Pensions and Retirement Lump Sums

I very much appreciate the opportunity to speak on this motion. Like Deputy Keating I find myself in agreement with some of that. Last week I was gobsmacked to hear the level of pensions being paid to the CEOs in the covered banks. I presume similar pro-rata pensions are paid to other senior managers in those banks. It would be very difficult to articulate the incredulity and outrage felt by people when that news was received, particularly by the general working population who have all to some degree suffered erosions of their own pensions and in some cases the complete vaporisation of their pensions. If annual pensions of in excess of €500,000 were being paid to bank executives who performed well, who behaved prudently and soberly and in line with well-established prudential practice, and maintained statutory reserve and balanced portfolios, I would and public opinion would still consider those pensions to be excessive, unnecessarily generous and contrary to the best interests of the shareholders of the banks. Our top bankers were none of these things. They were not successful prudent or sober. They were reckless, foolhardy and cavalier. Against that background, pensions at that kind of level are nothing short of obscene. It is now obvious that at least some of the money was provided by the taxpayers when the State rescued and recapitalised banks they had destroyed.

What has happened is egregious beyond words. I acknowledge that the CEO of AIB has, following a letter appealing to his better judgment, responded and reduced his pension to a mere €250,000 a year. I wonder to what extent a letter appealing to people’s better judgement will be successful given that we are dealing with people whose sense of entitlement has survived their ruination of the country, survived the vaporisation of pensions and the future security of their own shareholders, and survived the wiping out of the pension pots of ordinary private sector workers who contributed all their working lives to very modest pension funds. We cannot depend on a voluntary response and need to go further and find a way to impose a response.

I urge the Government to look again at the advice of the Attorney General. If we are told contracts cannot be broken, we need to ascertain if there is another way of dealing with this problem. Throughout the country in businesses that have not been bailed out by the taxpayer contracts are being broken. Businesses fail, jobs disappear and pensions disappear. When the contract is gone, as businesses struggle, salary contracts are being broken up. As Deputies and public servants, we know all those contracts relating to our pay, conditions, pensions and increments were broken and thrown away. We did not like it, but we understand when the country is broke and the money is not there we all need to cut our cloth. What is it about that equation that bankers do not understand?

As the banks failed and went to the wall, all bets are off as far as I am concerned. Of course, we all must do our best to sustain the pension funds of ordinary rank and file workers in banks. However, I find it very hard to believe that the taxpayer in rescuing banks has any obligation through historical contractual obligations to shore up inflated pensions.

I understand perfectly the argument about property rights, but last year a levy was introduced on all private sector pensions of ordinary hard-pressed workers. There was no talk about property rights at that stage, nor should there be. It was perfectly legitimate to introduce the levy. We did not like it; nobody liked it, but people recognised, maybe reluctantly, that if it was going to save some jobs by allowing a reduction in VAT and PRSI, it was worth doing to try and save jobs for young people who have suffered far more from the financial and banking crisis than pensioners have. While it was accepted, it is a step too far to expect people to subvent inflated pensions of bankers and indeed of some of those in commercial semi-State bodies. In fairness the Government has tried to deal with reducing pay and pensions from its first day in office, in particular with the imposition of a 20% levy on pensions of more than €100,000 for public sector workers. However, the notion of pensions linked to the pay of current holders of the same office is unsustainable. I know the new arrangements will change that and while it will not change immediately at least it will kick in when the real demographic burden hits in the middle of this century.

I applaud the Government’s many significant reforms and I do not accept that there have been no reforms. The public do not know about many of them and even if they knew about them I suspect they would probably believe they do not go far enough. In a country that has been brought to its knees, it is absolutely understandable that there would be great resentment that the public purse should continue to subvent inflated pensions. I again urge the Government to find a way of overcoming the legal or contractual obstacles that seem to be in the way of bringing some sort of equity into the situation.