Ms Josephine Feehily:

I thank Ms Burke.

In a nutshell, in terms of the commission's report, our key considerations led us to conclude that there is a very strong attachment in the community to the State pension. That attachment is built on certainty. Certainty is required for all sorts of reasons. It enables people to plan and to feel confident but it is also important for other aspects of their lives, including working and saving. We considered that there was a need for transparency and much better communication around the whole issue to avoid surprises and to help people to better understand the issues involved. We were very much driven by considerations of equity and fairness. An overarching conclusion was that we should move on funding first rather than on other policy levers.

Our overall conclusions related to social solidarity. The attachment of the community to the pension was evident in submissions to the commission not only from pensioners and those soon to be pensioners, but from people right across the different demographics and in work done for us among young people. It is the view of the commission that, if it is accepted that we want older people to have an adequate pension, everybody should contribute to ensuring that outcome on the basis of social solidarity. The five key elements of our conclusions and recommendations involve increasing funding through a gradual increase in PRSI, an increase in PRSI for the self-employed, broadening the PRSI base, contributions from the Exchequer and a gradual increase in the pension age. I will address those various points in the next few slides.

Based on those five levers, we put together four packages. We considered a range of options and settled on package 4. Package 4 uses all of the levers I have mentioned. With regard to extending the PRSI base, the details of this extension being set out in some detail in the presentation, we excluded its extension to social welfare payments but recommend extending the PRSI base to remove the exemptions currently in place for people aged over 66 and for supplementary pensions. We do not recommend a universal pension for a range of reasons, which I am happy to discuss if members wish. The principal reason is that the job is also located somewhere else.

I do not expect the members to be able to interpret the graph on slide 9. It gives a visual sense of what we were about. The detail is in the report. The coloured bars represent the elements of the packages. They show the contribution made to addressing the challenge under each package by the various elements, including funding, a change in the pension age and Exchequer contributions. The commission is strongly of the view that, if the Government and Parliament choose a different mix for the future policy direction, as they are absolutely entitled to, compensating measures will be needed. If it is decided to use less of a given measure and to invent a package 5 or a package 6, each of these elements will need to be addressed. Otherwise, there will be a shortfall.

On the funding side, we confirmed the pay-as-you-go approach. This is a structural piece which we think is quite important. There was some discussion in the committee's meeting last week about the notion of the Social Insurance Fund. The commission fully understands that this is not technically a fund in the sense that there are pension funds which have been put away for 20 years. It is a pay-as-you-go fund, almost like a bank account. We recommended that, within the fund, the funding and costs for pensions should be separated out to make them visible and transparent. This would mean there would be no risk of it getting confused with other demand-led schemes. We consider that an important transparency measure.

On the payment rates side, the Minister made it clear to us at our first meeting that the Government would not contemplate reducing rates, which is an obvious lever to consider when there is a funding problem. The commission would not have been inclined towards that view anyway. We did say that, since the roadmap on social inclusion, there has been a proposal in place with regard to a smoothed earnings approach to benchmarking. We asked that this be implemented because, if the rate going forward is not known, how can the sums be done? How can the shortfall be worked out? We recommended that an independent standing body be put in place to advise the Government on the rates derived from that benchmark each year. Having done that, the body should then periodically review whether that was the best benchmark in terms of pensioner poverty. We were very mindful that the risk of poverty is higher for people living alone than for a couple. We were therefore keen for the Government to continue to increase the living alone allowance at a faster rate than the basic pension, as it did in the recent budget.

With regard to calculation methods, it has been the policy of a series of Governments to move to a total contributions approach on the basis that it is fairer. However, this has not been fully implemented. The commission is basically asking for it to be implemented. If that is the Government's policy, it should implement it. Again, how can we know what the shortfall is if the denominators keep changing? There has been a policy of maintaining the old system, the yearly average approach, and allowing applicants for a pension to take the better of the two options. That is a recipe for serious cost increases. If the total contributions approach is fairer, which we believe it is, then the yearly average approach should be gradually removed. We recommend that people be allowed to calculate which approach is better for them but that, over ten years, the payment under the yearly average approach be reduced by 10% per year so that, at the end of ten years, that option will be off the table. By then, the total contributions approach will be serving a greater population and more and more people will be getting full pensions, based on the trajectory of employment. If that is not done, the grounding for calculations in respect of the pensions challenge will be shifting all of the time. The Government might as well forget about the total contributions approach because there is no point in having it as a policy while implementing something else.

We recommend that the total contributions approach become the definitive approach. This is based on 40 years or 2,080 contributions to include ten years of credited contributions and 20 years of home-caring periods. That policy change with regard to home-caring periods has been really important with regard to the point the Chair made on the increased proportion of pensions being based on the contributory rather than the non-contributory side.

We also believe that regular PRSI statements should be issued to contributors so that they are aware of how much they are paying and when their pensions are likely to kick in. If the Government accepts the recommendation to phase in pension age changes, people should be able to see that, based on current policy and so on, they are likely to get their pensions at, for example, 66.75 years of age. I am aware that the Department will issue pension contributions statements on request. We are talking about more than that. We want interpreted statements to be issued rather than just a list. Again, this comes back to the idea of better communication and no surprises.

We made a recommendation in respect of carers. I will not go into it in detail. We had very specific terms of reference to address. We came up with a solution which we think achieves the objective of making sure that there is special recognition and a special credited approach for the particular group of people for whom 20 years of caring credits are not enough when they reach pension age. We also took up a recommendation from Family Carers Ireland. It told us that it would like to see the establishment of a register of family carers. This would run across government and not be confined to pensions.

As we thought it was a good idea, we recommended that the relevant Departments might look at that, so it will be broader than the Department of Social Protection.

The retirement age on employment contracts was one of the dilemmas that arose from the pension age discussion; there was a gap. We received many submissions pointing out that people do not necessarily want to retire at 65. A European directive is also in place. It is hard work for somebody to challenge it and it requires going to the Workplace Relations Commission and so on. Equally there are people who want to retire and have the right to retire in their existing contract. Therefore, it is not as simple as changing everything. The recommendation is the legislation should allow but not compel an employee to stay in employment until the State pension age. That is designed to take care of two different groups of people.

Again, having taken account of submissions, we also felt that the social partners in government and the WRC could issue guidance to employers and workers on how to manage the transition if people want to stay at work. There are issues with recurring contracts, issues with people who may want to reduce their working hours and so on. That is a discussion which goes beyond our scope, but we felt that might be the right place for it.

We then come to the age. As members of the committee will know we recommended that the age should increase beginning in 2028 at the rate of one quarter per year reaching 67 in 2031, which is ten years' time. We then recommended it should increase by one quarter every second year reaching 68 in 2039. It is gradual and much slower. We felt the gradual approach which removes some of the cliffs and surprises was appropriate. The table displayed on your screen shows at what year the different age changes would come into being.

Many people raised the issue of flexible access with us and it is also contained in the programme for Government. We made a number of recommendations on it. One is that a person could choose to defer access up to age 70 and receive a cost-neutral increase in their pension. The second one was that a person whose insurance record was short might continue to contribute in order to establish an entitlement. The third recommendation is an option for the Government to consider done in conjunction with an age increase. The commission sees merit in recognising very long PRSI histories by including a provision whereby those who choose to retire at 65 with a very long record of 45 years may receive a full pension. The reason we say this must be done in conjunction with an age increase is that on its own it is a cost-increasing measure, which would only add to the sustainability challenge. It certainly has merit in the context of a total flexibility package where the age in general is going up.

The recommendation on the funding side of PRSI for self-employed has come in for some comment. The commission was unanimous in this. I should have said, when discussing the slide about the recommendation on age, that it was not unanimous. Ten out of the 11 members recommended the age increase; I should have made that clear. The self-employed PRSI of 4% is the best bargain anywhere for return on investment. I used to work in social welfare and I remember when it was invented everybody was very excited. I believe 4% or £102 was the number. Now 4% or €500 is the floor. The benefit range was modest. It covered State pension and widow's pension. The benefit range has been increased, but the rate has not.

To maintain equity and fairness relative to other workers, the self-employed PRSI contribution rate needs to increase. We are very clear and we suggest a steeper increase for self-employed PRSI than we do for class A, which is workers and their employers. There was a range of views in the commission about how far it should go. We settled on 10%. There is an argument for it to go to 11.05%, which is the employers' rate. There is an argument for it to go to 14%, which is the combined employer and employee rate having regard to the range of benefits. However, we will leave that to the Minister. We did not go there, but we debated it at some length.

We are also recommending an increase in the class A rate for both employers and employees. This is much more modest and does not need to kick in until after 2030. We were very mindful not to impact on the labour market by increasing it too soon and too steeply. It was not necessary in the context of package 4. Some of the other packages have a steeper and larger increase, particularly if the age is not included.

In a way, base broadening is not new. In 2014, PRSI was extended to unearned income on a social solidarity basis in the form of class K, which is payable on income over €100. It is payable on a class K solidarity basis by Members of the Houses of the Oireachtas without entitlement to benefits. Therefore, it is not a novel idea. Other than applying it to the social welfare payments themselves, on a social solidarity basis PRSI class K, which is 4% on all income currently subject to PRSI, would be payable by people over 66 and would be payable on existing supplementary pensions - occupational pensions, personal pensions and public sector pensions - by way of a contribution from existing pensioners. If the community at large wants pensions to be sustainable, adequate and certain, then the community at large ought to contribute to the balancing required.