EU in talks on pension security

THE EU is in discussions with the Government over protecting pension schemes from bankruptcy, as happened with Waterford Glass.

Ireland is the only country not to put in place a safety net to ensure worker’s contributions into pension schemes would not disappear if their company did.

But rather than taking the state to court, the European Commission says it is in consultation with the Government over plans to bring in legislation on the issue.

The trade union UNITE and Waterford Glass are taking the state to court over the loss of most of the workers’ pensions when the factory shut down last year.

David Begg, head of ICTU, said he expected that the case could end up in the European Court of Justice (ECJ) and the state could be forced to compensate the workers on the basis that the Government should have adopted the EU legislation.

However he acknowledged that it was difficult to see how the state could do much about protecting pension schemes now given that they have devoted so much to bailing out the banks.

Ireland’s private pensions were the worst hit of any in recent years, losing up to 40% of their value because so much of the money was invested in risky equities.

Three years ago, the ECJ forced Britain to increase its pension protection fund to protect 90% of pensions, but despite Ireland siding with Britain, they made no changes afterwards.

A commission spokesperson said that while the court ruled that the British provision of 50% protection at the time was not sufficient, they did not define what would be enough and they were now in consultation with member states, including Ireland, on new rules.

Social Affairs Commissioner, Laszlo Andor, said they would include this in new legislation dealing with solvency, especially following the devastating effect of the crisis on the sector.

He was speaking as the commission launched a public debate on the future of pensions in the EU.

Initially threatened by the fact that the number at work supporting the retired would halve over the next few decades, the pension system is now teetering following the effects of the financial crisis.

The commission has suggested that the pension age be raised – something many countries including Ireland are doing – that more people be encouraged to work for longer and that pension systems be reformed.

“The number of retired people in Europe compared to those financing their pensions is forecast to double by 2060; the current situation is simply not sustainable. In addressing this challenge the balance between time spent in work and in retirement needs to be looked at carefully,” Mr Andor said.

He added that the choice was between poorer pensioners, higher pension contributions or more people working more and longer.

* The consultation will run for four months until mid-November and all those interested can submit their views. Go to ec.europa.eu/index_en.htm.