Dr. Barra Roantree:

I will come in on that question. I am part of a team at the ESRI that has done some research on a few issues related to that. One aspect is the adequacy of income in retirement. An issue we have highlighted is that while, on average, pensioners do very well relative to the rest of the population and their rate of poverty is less than the general population, in particular children, that is very sensitive to the rate of the State pension. The key determinant is the level of the State pension to the extent that if we keep hold of earnings growth in the economy, rates of poverty among pensioners are not going to increase, but to the extent that it falls behind, they will.

One particular area that we point to is the issue with pensioners living alone, who maybe do not get as much attention as they should. They are the group of pensioners that are more likely to have inadequate income in retirement and to fall below the poverty line, however it is measured. We point to ways of ensuring those people have adequate income in retirement, for example, ensuring the living alone allowance is increased as it can be very well targeted towards the group of pensioners that are at risk of poverty.

The Deputy raised a good point on the importance of stability in the pension system. These are decisions people are taking over a long period of time and it is important there is a clear system and that that system is not changing every few years because, otherwise, it gets very hard to save and to encourage people to save. The Deputy raises an important point about certainty. However, as we both set out in our opening statements, there are some aspects of the pensions and taxation system that are not particularly coherent, sensible or fair, however we look at it. To me, the one that stands out from that point of view is the tax-free lump sum, which primarily benefits very high earners. To get a €200,000 tax-free lump sum, people have to have a very generous defined benefit pension and have to have been on a high level of earnings throughout. I would not be be particularly worried about anyone who might be affected by reducing that from €200,000 to, for example, €100,000 being at risk of having inadequate income in retirement. These are people near the very top of the income distribution, both in retirement and through their working lives.

I take the Deputy's point about the importance of having stability in the pensions and tax system and, from that point of view, the Commission on Pensions is very welcome and, hopefully, will set out a roadmap there will be consensus around and that maybe we can move towards. To follow up on the last part of the Deputy's question, we can do this in a way which ensures there is the prospect of a pension for those of us who might be retiring somewhat later than is the case now, in the later decades of the 21st century. We have a pay-as-you-go pension system. It is not pre-funded and it comes out of the State Exchequer. There is a real issue in regard to intergenerational inequality and this is something I have published research on at the ESRI. We are already in a position where many young adults are experiencing lower wage growth than their parents would have, and there is a real issue, particularly when this is combined with the issue of housing, about ensuring there is intergenerational fairness, as well as fairness across other dimensions. The issue the Deputy raises about ensuring a sustainable pension system is important in terms of addressing those intergenerational inequalities as well.