Pensions group urges radical rule change over priority given to retired
Workers subsidising wound-up schemes 'simply not fair', says IAPF chief
PENSION scheme trustees have demanded an end to the situation where those who have yet to retire are subsiding the pensions of retired members.
A survey carried out by the Irish Association of Pension Funds (IAPF), which is made up mainly of trustees who are charged with overseeing pension funds, has prompted a call for a radical change in the rules.
At the moment the regulations for defined benefit schemes mean that already-retired pensioners have first call on the money in the scheme if it is forced to wind up.
Some eight out of 10 defined benefit schemes are in deficit and face severe restructuring.
This will mean those yet to retire will lose a chunk of their expected pension benefits, but the current rules mean those in receipt of a pension will be unaffected.
A survey carried out at the IAPF annual conference found that 81pc of pension delegates believe that the rules should be changed to give those yet to retire from a scheme a better deal.
The so-called priority order in wind-up gives precedence to pensioners when the scheme's funds are distributed.
Jerry Moriarty of the IAPF said the rules should be amended for defined benefit pension schemes to give enhanced benefits to those still in employment, rather than the current absolute weighting given to those already in receipt of their pensions.
He said that at present when an underfunded scheme winds up the trustees must first buy annuities for existing pensioners for 100pc of their current pension.
Any remaining funds are then used to benefit those pension members who were still in employment at the time of the wind-up or ex-employees who have not yet retired.
To ensure that those in receipt of a pension get their full entitlements, all other pension members must sacrifice their promised pension, leaving them with much-reduced benefits or, in some cases, none, Mr Moriarty said.
Mr Moriarty added: "This situation must change.
"It is simply not fair that those nearing retirement age must suffer to such a degree by potentially having their pension cut in half, while a former colleague who has just retired receives his full benefit for life."
He added that trustees recognise that in an ideal world everyone in a defined benefit pension scheme would get everything due to them, but with so many of these company schemes in deficit this was not possible.
"Add to that the super-cautious funding requirements for schemes currently in place, and employers are more likely to be deterred from making the significant contributions required to maintain current benefits".
Social Protection Minister Joan Burton has signalled her intention to address the priority issue and Mr Moriarty said this cannot come quickly enough.