Pension problems

THE SHARP increase in the caseload of Pensions Ombudsman Paul Kenny tells its own tale of a changed economic climate and of more…

THE SHARP increase in the caseload of Pensions Ombudsman Paul Kenny tells its own tale of a changed economic climate and of more challenging times. In 2008, complaints to his office by the public rose 43 per cent on the previous year.

More than one in 10 of these cases concerned the building industry and involved mainly small construction companies. In that sector, many of the complaints made by building workers were, in effect, allegations of theft by their employers. A high proportion of complainants were from Eastern Europe. And these workers may have been less familiar with the language, less aware of their legal rights and entitlements in Ireland, and therefore more vulnerable to exploitation.

Some employers made pension deductions from their employees’ wages but failed to pass the payments on to the pension company. Employees were, in consequence, left without the pension benefits they had paid to secure. In many instances, it seems, employers used these pension deductions as a source of temporary cashflow to fund their businesses. Mr Kenny points out: “These funds are the exclusive property of the employees and are not available to a company for any purpose”.

Pensions are a form of deferred wages. Pension contributions made during a lifetime of work are later used to pay for that worker’s income in retirement. These contributions also give workers other forms of protection, including death-in-service benefits and sickness cover. In the construction industry, pension provision ensures that a mobile workforce has a measure of financial security. That is what the Construction Workers’ Pension Scheme is designed to achieve – always assuming full compliance by employers.

READ MORE

In the case of a few small building companies, however, that compliance is in question. Mr Kenny has identified the problem and is determined to prosecute offenders where his efforts at mediation have failed. In the past year the ombudsman has secured criminal convictions where employers have refused to produce payroll information and ignored court orders to do so. The punishment, however, may not adequately fit the crime. When the ombudsman investigates whether an employer has remitted pension contributions to the pension fund, a maximum fine of €5,000 and costs for failure to produce payroll records is hardly a sufficient deterrent. And the speed of the economic downturn, as well as the collapse of the construction industry, suggests these problems will not go away.