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Stephen Donnelly: Defaulting on pensioners marks new low

THE Fine Gael/Labour Government is letting Irish pensioners be wiped out in the liquidation of IBRC. This marks a new low, and starkly illustrates the moral bankruptcy, of the entire bank bailout saga. Having given so much taxpayer money to international investors, the decision to default on our own pensioners is abhorrent.

When Maurice Hudson's son got in touch with me, I assumed he'd been given bad information. His father put his pension fund in Anglo Irish Bank in January 2008. The capital was guaranteed, and was due to be returned to him in January 2014, with interest. When Anglo was merged with Irish Nationwide to form IBRC, remaining deposits were moved to AIB. Maurice's wasn't, as it was deemed to be an investment product. It was, nonetheless, recognised by the State as a pension – Maurice had been able to take out his 25 per cent tax-free lump sum, and the remainder was taxed when the Government decided in 2011 to take 1.8 per cent out of all private pensions.

Now, he was being told that when IBRCs assets are sold, there won't be enough left to return his pension to him. He won't get his €450,000. He won't even get the €100,000 which was presumed guaranteed by the State under the deposit guarantee scheme. Now €450,000 might sound like a lot, but it pays a pension of about €27,000 a year. That's less than many teachers get on retirement, so nothing out of the ordinary.

When Maurice's financial adviser confirmed all of this, I still assumed a mistake had been made – that in the chaos of liquidation, the Government didn't realise Irish pensioners were being wiped out. Having paid tens of billions of euro of taxpayers' money we never owed to international investors, to avoid having "the name of defaulter across our foreheads", it was inconceivable that we would now default on our own pensioners.

Turns out I was wrong. I raised Maurice's case directly with Minister Michael Noonan, and was stunned by his reply.

"Neither I nor the Special Liquidators are able to discuss the circumstances of individuals who had accounts with IBRC ... I would suggest that individual customers take up their concerns with the Special Liquidators and IBRC (in liquidation) directly."

The minister was washing his hands of any responsibility.

He continued, "I have been advised that the Liquidator is aware of a number of customers who fall outside the eligibility criteria for the ELG (Eligible Liabilities Guarantee) Scheme due to the nature of the investment product. Unfortunately, if a customer is not eligible under the ELG scheme they will rank as an unsecured creditor in the liquidation."

Here's the logic being applied: Maurice isn't covered by the ELG because he put his pension in Anglo before the State guarantee began in September 2008. As such, he's an unsecured creditor. And because there aren't enough assets in IBRC to cover its liabilities, the unsecured creditors, like Maurice and the other pensioners, aren't getting their pensions back.

Taken at face value, there's a certain logic to what's being said – he invested his money in a bank that did not have a State guarantee, that bank became insolvent, and so he can't have his money back. Only here's the thing: on the night of the guarantee, in September 2008, €573bn was invested in the six Irish banks in question. Every one of those banks was insolvent, and so the owners of that €573bn should have taken a hit, including Maurice. Some would have taken more of a hit than others, due to the legal strength of their investments. But if we assume €64bn was needed to make the banks solvent, as that's how much we've put in to them, then the average hit would have been 11 per cent.

But that's not what happened. While some junior bondholders were hit, the vast majority of the €573bn was paid out in full. To the best of my knowledge, nobody got nothing back – until now.

Let's look at Anglo, where Maurice put his money. On the night of the guarantee, there was nearly €100bn invested in the bank. Over €72bn was deposits, which have been honoured in full. Over €17bn was senior bonds, and the vast majority of these have already been paid out, with profits (€22.3bn of the €22.5bn of senior bonds in Anglo and Irish Nationwide in September 2008 has already been paid out). This was only possible because the Government gave Anglo about €30bn of our money.

Last year alone, €2bn was paid out to bondholders who put their money in Anglo before the 2008 guarantee. One such payment was for €1.25bn. Let's just line these up. In January 2007, a professional investor loaned €1.25bn to Anglo, for five years. In January 2008, Maurice Hudson deposited his pension with Anglo, for six years. Neither had a State guarantee. In

January of last year, Irish taxpayers' money was used to pay out the €1.25bn, plus accumulated interest, to whoever now held the 2007 bond. In March of this year, Maurice Hudson was informed he wouldn't be getting a cent back.

And if that doesn't lead you to rage or despair, consider this: the Government refuses to find out who the €1.25bn was paid to. It's entirely possible the bond was bought from the original owner at a fraction of the original value – nobody thought the Irish Government would be stupid enough to pay out in full on unsecured, unguaranteed bonds from a dead bank under criminal investigation. But it did, and so it's possible that someone made hundreds of millions in profit when the €1.25bn was paid last year.

This lack of information has become the norm. I asked Minister Noonan for the balance sheet of IBRC at the time of liquidation, to see who's owed what. It is being withheld. I asked him how many pensioners are being affected by the liquidation. He said he doesn't know. And yet when pressed by the Prime Time team last week as to why Irish pensioners were being wiped out, the Department of Finance responded that it would be too expensive to save them – even though it knows neither the number of pensioners involved, nor the cost of saving them.

It turns out that the Government is OK with having 'defaulter' written across its forehead. Just so long as we're defaulting on our own people, and not on international investors, like Deutsche Bank. And so you have to ask the question: what have we become, other than debt collectors for foreign millionaires? What values do we hold as a nation? What lines will we not cross?

A way must be found to give these pensioners back their money. It was possible to underwrite the liabilities of an entire banking system, to implement the biggest per capita bank recapitalisation in history, and to create the largest property company on earth, all in order to save the banks. If we accept that it is too difficult to help our own pensioners, then we stand for nothing.

Stephen Donnelly is the independent TD for Wicklow and East Carlow

Irish Independent