Mr. Ciarán Phelan:

No problem.

Like Deputies and Senators, our members are at the forefront in dealing with the financial problems experienced by citizens. I refer to flood damage, mortgage arrears and the impact of the pension crisis. Our members advise on 90% of private pensions in Ireland which, we believe, allows us to speak with some authority on the current state of private sector pension provision.

It is not an exaggeration to say pension schemes in Ireland are in crisis. We are all aware that we face a significant challenge as our demographics change and the population ages. Given current and expected Exchequer returns, it is obvious that pillar 1 social protection pension payments are unsustainable at current levels and will inevitably reduce as a percentage of pre-retirement income. In the light of this reality, it is imperative that private funding of pillar 2 and 3 pensions be increased in order to cover the deficit and provide a sustainable, as opposed to subsistence, income for citizens in retirement. The latter, in the light of increases in longevity, could last 25 years or more, which is half a working life. Government policy to date has been inadequate in addressing current and future crises. Defined benefit schemes are terminal and employees are faced with the stark reality that promises made as part of their employment contracts and in lieu of salary will not be realised. Government action on caps and levies has also had the impact of scaring people away from making sufficient contributions to pension schemes to ensure adequate provision when they reach retirement age.

The self-employed have been completely ignored in the pension debate to date. The costs regularly mentioned in Dáil Éireann attaching to pension reliefs are grossly exaggerated and, in our opinion, have led to flawed decision making. Tax reliefs do not cost this State €2.9 billion.
We have had the NPPI report in the 1990s, the Green Paper on Pensions in the 2000s and the OECD report last year. The IBA would suggest we have ample reports and that serious action that encourages and makes pension contributions affordable is needed. The OECD report recommends mandatory or soft mandatory pension contributions which we would agree will address the coverage rates in Ireland, moving the private sector from approximately 40% to close to 100%. However, it will not address the adequacy issue - an important element overlooked in most debates on an Irish solution to pension provisioning.
The average pension fund in Ireland in the private sector is €120,000. On current annuity rates, it provides a pension of around €6,000 per annum, which when coupled with the State pension will provide an income on reaching the age of 68 of €18,000. A public servant on €50,000 per annum at retirement will retire on a pension of €25,000, excluding the ex gratiapayment of €75,000. In the private sector this would require a fund of more than €500,000. The Government needs to start educating citizens regarding the funding levels required to deliver a sustainable pension and to provide sufficient encouragement by way of incentives for people to make affordable reasonable contributions.
However, to date Government has cut reliefs, capped contributions, capped pension pots and imposed a discriminatory levy that only applies to funded pension schemes and hits the more prudent hardest. Over the course of the levy, in excess of €2 billion will be taken from the pension savings of the citizens of Ireland, and I hasten to add that if a similar amount was taken from people's deposit savings, there would be considerable anarchy. While we readily acknowledge the difficult economic circumstances in which the country found itself, and the work of the Government to right the situation, it should acknowledge the contribution made by individuals pension funds to the recovery, and allowance should be made by way of tax credit on maturity of these funds to bring equality back into the system.
As an association that represents the majority of advisers in the pensions industry, we want to make a positive contribution to the solution of the impending crisis. My colleague, Mr. Aidan McLoughlin, will discuss some plausible and possible solutions to encourage greater pension savings.