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Social Protection Minister Joan Burton has today secured Government approval for a package of measures aimed at tackling difficulties in Defined Benefit pension schemes.

The package addresses the situation where an underfunded Defined Benefit pension scheme winds up in deficit or elects to restructure. It can arise at present that pensioners receive all or almost all the pension fund and the members who have contributed but not retired receive considerably less than expected.

These measures will ensure a more equal distribution of assets in an underfunded Defined Benefit scheme when an insolvency/restructuring occurs. The measures will apply only in a limited set of circumstances, meaning the potential number of schemes affected will be small.

The typical pensioner in such a scenario would have a State contributory pension of €12,000 in addition to their occupational pension, meaning they would therefore receive a retirement income of up to €24,000. Those pensioners receiving occupational benefits in excess of €12,000 will still retain a significant degree of prioritisation for receipt of benefits.

In the case of both a company and scheme being insolvent, the Government will guarantee that existing pensions will be protected to a level of 50% with pensions of €12,000 or less being 100% protected. Minister Burton has secured agreement with Finance Minister Michael Noonan to use funds from the Pension Levy to meet any obligations on the State that may occur arising from such double insolvencies.

Minister Burton said:

The measures I am announcing today are the result of very careful consideration of the issues affecting Defined Benefit pension schemes. These measures are about fairness in the first instance – to ensure that in the circumstances where there is an insolvency or restructuring of a Defined Benefit scheme, workers receive a greater share of their pension benefits to which they are contributing, while pensioners are protected to a high level to ensure adequate income in retirement.

Crucially, the State pension is totally unaffected by today’s measures. I have fully protected the State pension since becoming Minister in light of its critical importance to older people. But not every employer has been in a situation to protect the Defined Benefit schemes they put in place for their workers. The State could not be expected to solve employers’ funding problems given the financial implications it would have for taxpayers. However, the State can intervene to ensure a fairer deal for workers and sufficient protection for pensioners while allowing employers to get to grips with their pension problems. That is the purpose of this Bill.