3.6 Port company pensions

3.5 Future funding

The National Pensions Framework, published in 2010, recognised that there are “significant problems with the typical current design for funded defined benefit schemes”, while stating that any changes to schemes remain “a matter for negotiation at scheme level between employees, unions, trustees and employers”.

The policy outlined in the 2005 Ports Policy Statement that the ports sector should receive no further Exchequer funding for infrastructure development or otherwise will be maintained.

The Government is of the view that port infrastructure projects that can demonstrate stable and strong cashflows are attractive propositions for private-sector investors and lenders in the medium to long term.

A number of both administrative and legislative measures were put in place since then to help the trustees of pension schemes respond to the funding challenge.

The Government is open to a variety of mechanisms for private-sector investment in the port sector. Mechanisms already exist for this type of investment within the context of a landlord port model, but consideration will be given on a case-by-case basis for investment in future port expansion through the possible sale of equity stakes, public-private partnership-type arrangements, build-operatetransfer arrangements, or other similar proposals.

Following a consultation process which was completed in 2011, the Pensions Act was amended in 2012 to provide for revisions to the defined benefits model. The primary change introduced a requirements for defined benefit schemes to maintain a risk reserve. This risk reserve requirement will provide a ‘buffer’ to assist schemes absorb financial shocks in the future and in this regard will enhance the protection of entitlements of scheme members. Defined benefit schemes are required to satisfy this requirement by 2023.

Additional funding opportunities may arise through the European Investment Bank, the National Pension Reserve Fund, NewERA or other State or European sources. However, any such investment will only be made on a commercial basis with a commercial return.

As is common in the broader State commercial sector, the port companies traditionally offered employees membership of defined benefit pension schemes. Many of these schemes now face funding difficulties. The port companies have taken a number of measures to address the problem. Ports whose defined benefit schemes are currently underfunded are of course actively engaged with the Pensions Board in seeking to address their funding difficulties, as provided for in legislation.

There is also the possibility that, arising from the revised TEN-T programme, there will be opportunities through the Connecting Europe Facility for those designated TEN-T ports to avail of those funding facilities.

3.6 Port company pensions

Many port companies have closed their defined benefit schemes to new members and set up defined contribution schemes for all new employees. Those port companies that have not taken this action should do so as soon as possible and ensure that future employees are offered membership of a defined contribution scheme.

Pension schemes in Ireland have experienced considerable challenges and change in recent years, particularly defined benefit schemes. The State commercial ports sector is no exception.

The downturn in the financial markets in 2008 had a significant impact on the funding position of pension schemes. The Pensions Board Annual Report 2011 stated that approximately 70% of defined benefit pension schemes had insufficient assets to meet the current funding standard. Another aspect of the changing nature of pension provision is the decline in the numbers of defined benefit pension schemes generally from just over 2,500 such schemes in 1991 to just under 1,000 schemes in 2011.

New and, indeed, a number of existing port company pension schemes require the approval of the Minister, with the consent of the Minister for Public Expenditure and Reform. The Department will work with the Department for Public Expenditure and Reform to ensure that the requisite Ministerial consent process is concluded in as timely a fashion as possible.

section 4 Ports Policy and the Planning and Development System

Image Credit: Irish Maritime Development Office

69%

AVERAGE GROSS TONNAGE

INCREASE