Dr. Tom McDonnell:

Yes, of course. The first point was about price indexation. The reason price indexation is not suitable is because if we index prices, we are saying a person's standard of living will never improve. I know something similar has been said about the minimum wage in recent years in the media whereby it should be linked to price increases, which is basically saying people's wages and standard of living will never improve, even in 20 years' time.

The second problem with price indexation is that, over the longer term, wages grow faster than prices. If wages did not grow faster than prices, then the living standard for workers would not improve. However, they do, slowly. Sometimes it goes backwards, like it did in the past two years, but generally it goes forwards. Therefore, if a person has his or her personal pension on a price index model that goes up by 2% every year, as the European Central Bank, ECB, would like it to be, but wages are maybe going up by 2% plus a little bit extra for productivity or whatever, maybe 3%, that 3% or 2% is actually accelerating past the person on the pension. That means they are becoming even more decoupled from the vast bulk of society in terms of their standard of living. It creates a whole class of people who are on fixed incomes because they are not able to work or they are of a certain age or whatever it might be and they are falling further and further behind. Therefore, if we wanted to keep their living standards moving along with the rest of society, we could either link it to economic growth, wages or, indeed, incomes, which include capital income as well. Those would all be reasonable options to think about. I like median wages because it is the middle person and it links it to what is happening in the labour market. It is also less volatile than the mean or average wage, for example, which can often be skewed as well by some very high salaries at the top. That is why we think price indexation is not the right way to go and wage indexation is better.

The Deputy's second point was about the two-step process if I recall.