The Government plans to introduce new legislation by the end of the year, which amongst other measures allows individuals yet to retire to make additional payments into their pensions.
Whilst the legislation hopes to share out losses between those currently contributing to their pension and those already taking income, the new rules stipulate that existing pension payments can be reduced in schemes which are facing bankruptcy or undergoing restructuring.
This is the first time Ireland’s current pensioners have been negatively affected by legislation, and many have expressed outrage over the penalisation of a minority who cannot make up the lost income.
Up until now, private pensions were fully protected in the majority of cases.
This was the case even if the schemes had to slash predicted pensions benefits for those still in employment.
Yet now, Social Protection Minister Joan Burton is introducing new legislation which will allow trustees of defined-benefit schemes to spread the losses in schemes amongst both current and future retirees.
It pledges workers 100% of their defined benefit pension with an upper limit threshold of EUR 12,000 a year, but an individual may lose money if they are to receive more than that.
This is because the new legislation allows cuts for payments coming out of troubled defined benefit schemes.
Currently, about 50% of these schemes are in deficit, leaving between 50,000 to 85,000 people are vulnerable.
The Irish Brokers’ Association (IBA) has said as the measures are not retrospective, the change comes too late for many – with experts suggesting up to 50,000 may be affected after their schemes went bust.
“Thousands of people that have been paying into pensions could be left with very small pensions” Ciarian Phelan, IBA’s Chief Executive said, “because new pension guidelines introduced by the Government contain no retrospective elements and only seek to rescue those where double insolvency applies.”
Willie O’Dea of Fianna Fail – Ireland’s Republican Party – accused Social Protection Minister Joan Burton of dithering, which led to the individuals already missing out.
There will be no changes to the state pension.