Seán Barrett (Dún Laoghaire, Fine Gael)

Following on from what Deputy Costello had to say as regards people having some type of pension, I believe a system should be introduced whereby everybody contributes towards an old age pension. It is the easy to arrange. Again, we have been fiddling around with private pension funds to satisfy the failure to deal with this issue. I shall expand on that in a moment.

Everybody should have to make a PRSI payment, including the self-employed. An unemployed person should get credits, in the event, until he or she can get employment to retain his or her benefit. It is crazy that in the case of those who do not contribute the only thing they can apply for is a non-contributary old age pension. As a result of this stupid changes are being introduced here to the present approved retirement fund, ARF, system - where people cannot avail of an ARF unless they have an income of €18,000. They then have to put a lump sum into an approved minimum retirement fund, ARMF, and leave it there until they are 75. This is a crazy way of interfering with people's personal rights. None of it was mentioned in the Budget Statement. It came out of the blue and was leaked to some people in the industry.

I received this Bill on Monday, today is Wednesday and we are being asked to make major changes in respect of an ARF scheme within two days. There is no reason why this section should not be taken out and re-introduced in the finance Bill (No. 2), which I understand is under preparation within the Department of Finance. There is no loss of revenue involved, other than what was announced on budget day, so it is simple to do. I appeal to the Minister to stop messing around with these.

The then Minister for Finance, Deputy Charlie McCreevy introduced this in 1999, because the only option somebody had on retirement - given the amount of money in the fund - was either to take the benefit, if he or she was in a scheme or, if self-employed, to purchase an annuity. Annuities, by and large, die with the person, however, which means that the State gets less income tax as a result of somebody dying after the guaranteed period of five years. The funds then go back to the insurance company and no tax is paid on them. It was discovered in 1999 when this was introduced that the annuity rates were based on a male living until 81, which was totally out of order. It was a rip-off. For the first time we loosened this up and people did not like it, particularly those in the annuity market, because they were losing a great deal of revenue.

The introduction of the ARF scheme meant that the State got tax on every penny in the fund, irrespective of when a person died, because the fund would pass into his or her estate and tax would be collected. From the State's viewpoint it is far better to have people in an ARF, therefore, than in an annuity, yet the Government is now introducing changes that push people out of ARFs, and making them less attractive. Who wants to leave money in a fund until he or she is 75? Either one has a State pension or one does not.

For those who are not drawing down, the amount that they must take is increased from 3% to 5%. What is the reason for that? Very little extra tax will be collected but for those on small pensions the funds will run out quicker than normal. The whole idea of the ARF system was to make it flexible for people because, for example, people who retire sometimes might have children in full-time education or children getting married and therefore need more money in the early years of retirement as against what is required in the latter years. This gave flexibility, so that somebody could take more in the first couple of years than in the last couple of years of retirement. That flexibility is not available in annuities. I do not understand why these changes are being rushed in when there is no need for them, with the effect of upsetting this whole market.

On the question of pension funds, it is far more important to encourage people to save. We should be trying to make certain, as far as possible, within the restrictions being imposed by Ireland's membership of the European Union, to make it attractive for those funds to be invested in this country, and not outside. To do this a small levy should be imposed on such funds on an annual basis. Fine Gael, in its budget submission, recommended that 0.5% of a fund should be taken by the State. These are changes that could be made, while at the same time protecting the whole pensions industry.

In case anybody believes I have a vested interest, I was an insurance broker, but am no longer involved in that area although I happen to have a knowledge of it. What is being displayed here shows that those who are imposing these changes do not have a clue what they are doing. I ask that members of the pensions industry be into a committee of the Oireachtas where we can debate all these issues. It is for these reasons I am upset this will not get proper attention during our consideration of this Bill. I appeal to the Minister to remove this measure from the Bill and leave it until the finance (No. 2) Bill.

A large volume of money could be used for investment to create jobs. The Minister can tax it but he should not start fiddling with what people can put into their pension fund. In any case, they will pay tax when money is coming out. The idea of pensions is that one receives tax relief when putting money in and one pays tax when it is taken out. The only thing the State must worry about is the amount of money that can be taken in a lump sum. This section contains that point. I do not have great difficulty with it. I have a slight difficulty with the amounts chosen because there can be a conflict between a pension fund that is part of a pension scheme where the employee can take 1.5 times the final salary and how this compares with the lump sum under an approved retirement fund.

The Department of Social Protection was charging PRSI on payments from approved retirement funds and insists these are investment funds. That is incorrect; they are the same as an annuity and one should not pay PRSI on them. Those who are retired should not pay PRSI. The Department has now come round to the idea that one should not pay PRSI beyond the age of 66. There is no reason why they were charging PRSI because no benefit is given to the person paying PRSI.

As a result of changes in the budget, those receiving the approved retirement funds are being taxed at the January 2011 rates and are also being charged the universal social charge when the payment is from the 2010 fund. I ask the Minister of State to contact his officials to find out why one can tax someone from payments in 2010 at rates included in the Finance Bill 2011. Insurance companies tell me they are obliged to do so by the Revenue Commissioners. I fail to understand why we should have to pay tax at the new rate when the tax did not apply to the moneys earned in the previous year. This should be checked out. I appeal to the Minister of State to leave this section until the finance (No. 2) Bill.

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