Thousands to lose out on pensions in new rules
THOUSANDS of people who have yet to retire will be left with tiny pensions or nothing at all because of the way new rules have been designed.
The Government will introduce new legislation by the end of the year to ensure those yet to retire get more money put into their pensions.
This will be achieved by allowing cuts to existing pension payments coming out of troubled schemes.
But the changes to the rules on defined benefit pensions will have no impact on schemes that have already wound up.
The Irish Brokers' Association (IBA) said the fact that measures were not retrospective meant the change would come too late for many.
Up to 50,000 people who are under 65 have already ended up with no pension or a tiny retirement fund after their schemes went bust, experts said. Chief executive of the IBA Ciarian Phelan said: "Thousands of people that have been paying into pensions could be left with very small pensions because new pension guidelines introduced by the Government contain no retrospective elements and only seek to rescue those where double insolvency applies."
Fianna Fail's Willie O'Dea accused Social Protection Minister Joan Burton of dithering, which has meant 50,000 people have already lost out. Ms Burton is to introduce legislation by the end of the year to allow trustees of defined benefit schemes share losses in schemes between those yet to retire and those already getting pensions.
Pensioners being paid out of bust schemes, or where the fund is being restructured, will get at least €12,000, but face cuts if their pension is more than that.
There will be no impact on the state pension. And there was huge criticism of the rule changes as the private sector pensions levy will end up funding situations where both the pension scheme and the sponsoring company are bust.
Mr Phelan said: "The new rules will mean that defined contribution scheme members will be asked to surrender part of their pensions to some of those lucky enough to remain in defined benefit schemes."
Traditionally, a defined benefit scheme where someone has 40 years' service pays out half the final salary in retirement.
Samantha McConnell of IFG Pensions said: "Given that defined contribution members already have to contribute the majority of the cost to fund their own pension and that many will struggle to enjoy a pension of 50pc of final salary, is it right that they are subject to this levy to fund a level of defined benefit benefits that they themselves will likely never receive?"
She said this was "blatantly unfair" and the minister should look to amend the levy to ensure that it was applied to defined benefit schemes only.
The Society of Actuaries said the new rules would provide a more equitable distribution of the assets between pensioners and those who had not yet retired.
The Department of Social Protection said there was no evidence to show that 50,000 people yet to retire had lost out through schemes collapsing.