Mr. Peter Kavanagh:

I will start by responding to Deputy O'Dea's question. Nothing is based on rumour. In the past four years, we have been working with the Department of Social Protection on a variety of issues and officials working on policy in the Department have been telling us that this is coming down the tracks and that it is necessary to re-imagine how we fund the pensions system in order that we have a national third pillar pension or national PRSA, if one will. If it does not mirror the British version, which is a soft opt-out system in which everyone is auto-enrolled and then given the choice to opt out, it will fail because it is much more difficult to get people to opt into something that will reduce the amount in their pay packet. People are unlikely to put up their hands and say they want to contribute to a system. However, if one takes €1 from people and allows them to ask for it back, they are more likely not to ask for the money back because they will understand the social benefit involved. All of the studies on how the United Kingdom built its system are widely available and I highly recommend that the joint committee pay attention to them. If we introduce a nationally sponsored third pillar pensions savings scheme that requires people to opt in, in other words, one which people must make an effort to join, I guarantee it will fail. I hope that clarifies the matter for the Deputy.

Deputy O'Dea also referred to standard rating. I direct him to Social Justice Ireland, which has done some fantastic studies on this issue. These outline exactly how standard rating pensions can be paid for using what is in essence a Danish-style universal citizen's pension, whereby anyone who has lived here legally for 35 years is allowed to claim the pension. That also addresses one of the points raised by Senator Higgins regarding a care credit. We believe strongly that a universal citizens pension would recognise care and any other way of spending those years that are normally spent in traditional employment. A universal citizens pension would negate the need for a care credit. If we do not go down the route of a universal citizens pension, a credit would be very important.

Deputy O'Dea also referred to the suspension of the age increase. It was galling that this was done without consultation with older people. The suspension affects a large number of people, particularly, as Mr. Berney pointed out, those who are in physical employment or employment of a taxing and tiring nature and who are looking forward to retirement. While a suspension would probably be welcome while the age increase is analysed, it is important to note that raising the pension age is not necessarily bad. As Senator Higgins pointed out, this should be a matter of choice. I hate to repeatedly refer to the UK but Britain has a deferral scheme in place for its first pillar state pension under which people can choose to get their pension one year later than the pension age and have a small extra dividend paid each week on the State pension. The Government saves much more than it pays out in the dividend. Allowing someone to defer the State pension for two to three years would be a good option for us and the Exchequer could save a large amount of money.

One of the problems with the State pension is that the system is hard and fast. Even when people have a contract that allows them to work beyond 66 years or, from 2021 onwards, 67 years, the additional wedge of cash they will receive often pushes them into a higher tax bracket. As a result, they will decide to retire instead because it is not economically worthwhile to continue working. In many cases, those who have the option to continue in employment do not do so. We advocate taking a more holistic approach. People between the ages of 65 and 67 need to have options to retrain. One cannot continue to carry a hod into one's 70s and there are many other things that people cannot continue to do. We fully believe in the empowerment of older people and that they can do everything that other people can do but we must be realistic about the physical demands placed on people in certain spheres of employment.

The Deputy referred to the demographic time bomb versus the demographic dividend. I direct him to some excellent research done by Professor Eamon O'Shea of the Irish centre for social gerontology in Galway.

I thank Deputy O'Dea for raising the dependency ratio because it is an issue that ticks me off no end because it is used to show how terrible matters will become when we have so many pensioners. However, the dependency ratio also includes those under the age of 16 years. A high dependency ratio, therefore, includes a large number of people who will be taxpayers in a few years. It is obvious that costs will increase as the population increases and I admit that it will cost €100 million to stand still on our pension scheme. We must fundamentally address how we run the country and whether these costs are something to be avoided or whether, philosophically, it is the case that as the population grows, we must bite the bullet and admit we need to spend more on health, education and social protection. I am not saying there is a magic bullet that will enable us to save a heap of money because we have this opportunity. However, we certainly have the opportunity to allocate revenue from tax and PRSI to the right areas and future-proof our pensions system.

I will provide some detail on the triple lock, about which Deputy John Brady, who has left the meeting, asked a question. The idea is that people will have some kind of security and are not left to wonder whether they will receive an increase of €3 or €5 in the budget every year. Instead, income is secure into the future and people are able to plan on that basis. As far as what we should link the pension level to, we should aim for an ideal of linking it to 40% of the average industrial wage as the replacement rate on the pension. The triple lock should still apply at that level.

As I stated, I favour taking a holistic approach to the pension. Deputies Brady and Mitchell have done tremendous work on trying to have the use of mandatory retirement ages in contracts abolished to give people a choice about retirement. I also commend Deputy O'Dea and some of his colleagues who have done some fantastic work on this issue and Deputies Curran and Gino Kenny who committed to the Earn Our Vote campaign during the previous election campaign. I know this because I have the pleasure of living in the Deputies' constituency. There is a great deal of support in the room for the types of issues I have raised and I hope Deputy O'Dea is not offended if I only point to the most recent Bill. The Deputy has done some sterling work on this issue.

A holistic approach should allow deferrals. The Chairman asked if a specific index should be applied to a triple lock for older people. It is important not to treat older people as others because if one takes the position that older people do not have to pay mortgages or worry about accommodation and these factors should not be in the index, one will create a major gap for older people who do have to pay rent or still have years left on their mortgage. It is better to copper-bottom, as it were, an index and allow it to affect the most vulnerable, rather than deciding not to include X, Y and Z in an index on the basis that pensioners do not pay for them. It is important to treat older people as we would treat other people. We should take a holistic view and treat a living pension in the way we would treat a living wage. I hope I have addressed the questions.