# Soc of Actuaries call that on wind up of DB scheme pensioners should not get priority



## Duke of Marmalade (2 Dec 2008)

Tonite's Prime Time featured <.....Brendan Burgess.....>.

He reiterated the Society of Actuaries call that on wind up of a DB scheme pensioners should not get priority.

As a pensioner I cry No, No, No. Those are the rules, you cannot change the rules.


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## Homer (2 Dec 2008)

*Re: Pensioners must rise against the Boss*



Duke of Marmalade said:


> Those are the rules, you cannot change the rules.


 
Interesting idea. Rules are rules and cannot be changed. If only life were that simple.

I assume from the tone of your posting that you are being somewhat tongue in cheek. Your response, whether serious or facetious, is a nice succinct distillation of the "raise the drawbridge" mentality that we are all guilty of from time to time.

I can understand the desire of pensioners to hold onto what they have, particularly as the majority of pensioners have little or no opportunity to generate additional future wealth if they were to suddenly find themselves deprived of part of their hard earned pension.

However, the way in which pension scheme assets are divided on a wind up under current legislation is clearly inequitable. In a pension scheme with retirement age 65, a 64 year old who has spent over 40 years with the company can be at risk of losing everything while a 51 year old who took early retirement last year is entitled to 100% of his benefit before a single cent is paid to the 64 year old. How can anyone consider this to be a fair division of the pension scheme assets?

Of course the Society of Actuaries finds the current system inequitable. It would be difficult to find an objective observer who does not.

Regards
Homer


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## Carramore (2 Jan 2009)

*Re: Pensioners must rise against the Boss*

I agree with Homer that the Duke was probably making the comment tongue in cheek, but there is a very serious issue here that needs to be addressed as a matter of urgency.  I would think that the "scandal" of 2009, after that of the banks in 2008, will be the wholesale failure of defined benefit pension schemes.  Continuation of the current priority list will result in untold hardship.  Continuing the example quoted by Homer, it is quite possible that the 64 year old is in a junior positon and prospectively entitled to a pension of (say) 10k a year, while the 51 year old (more realistically, say a 59 year old) was the MD, who saw the writing on the wall as far as the pension fund was concerned and decided to jump before the whole edifice collapsed.  Suppose he's on a pension of 100k a year.  On the collapse of the pension scheme, his entire 100k a year is secured (at the exorbitant(?) annuity rates charged by insurance companies) before the 64 year old active service employee gets a bean.  This is manifestly unfair, but still nothing is done about it.


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## Omega (2 Jan 2009)

*Re: Pensioners must rise against the Boss*

On this subject, what priority does a person who has a deferred pension from a DB scheme have? - e.g. a person who leaves the company before the normal retirement age? Is he/she in the same boat as the active members in the case of a wind-up, i.e. having no security at all in the event of an under-funding situation? Thanks.


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## Carramore (2 Jan 2009)

*Re: Pensioners must rise against the Boss*

I'm pretty sure that people with deferred entitlements rank behind people already on pension but ahead of active service employees.  In order to confirm if this was the case, I looked at the Trust Deed of the Scheme of which I am a member.  After stating first that the Trustees should put money aside for covering the expenses of the scheme (the hangers-on must always be looked after!) it then lists  (i) pensions to people who have already retired;  (ii) benefits for people over pension age who have not yet retired;  (iii) people under pension age with deferred entitlement (i.e. people in your category); and finally (iv) benefits for active service employees under pension age.  Interestingly, however, it doesn't explicitly state that the money has to be applied in this order, implying that it's not necessarily the case that pensioners and deferred pensioners  rank ahead of active service employees.  I can see lawyers arguing over whether benefits for categories (i) to (iv) must be secured in that order when the Trust Deed doesn't say so explicitly.  

In your case, the precise ranking depends on the wording of the Winding-Up Clause in the Trust Deed for your scheme.   The Trust Deed for my scheme may be unusual in not specifying that benefits for categories (i) to (iv) must be secured in that order.  It is also deficient (I think) in not saying anything about benefits secured by members' AVCs.  I think that those benefits are at the very top in  priority terms in most schemes.


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## rheinie (4 Jan 2009)

*Re: Soc of Actuaries call that on wind up of DB scheme pensioners should not get prio*

Perhaps some one might clarify this for me .If a person is made redundant before NRA but has 40/60ths in a DB scheme (if scheme is wound up ),is that member considered to be on a Deferred Pension.Thanks


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## Carramore (4 Jan 2009)

*Re: Soc of Actuaries call that on wind up of DB scheme pensioners should not get prio*



rheinie said:


> Perhaps some one might clarify this for me .If a person is made redundant before NRA but has 40/60ths in a DB scheme (if scheme is wound up ),is that member considered to be on a Deferred Pension.Thanks


 
Yes


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## Brendan Burgess (5 Jan 2009)

*Re: Soc of Actuaries call that on wind up of DB scheme pensioners should not get prio*

I made my call in the context of commenting on an employee from Waterford Wedgewood.  With WW gone into receivership this morning, I reckon he is in real trouble. Strangely enough, the trade union official on the same program said that the trade unions were confident that the employees would not lose their pensions. 

Brendan


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## Don_08 (5 Jan 2009)

*Re: Soc of Actuaries call that on wind up of DB scheme pensioners should not get prio*



Brendan said:


> I made my call in the context of commenting on an employee from Waterford Wedgewood. With WW gone into receivership this morning, I reckon he is in real trouble. Strangely enough, the trade union official on the same program said that the trade unions were confident that the employees would not lose their pensions.
> 
> Brendan


 
That sounds like the trade unions just trying to keep the opinion going that DB schemes are the gold star of schemes no matter what.  Unfortunately there may a few finding out this year that its not the case at all.


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## DerKaiser (21 Nov 2013)

Looks like Joan Burton has answered the call....five years on!
http://www.irishtimes.com/news/politics/pensioners-may-face-cuts-under-reform-package-1.1600542

Society of Actuaries welcome the move: 
https://web.actuaries.ie/news/13/11/government-responds-call-action

The pensions board will work with it:
http://www.pensionsboard.ie/en/News...tion_of_the_Pensions_Amendment_Bill_2013.html

Age action are concerned
[broken link removed]


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## shweeney (21 Nov 2013)

great - the pension levy thats whittling away the value of DC schemes for suckers like me gets used to prop up DB schemes.  On what basis is it fair to guarantee 12K to members of failed schemes by taking money from other workers who have no such guarantee?


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## JoeRoberts (21 Nov 2013)

It's still a bad deal for non-pensioners who should have the same right to an equal % of their earned pension as pensioners have. The injustice continues.
 On top of that, non-pensioners also suffer with an unjust transfer value calculation.
 So, not really much improvement but great sound bites for Joan Burton.


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## oysterman (22 Nov 2013)

The attempt to prioritise conflicting rights of retired/deferred/current contributors in DB schemes with looming deficits by reference to a minimum protected amount is interesting.

The political problem the government faces with this approach lies in the state funding to be provided by DC contributors through the pension levy which will be passed on to some DB recipients. Setting the protected level low (the €12k pa) minimises the negative fall-out for the government since arguing against providing people a thousand euro per month looks a bit mean-spirited.

However, is the unintended consequence of this that (save for this low amount) the pain to be borne by members in DB schemes under-water will be proportional to amount of entitlement had the scheme been fully solvent? This ignores the fact that the level of contribution to such schemes made by firms to provide for higher paid workers was far higher than that made by them to provide for their lower paid employees i.e. the funding model was hugely regressive in the first place.

Most of these funds could easily fund comfortably in excess of €12k pa to all of their members but I suspect that many of the solvency issues lie in the entitlements of the top say 25% of members, both retired and still contributing. (Have sufficient numbers been released to allow all interested parties to examine this issue? For example, have higher executives been exempted in many cases from making contributions on a proportional basis with lower earners in the same companies? Have pension enhancements been used as a golden handshake for retiring senior managers in such schemes?)

It would have taken real courage for the government to establish a principle that so-called pension rights in failing schemes are not proportional to salary but that a far more more generous target than €12k should be set by all schemes to fund for all from within their own resources. If this would require cutting the current or future entitlements of the better-off, well wouldn't that be entirely appropriate for a Labour minister to introduce?


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## TRS30 (22 Nov 2013)

oysterman said:


> Setting the protected level low (the €12k pa) minimises the negative fall-out for the government since arguing against providing people a thousand euro per month looks a bit mean-spirited.



So it is mean-spirited of me to argue when my pensions is being robbed to ensure this protected level when I have no such guarantee?


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## oysterman (25 Nov 2013)

TRS30 said:


> So it is mean-spirited of me to argue when my pensions is being robbed to ensure this protected level when I have no such guarantee?


The government is relying on such an argument looking mean-spirited. And that's why it's such a clever piece of politics: make DC contributors pay for the structural problems in DB schemes and undermine their legitimate complaint by pointing to the benefit being directed at the low end of DB members.


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