Congress calls for DB pension emergency legislation
DEFINED benefit pension schemes in the private sector are in danger of a meltdown unless urgent action is taken by the Government and regulators.
The Irish Congress of Trade Unions called for emergency legislation to ensure the survival of defined benefit schemes, which pay out two-thirds of final salary for those with a full 40 years' service.
The country risks "sleepwalking into a catastrophe" as defined benefit (DB) schemes in the private sector are failing fast, Congress's general secretary Patricia King said.
"Unless we tackle this problem as a matter of urgency, we will inevitably witness a sharp rise in levels of old-age poverty as hundreds of thousands of people see the retirement they worked and saved for evaporate before their eyes," she said at the launch of a pensions report.
From a peak of 1,500 DB schemes a few years ago, covering 300,000 people, there are now just 715 plans with 100,000 active members.
Congress wants emergency legislation to be enacted to make DB scheme deficits a debt on the employer, as in Britain.
Congress also wants a suspension of the minimum funding standard and the establishment of a commission to examine how assets in DB schemes can best be protected.
Ms King said use of the minimum funding standard exaggerates the liabilities of DB pensions, and was a form of "leprechaun economics".
The standard is misleading because it forces actuaries to value pensions on the basis that the scheme closes immediately and annuities are bought for members. Annuity rates are at record lows due to low German bond rates.
The report quotes the UK regulator questioning the use of the minimum funding standard.
The report comes months after Independent News and Media, publisher of this newspaper, was heavily criticised after it said it would stop paying into two defined-benefit schemes.
Talks between the INM management and the schemes' trustee are ongoing.