The Government has introduced a series of pension-related measures for protection of pension scheme members whose employers are faced with insolvency.

The Pensions Insolvency Payment Scheme

A Pensions Insolvency Payment Scheme (PIPS) is to be introduced which will be of assistance in situations where a defined benefit scheme operated by an insolvent employer is wound up in deficit. The scheme will allow trustees to pay a sum to the Exchequer to cover the cost of paying pensions for retired members as an alternative to purchasing annuities from insurance companies.   Provision of pensions under the PIPS will be on a not-for-profit basis.  Any savings made are to be put towards the pensions of members who have yet to retire, thereby reducing shortfalls in a way that is cost-neutral to the Exchequer. 

The PIPS will be overseen by the National Treasury Management Agency, and provisions governing the scheme are included in the Social Welfare and Pensions Act 2009, which was enacted on 29 April.

Changes to statutory order of priority of benefit payments

Changes to the system of priority of payments where a defined benefit scheme winds up in deficit have been introduced.  The changes mean that while pensioners will continue to get priority for their existing pensions, future increases on those pensions will not be granted until workers who have contributed to the scheme but have not yet retired receive their share of the benefits.  Announcing the change, the Minister for Social and Family Affairs, Mary Hanafin, said that the system in force prior to these changes, where existing pensioners received all their benefits with other workers who had paid into the scheme receiving only a fraction of their entitlements, was unfair.

Scheme restructuring

The Pensions Act has been amended to allow for former employees, as well as pension increases, to be included in any defined benefit scheme restructuring plans.  The aim is to share the burden amongst all scheme members and to avoid a situation where current members are the only group required to make sacrifices to secure the future of a scheme. 

Non-payment of contributions

Addressing the problem of employers who fail to pass on contributions made by employees to their pension scheme, the Social Welfare and Pensions Act 2009 contains provisions to enable this offence to be prosecuted more easily.  Harsher penalties for such offences are also introduced.