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News : Irish Economy Last Updated: Nov 20, 2013 - 9:05 AM

Retirees to share risk when Irish pension funds wound-up/restructured
By Finfacts Team
Nov 20, 2013 - 9:03 AM

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Joan Burton, minister for social protection, announced on Tuesday plans for retirees to share the risk with the employed when an underfunded Defined Benefit (guaranteed payout) pension scheme is wound-up or restructured.

At present pensioners can receive all or almost all the pension fund and the members who have contributed but not retired, receive considerably less than expected.

The new provisions will apply to 80,000-85,000 people who are still members of defined-benefit funds. It will not apply retrospectively to schemes wound-up.

Where the scheme is insolvent and where schemes are being restructured, trustees will have to ensure pensioners get €12,000. Any reductions over that amount will be limited to 10% for pensions up to €60,000.

Where both the scheme and the related employer are insolvent, the new rules will allow trustees to reduce the pension in half, but only for amounts over €12,000. In this situation, a person getting €20,000 a year from a scheme could lose up to €4,000.

Burton said Michael Noonan, finance minister, has agreed to provide funds from the pension levy to meet any obligations on the State that may occur arising from such double insolvencies.

Maeve McElwee, Ibec head of industrial relations and human resources, said: "The current rules are desperately unfair. If a scheme collapses, a person one day short of retirement can have their entire pension wiped out, while a person who has just retired retains 100% of their benefits. The proposed change will ensure that the assets of insolvent schemes are distributed more fairly. Existing pensioners will still have considerably more protection, but people of working age will receive a greater proportion of the scheme’s assets."

Finfacts: Half of Ireland's workforce have no occupational pension coverage

More details of new protection here.

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