Pension changes mean levy may last indefinitely

Ireland’s levy on pensions may last indefinitely in the light of the Government decision to change the operation of employees’ defined benefit schemes.

Joan Burton, the social protection minister, announced on Tuesday that pensioners who are members of insolvent schemes will no longer be automatically entitled to have their income fully protected.

According to Age Action Ireland, which yesterday expressed grave concerns about the changes, the pensions levy — designed to operate from 2011 to 2014 — is likely to be extended for many years to come.

“Under the terms of the Pensions Amendment Bill 2013, the levy has been given a specific purpose as a method of compensation for schemes in difficulty, so it is likely to be extended indefinitely,” said Eamon Timmins, the organisation’s head of advocacy. He described the levy as a “burden and another form of taxation of people’s savings”.

Age Action is also worried about the impact the changes will have on pensioners on lower incomes.

“One of the problems with ageing in Ireland is the whole problem of certainty,” said Mr Timmins.

“Pensioners could face huge cuts in their income.

“They have retired and thought they had a defined income for the rest of their lives. That will change under this proposed legislation in cases where their pension fund is insolvent. We are also concerned with those approaching retirement. In both cases, these people have little scope to recover if their expected pension payment changes dramatically.”

The new rules will see those on pensions between €12,000 and €60,000 a year lose 10%, while those on pensions of over €60,000 will lose 20%.

Currently, if a scheme is wound up, existing pensioners continue to get their full pension but those who are employees or deferred members may receive nothing. “We do not believe that this level is sufficiently high, especially given that not everyone in a defined benefit pension scheme may be entitled to the state contributory pension. Alone, €12,000 per annum would leave people on the brink of poverty,” said Mr Timmins.

The changes announced by Ms Burton received a cautious welcome from the trade union Unite which said it offered no comfort to former Waterford Crystal workers who had earlier won a European Court of Justice case on the issue against the Government.

The union also expressed concern at the Government’s “minimalist approach” to complying with the EU Insolvency Directive.

Unite said the Government had failed to make any proposals to resolve the Waterford Crystal pensions case, and that former workers were still being forced to await the verdict of the Irish courts despite the European Court of Justice having ruled unequivocally that they were entitled to pension protection under the terms of the directive.

Commenting, regional secretary Jimmy Kelly said: “While Unite welcomes the fact that, under the proposed legislation, members of [defined benefit] schemes will have some protection... neither the European Court of Justice, nor any other court since, has answered the more difficult question of what percentage is sufficient. Unite is particularly concerned that this minimum level of protection is apparently to be achieved by cutting the accrued benefits of future and existing retirees.”

Ms Burton yesterday defended the changes, saying the new rules are about delivering fairness.