State 'rowing back' on pay-out plans for wound-up schemes
THE Government was accused yesterday of rowing back on a promise to ensure workers do not lose out to pensioners when a company pension scheme is being wound up.
The Irish Association of Pension Funds (IAPF) said under the present rules some people stood to get nothing when a fund is closed down.
To counter this the Government had been looking at changing the Pensions Act to ensure that money left in a scheme being shut down is more evenly divided between those currently receiving a pension, those still paying into it, and deferred members who have yet to retire.
It had been proposed that pensioners would get pensions up to a €30,000 maximum, or 75pc of expected benefits, whichever is the lower.
This would mean that those on high pensions of around €60,000 or higher would face a large cut in their retirement income if the sponsors and trustees of their scheme decide to shut it down. Eight out of 10 schemes are in deficit, and at risk of being wound up.
An IAPF conference was told yesterday that the Government was now going back to a "winner-takes-all" approach instead of going ahead with its original plan to a fairer outcome when a scheme is wound up.
Pensioners receiving payments get first call on the assets of a scheme when it is being closed down, a situation which often means there is nothing left for the active and deferred members.
This can give rise to a situation where a 65-year-old who has retired would retain their pension if a scheme was wound down, but someone who is just one day away from retirement could be left with nothing. IAPF chairman Maurice Whyms said: "Recent indications have been that the Government has now decided not to make any changes at this time.
"This is extremely worrying as it will lead to situations where current workers could lose a significant amount of pension they have built up, often at the same time as losing their job."
Social Protection Minister Joan Burton said the IAPF was effectively calling on the Government to change the law to allow trustees to reduce pensions and give the money saved to those who have yet to retire.
A spokeswoman for the minister said: "Minister Burton is also very conscious that people need to be consulted on this in advance of any change and she has asked her officials to run a consultation process when the technical aspects have been completed."