Retiring workers may be able to defer pensions

RETIRING workers with pensions that have slumped in value due to the stock market collapse may be able to defer cashing in their investments until the market recovers.

Minister for Social and Family Affairs Mary Hanafin said she was in discussion with the Department of Finance about ways of helping workers stuck with devalued annuity investments and the department was “very sympathetic” to the idea of creating a deferral mechanism.

“There is always a risk [with annuities], but it must be really soul-destroying for someone to put all their money all the years of their working life into an investment and, at the very worst time, to know they are stuck with it,” she said.

Ms Hanafin said pension fund managers and trustees needed to be much more aware of the vulnerability of people in the past 10 years before retirement and look for “safer options“.

“Most people find pensions really complicated. They don’t’ understand the language attached to it and if somebody appears to be expert on the issue, they go with it and they trust them,” she said. She criticised the complexity of pension documentation and the often obscure small print.

“It should be improved and simplified,” she said.

She made her remarks at the publication of the annual report of the Pensions Ombudsman which shows that disputes between workers and employers over pension entitlements increased by almost 50% this year.

Ombudsman Paul Kenny also recorded big increases in the number of telephone queries and website searches for information. “There is every indication that our workload in 2009 will be heavier again,” he said.

Common among the complaints were cases where workers found their pension contributions were not passed on to the pension fund or they were excluded from entitlements on technicalities never explained to them.

Mr Kenny said his staff were pursuing employers with vigour where they were found to be in the wrong or failed to co-operate with an investigation. In the last few months, an employer was arrested for ignoring the ombudsman’s request for payroll files. The case will be heard in Waterford next month.

In more recent days, a Co Wexford employer was convicted and fined €2,500 for failure to release payroll records. He was also forced to hand over the files which will now form the basis of a separate investigation.

Mr Kenny said some employers seemed to think he would simply go away if they ignored his investigations, but warned they faced criminal prosecution. “In these [recent] cases, the complaints related to alleged deduction of pension contributions and failure to remit to the pension fund. That is no better than theft.”

The ombudsman said many contentious issues could be defused by an apology or simple explanation but, he said, “Simple appears to present a challenge to some administrators.”

He added there was a growing tendency of employers, given the standard 21 days to respond with straightforward information, waiting until the 20th day to reply through their solicitors with long lists of questions about the legal basis for his very existence.

“What appears to be costly delaying tactics are being employed, possibly in the hope that the issue might go away. Again, it won’t.”

Case 1

A COMPLAINT was made about Jackman Developments Ltd, a construction company, for failing to pay pension entitlements to the mother of a deceased employee.

The Ombudsman directed the company to pay €63,500 to the mother within a month of concluding the investigation.

He ruled that the company “made a dishonest attempt to defraud the pension scheme into paying the mortality benefit for which it was not liable because the relevant contributions had not been made by Jackman Developments Limited”.

The company did not accept his ruling, however, and he has begun proceedings in the circuit court to get a court order forcing them to comply.

Case 2

AN AMBULANCE supervisor who retired at age 65 but was asked to remain on full-time until a replacement could be found, discovered on his eventual departure that the extra time he served didn’t count for the rate of pension he assumed he was entitled to.

He was 16 days short of eligibility for the higher rate of pension payment when he reached 65 but assumed the extra service he performed would make up the days.

He argued he was never informed that his contract changed from a permanent to a temporary one after his original retirement date or that his pension entitlements were dictated by the permanent contract.

The Ombudsman described the case as “unfortunate” but ruled that the contracts were sound and the complaint could not be upheld.