Troubled schemes will be allowed balance brunt of cuts between workers and retired members
The Government has today approved a significant change in the rules governing pensions schemes which could see cuts in the payments being made to existing pensioners from troubled schemes.
Up to now existing pensioners have been protected when defined benefit schemes get into difficulty with those not yet retired taking the full brunt of any cuts.
Minister for Social Protection Joan Burton has today got approval from the Cabinet for a new Pensions Bill providing for a change in the law to allow for a rebalancing in how limited funds are distributed from troubled schemes.
Once the Bill is passed by the Oireachtas pension fund trustees will be able to cut payments to existing pensioners when schemes are being restructured or wound up.
It will mean that more of the fund is retained for workers still in employment who have contributed to their pensions.
At present if a scheme is restructured or wound up existing pensioners retain their full pension entitlements and whatever is left over, if anything, is divided up between the contributors who have yet to retire or those who have left a company but deferred their pensions until retirement age.
The current rules are particularly hard on workers who are close to retirement as they can be left with little or nothing and do not have time to build up a new pension entitlement.
The move to change the rules comes after an unprecedented call by the Irish Congress of Trade Unions, employers’ group Ibec, the Irish Association of Pension Funds and the Society of Actuaries to change what is called the priority order in a wind-up.
Around 65,000 workers have been impacted by the closure of 400 defined benefit schemes since 2008, the three bodies said recently.
The Department of Social Protection is expected to outline further details later.