accelerate over the coming months and we expect to shortly reach the point where several schemes will not be in position to submit plans to close that funding gap by next Sunday's deadline," he added.
Mr McGinty said most of the the funds that are in deficit will not be in a position to submit plans to close their funding gap.
"It is a testament to the mess which successive governments have made of Irish pensions policy that many of those schemes will not be in a position to submit plans to close that funding gap by next Sunday's deadline," said Mr McGinty.
He warned that thousands would be left with a fraction of the retirement income that they had envisaged.
IBEC said the Government's failure to reform pension rules means that losses will not be shared equally, with those approaching retirement taking a much bigger hit than existing pensioners.
"To make matters worse, Minister for Social Protection Joan Burton has refused to rule out introducing a new, across the board, levy on pension savings," he said.
Mr McGinty said the Government has taken no action to either slow the rate of scheme closures, or off-set the worst effects of these closures.
"Pension schemes are in a state of crisis and government inaction is making matters worse.
"Rules governing the distribution of pension funds on wind-up mean that people of working age must lose everything before pensioners can be asked to give up anything," he said.