Waterford Glass

hmmm

Today's Waterford Glass workers judgement is massive news with the potential to cost this state billions. Billions upon billions bailing out broke pension schemes.
http://www.rte.ie/news/2013/0425/385516-waterford-crystal/

I don't begrudge these workers winning a case which will see their pensions paid by the taxpayer - I'd much prefer to see money going to workers than to repay the property debts of the D4 negative equity set.

What I do object to however is the incompetence of our government and public sector which has exposed the taxpayer to massive potential liabilities as a result of their inadequate implementation of European legislation. As usual the taxpayer is the one who will get saddled with extra taxes while these people continue on as if nothing has happened, all the while collecting their enormous salaries.

Tea drinker

Same as Gov, DoF, PS, Central Bank all landed us in the do-do, by failing to do the jobs I paid them to do.
Can't believe we are bailing out a private pension fund, this is some crazy stuff.

At the time 1,500 workers were told they would receive only between 18% and 28% of their full pension entitlements.

Pete_Cavan

How can the state carry the burden of guaranteeing pension funds like this? The government doesnt receive the money paid into these pension funds so why should they be responsible for it? Does this mean that these pension funds no longer carry any risk, because the state has to cover up to 90% of the money owed, and there is very little incentive for them to be properly administered? I know very little about how these pension funds are operated but maybe the workers who contribute to the scheme (perhaps through their union) should be given more control over the fund and they should carry more of the risk. How does it make sense for workers pension contributions to be piss against a wall and then for the taxpayer to pick up the bill? This would result in a huge loss of money to the economy with an enormous opportunity cost.

deise blue

You can't get into a pub in Waterford such are the celebrations.

Massive kudos to the Glass Workers & the Unite Trade Union , particularly Jimmy Kelly & Walter Cullen - all of whom refused to be browbeaten by the State.

Farmer Pudsey

This is another failure by the state. The pension situation in Ireland leaves a lot to be desired. The state over the last 20 years failed to address the pension situation in Ireland. There are two strands this.

The DB pension scandal has being on going for a long time. The main reason is the failure of the state to do two things. To change legislation so that existing and ex-workers are protected as existing legislation protects existing pensioners to the detriment of all others. To also police these schemes and make sure that when values are high when the economy is strong that companies are not allowed to stop there own contributions therefore causing a shortfall when the economy is weak.

The other issue is that the government has allowed pension funds charge high rates of commission and charges in Ireland for those that take out private pensions. It has also failed to police pension and investment companies look at Custom House Capital scandal.

It is unfortunate that the tax payer will have to pick up the bill but it will force the Government to make sure that existing companies that have schemes will sort out issue and not let them drag on.

Markcheese

Is it just pension schemes that are now underwritten by the state or is any investment used for a pension... Can think of many people who
Bought a second home as a pension... Will they get compo...
With the banks shedding staff are their pensions top heavy,
Aer Lingus and Daa pension scheme have a large shortfall .. Ah sure the state will have to pick up the tab if the scheme fails ....
Do the mistakes of the past always get dumped on current and future tax-payers...who probably won't get much of a state pension at 70, and can't afford a private pension....
Will we hit a point when we just have a nation of politicians,civil and state servants, pensioners, unemployed ect. Who will be paying in..... ??

Scortho

If I was the gov in return for this 90% that they now have to cover, I'd be removing some if not all of the tax relief on these pensions. If these pensions by this ruling have an increased risk to the state, there should be associated charges to cover that risk.
In a similar way that bank customers were charged for having their deposits guaranteed by the state, so too could these pensions.
Is it only applying to defined benefit or is it defined contributions as well?

The pension time bomb has started ticking faster.

It is rediculous though. The private sector getting bailed out by the state once again. And I'm very pro private sector.

Markcheese

I'm not begrudging the Waterford lads , yeah they got bailed out but are probably among the more deserving to be helped....
I agree that the pension system should have been reformed years ago to make it less likely to fail and more equitable when one does....
I'd definitely bring in a pension "super" tax .... Starting at say 30/ 40 grand at a low rate and hitting 90 / 95% by 100 grand .... On total income for anyone drawing a pension ....
Might not be very fair , but the whole situation we're in isn't very fair... And it'd be a hard one to avoid...

There already have been major pension reforms by the pensions board in recent years to ensure security for members of DB schemes.

We should absolutely not be bailing out private pension funds. 75% of DB schemes were in deficit according to the PB - dangerous precedent. They can get extremely expensive.

touts

This will be all the excuse Noonan will need to raid the pension pots again. We'll probably see the levy on existing pension funds extended by a year or five. Then we'll see another new levy placed on all future pension contributions (similar to the insurance levy to cover the Quinn Insurance disaster). It'll be a "temporary measure" but will still be there in 20 years. Next there will be "reform" of the tax surrounding pensions so that there will be little or no tax benefits to investing in your pension. Finally having eliminated all the carrots to invest in a pension the government will need to bring in a big stick to force people to make contributions even under unattractive conditions. That's where the concept of mandatory private pensions, that Burton has been talking about recently, comes in. Expect the conversation to also turn to "means testing for the state pension". Basically they will scare people into investing into pensions so that (a) the government don't have to provide a state pension and (b) the government can steal from those funds anytime they need to.

AlexisM

Markcheese wrote: »

Is it just pension schemes that are now underwritten by the state or is any investment used for a pension...

This particular judgement only applies where both the employer AND the DB scheme are insolvent. So there is a bit of unfairness there as many DB schemes are insolvent and will pay less than they originally said they would - but if the employer remains solvent, well that's tough (wrt pensions) on the employees/pensioners.

Scortho wrote: »

It is rediculous though. The private sector getting bailed out by the state once again. And I'm very pro private sector.

It more likely that the cost will be funded by a levy on other DB scheme rather than a taxpayer bailout. Pain in the ass for well-run, struggling DB schemes who have to contribute to a bailout caused by incompetence elsewhere as well as trying to keep their own schemes adequately funded.

Scortho

AlexisM wrote: »

This particular judgement only applies where both the employer AND the DB scheme are insolvent. So there is a bit of unfairness there as many DB schemes are insolvent and will pay less than they originally said they would - but if the employer remains solvent, well that's tough (wrt pensions) on the employees/pensioners.

It more likely that the cost will be funded by a levy on other DB scheme rather than a taxpayer bailout. Pain in the ass for well-run, struggling DB schemes who have to contribute to a bailout caused by incompetence elsewhere as well as trying to keep their own schemes adequately funded.

It'd need to be a serious levy if that's the case. The tax payer will once again be taking the hit on something which it shouldn't be.

That said, if we need a bailout loan/debt write down on these db pension schemes at least this time we have full proof that Europe forced us to do it.

carpejugulum

Another FF cock up.

Count Dooku

i.e. those who don't have DB pension now will have pay for those who have(in addition to public sector)
thanks to unions for screwing working people in interests of unionised labour aristocracy

Cody Pomeray

hmmm wrote: »

What I do object to however is the incompetence of our government and public sector which has exposed the taxpayer to massive potential liabilities as a result of their inadequate implementation of European legislation.

Eh?

The failure of the state to properly and fully transpose Directive 2008/94 is of very doubtful relevance.

What are you suggesting the relevance is?

Count Dooku

Cody Pomeray wrote: »

Eh?

The failure of the state to properly and fully transpose Directive 2008/94 is of very doubtful relevance.

yes, because directive doesn't say about full repayment without taking into account balanced economy

It is necessary to provide for the protection of employees
in the event of the insolvency of their employer and to
ensure a minimum degree of protection, in particular in
order to guarantee payment of their outstanding claims,
while taking account of the need for balanced economic
and social development in the Community

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:283:0036:0042:EN:PDF

Cody Pomeray

Count Dooku wrote: »

yes, because directive doesn't say about full repayment without taking into account balanced economy

Because of how this is phrased, I really have no idea what you mean.

Count Dooku

Cody Pomeray wrote: »

Because of how this is phrased, I really have no idea what you mean.

I mean that directive clearly stated that state must protect workers in full only if it can afford it, otherwise it should be minimum protection
Do you think that state can afford now additional 280 millions spent?

Cody Pomeray

Count Dooku wrote: »

I mean that directive clearly stated that state must protect workers in full only if it can afford it, otherwise it should be minimum protection

The ECJ says differently:

...provisions of domestic law that may lead to a guarantee of benefits under a supplementary occupational pension scheme limited to less than half of the benefits to which an employee was entitled does not fall within the definition of the word ‘protect’ used in Article 8 of Directive 80/987 ( Robins and Others , paragraph 57).

Directive 2008/94 must be interpreted as meaning that the measures adopted by Ireland following the judgment in Robins and Others do not fulfil the obligations imposed by that directive and that the economic situation of the Member State concerned does not constitute an exceptional situation capable of justifying a lower level of protection of the interests of employees as regards their entitlement to old-age benefits under a supplementary occupational pension scheme.

Do you think that state can afford now additional 280 millions spent?

I'm not interested in personal opinion and when it comes to providing employees with less than half of their entitlements, neither is the ECJ concerned with affordability in light of Directive 2008/94.

The fact is that the ECJ's decision was taken on foot of a European directive which is applicable to Irish workers regardless of the Irish Government not having properly, officially transposed it into Irish law.

Sorry but the idea that this decision arose because of a Government "inadequately implementing" a European directive is way off. The directive itself is the cause of the 'problem'.

deise blue

The ECJ ruled against the State's claim that Ireland's economic difficulties should be taken into consideration when adjudicating on the Glass worker's case.

My reading of the 2008 Insolvency Directive is that the payment of the outstanding claim is required in order to take into account the need for balanced economic & social development in the community.

The recent ruling against the State and for the Glass workers would seem to support my reading of matters.

Cody Pomeray

No the need for a balanced economic and social development does have an influence over the level of protection the state is required and does (or can) refer to the state's fiscal/ economic well-being.

However, this only kicks in at north of 50% of protection of the original entitlement, and is only one of a number of factors the High Court (Ireland) will have to take into consideration.

Sleepy

I'm beginning to think it's time we scrapped the idea of a retirement age altogether.

If one can put themselves into a position where they can afford to retire from work at any age, fair play to them but the notion that simply being 65 entitles one to a life of leisure on x% of their final/average salary etc. is simply unworkable in the modern world.

Cody Pomeray

Sleepy wrote: »

the notion that simply being 65 entitles one to a life of leisure on x% of their final/average salary etc. is simply unworkable in the modern world.

Well that's really an argument against defined benefit plans as opposed to retirement at 65, it seems to me.

Whatever about DB plans, which are seriously unpopular anyway, incentivising retirement can do an awful lot of good: it can be an important aspect of promoting economic activity, of keeping down the costs of labour, and may even encourage those whose skills and working habits are increasingly out-dated to re-allocate their time to performing the pastoral work of the economy (child minding, maybe volunteering, community activities), particularly where there is household co-residency.

Perhaps most relevant to Ireland, retirement can have the added benefit of curbing youth emigration.

There are a number of options available to Governments faced with a burdensome ageing population; personally I would rather see cash benefit cuts, incentivised private pensions and possibly even increased tax and PRSI contributions take precedence over any significant extension of the retirement age.

clear thinking

Surely the €230 a week state pension is the social protection needed if you, your bosses or your pension trustees make a haimes of things.

Why do they get rewarded at everyone elses expense? Can someone explain the justification for the state basically having to hand ove €200m to a load of punters when htey would otherwise get their €230 a week nyway?

Farmer Pudsey

clear thinking wrote: »

Surely the €230 a week state pension is the social protection needed if you, your bosses or your pension trustees make a haimes of things.

Why do they get rewarded at everyone elses expense? Can someone explain the justification for the state basically having to hand ove €200m to a load of punters when htey would otherwise get their €230 a week nyway?

Because it was the states jobs to police these systems. It was also the state job to amend legislate for the dofferent protection given to existing pensioners over existing and ex-workers. We have a pension ombudsman who had a duty of protections as well.

EU protocols were in place the government is usually very fast to enforce these if they have no cost to them but can be lax in any case where ir may cost the state money.

The State knew for a good few years that Waterford Glass had issue and failed in its dity of care to workers. These were not punters rather workers that were puting money into a penson fund with legitimate expectation that there would be at least something in there when they retired.

On hindsight and I am not one top advocate state intervention but it may have been cheaper for the state to keep Waterford Glass as a going concern. Also the state could change legistlation whereby pension funds get priority in the case of liquidation instead of banks.

Pete_Cavan

Farmer Pudsey wrote: »

Because it was the states jobs to police these systems. It was also the state job to amend legislate for the dofferent protection given to existing pensioners over existing and ex-workers. We have a pension ombudsman who had a duty of protections as well.

I understand that the state regulates the pensions industry but that should not mean they should have to compensate pension funds for their bad investments. The key issue is risk allocation and it seems that ultimately all the risk is being allocated to the state (i.e. taxpayer) while all the benefits stay with the workers - the workers get their pension even if their contributions are wasted while the state pays the bill. The state cannot be expected to approve all decisions made by the pension fund, they simply regulate the type of decisions that can be made therefore they carry a disproportionate level of risk. The state regulates many other types of investments but is not expected to underwrite them for losses. The workers, through their union, should be given more control over their pension fund and take on more of the risk. The state already provides social protection in the form of state pensions, medical cards, travel passes, etc. and will need additional funds to cover the additional protection.

Cody Pomeray

clear thinking wrote: »

Why do they get rewarded at everyone elses expense?

Not sure if you are asking for a philosophical answer or a procedural answer.

The procedural answer is that the law says so. This is an EU law which, regardless of the fact that we didn't transpose it correctly, applies in Ireland.

The philosophical answer is somewhat more difficult to elaborate on. Personally I don't find it palatable that the state should bail out all private pensions where the employer is insolvent.

Pete_Cavan wrote: »

ultimately all the risk is being allocated to the state (i.e. taxpayer) while all the benefits stay with the workers

You could say the same thing about protection of employees' wages under the insolvency legislation.

The difference here - and the reason why it's incorrect to say that all the risk is borne by the state - is that the state is only obliged to guarantee half of the insolvent company's insolvent pension. The High Court might rule that the state must pay for 51% of the original Waterford staff pension entitlements. There is no serious question of the state being asked to pay even 90% of it, llike in the UK precedent, imo.

deise blue

Fortunately for the Glass workers the procedural answer is the only one that applies.

Presumably if either the Glass workers or the State are unhappy with the adjudicated amount decided on by the High Court then such an adjudication can be appealed to the Supreme Court ?

Farmer Pudsey

Pete_Cavan wrote: »

I understand that the state regulates the pensions industry but that should not mean they should have to compensate pension funds for their bad investments. The key issue is risk allocation and it seems that ultimately all the risk is being allocated to the state (i.e. taxpayer) while all the benefits stay with the workers - the workers get their pension even if their contributions are wasted while the state pays the bill. The state cannot be expected to approve all decisions made by the pension fund, they simply regulate the type of decisions that can be made therefore they carry a disproportionate level of risk. The state regulates many other types of investments but is not expected to underwrite them for losses. The workers, through their union, should be given more control over their pension fund and take on more of the risk. The state already provides social protection in the form of state pensions, medical cards, travel passes, etc. and will need additional funds to cover the additional protection.

While the state should not be expected to carry the can the reality is that over the last 10 odd years it has failed to leglislate for issue regarding DB schemes. DB schemes are the only schemes that workers pay into that at the end of the day where there may be funds insitu thyat they will recieve nothing. It is not that these schemes have no money to give out rather that some workers are protected to the detriment of others.

This happened at WG if you were retired on pension you got all you pension, if you were one day short of retirement you got virtually nothing. Two days in the difference of your age made a huge difference to the way you were treated by the pension Trustee's who are bound by law.

Another issue is that if company directors know that therte is an issue with the fund and fail to sort it out then workers are left carrying the can. Often workers in these companies have no choice but to pay into these Pension schemes and cannot if they leave the company carry there benifits with them i.e. they have no control over the eventual outcome.

There is pension regulation EU directives and the Government ignored them

AlexisM

I suppose the High Court has to break down the financials into the three main reasons the employees ended up with such a poor % of pension available to them:
(1) the priorities issue where those already retired are prioritised over those still working,
(2) any specific mismanagement that might have been addressed by an ECJ-compliant regime and
(3) the general 'affects all/many DB schemes' issues that have put many DB schemes into deficit.

It doesn't seem fair to ask the taxpayer/other DB schemes to pay for (3). (1) is easily calculated: the WC scheme has 130M of assets and 240M of liabilities when it would up so if everyone was given equal priority, everyone should have got 54.2% of their benefits. That leaves issues with (2) for the High Court to decide what percentage is appropriate between 54% and whatever % the WC scheme might have been expected to be at in the current economic conditions if the ECJ ruling had been implemented. I can't see this being north of 80%.