Joan Burton (Dublin West, Labour)

These are important policy changes. Deputy Murphy has just referred to them. In this country, happily, more people are living to pension age and longer in retirement. The period for which an average pension will be paid will be greater than at present. That is a happy fact for Irish people and for older people. However, it has implications for how we structure pensions. It has significant cost implications for the future of State pension provision. For this reason, the discussions on this matter started in 2007 and were published in the National Pensions Framework in March 2010.

Even before the economic crash people were thinking about the sustainability of pension liability in Ireland. We all contribute to each other's State pensions through the tax and PRSI we pay during our working lives. The State must be able to ensure that it can continue to sustain pension payments and balance adequacy and affordability. A number of fundamental principles need to be emphasised, specifically that people need to participate in the workforce for longer and to contribute more towards their pensions if they are to achieve the income they expect or would like to have in retirement. We must provide for dignity for people and adequacy of payment in retirement. That is why facilitating an older working age was raised in a number of documents over the years during the height of the Celtic tiger period, including the Green Paper on pensions that was published in 2007. The precise details for which we are now legislating were announced when the National Pensions Framework was published in March 2010.

This is not just an issue for Ireland. About half of OECD countries are in the process of increasing pension ages or have already legislated for future increases. However, the OECD has noted that in most cases the projected increase in life expectancy is such that it will outstrip prospective pension age increases. Recently, the OECD published country specific recommendations by the EU Commission that draw attention to the need for many EU countries to increase their retirement age.

That fundamental increase arises from demographic changes. The changes happened at the same time as this enormous crisis in the Irish economy and in the economies of other European and non-European OECD member countries. People are living longer. By 2050, there will be fewer than two people of working age per older person, compared to six people of working age today. This is a bonus of improvements in health and living conditions and is to be welcomed. However, there are significant associated pension costs for the State. The number of older people is increasing. At present, 11% of the population is over 65 and we expect this to increase to between 22% and 26% between 2050 and 2060. The percentage of older people will more than double.

In contrast, over the same period the proportion of the population who are of working age is expected to decline from approximately 68% to 58%. Life expectancy is increasing. In the mid-1990s, life expectancy for men was 73 years and for women it was 78.5 years. For men and women born in 2041, it will be 86.5 years and 88.3 years respectively. State expenditure on pensions will increase from 5.5% of GDP in 2008 to almost 15% by 2050.

With regard to the statistics quoted by Deputy Collins, the reason some countries spend a higher percentage of their GDP on pensions is that they have a higher level of older people in their populations. At the moment we are blessed that we have a relatively younger population compared with many other countries, but the demographics are changing. The Irish population is ageing, not at a rate that is as fast as in some European countries, but it is still increasing. We need to take account of that issue and address it.

Deputy Higgins suggested this was not an issue for people with private pensions or public sector pensions. There are more than 100,000 workers in defined benefit schemes and not all of them are the kinds of well-off people he seems to think they are. They include people who work on the production line in Cadbury and in places like Irish Distillers and Guinness. Quite ordinary working people are in pension schemes. The fortunes of those pension schemes have been heavily affected by the various collapses and calamities that have happened in the international markets given how those pensions are invested. While that is an issue for another day, I would not like Deputy Higgins to imply that everything in the garden is rosy for people with private pensions. As Minister dealing with social welfare, I only wish that was so. I have enormous concerns for the sustainability of private pension schemes, but that is not what we are discussing now.

We need to ensure that State support for pensions is equitable and sustainable and, therefore, as provided for in this legislation and as discussed for more than ten years in this House and other seminars and discussions, White Papers, pension frameworks and so on, the State pension age will be standardised at 66 in 2014. It will increase to 67 in 2021 and to 68 in 2028.

References were made to the agreement with the IMF, EU and ECB. This commitment, which was given by the Government before the IMF came into this country and published in a pensions framework in March 2010, had nothing, as such, to do with the IMF deal. It is to do with the demographic changes in our population. However, given that this arrangement had been outlined by the previous Government in March 2010, it was an element included in the IMF programme for Ireland and it is a commitment entered into by the Government at the time of bringing the IMF into this country. One of the critical objectives for the Government and certainly for me as a politician is to see the country return to financial sovereignty and full financial independence. This is one of the elements included in the programme. We should proceed with this reform even though I accept it is a reform many people in this House find difficult.

The expenditure in 2010 on pensions for older people was just under €6 billion - a very extensive commitment by the State which is paid for by people of working age and in work when they contribute their taxes and PRSI. Owing to the change in demographics, we need a series of reforms on pension age. These reforms have been discussed at length for almost a decade. I accept, as Deputy Ó Snodaigh said, that not many people were aware of this but it has been discussed at great length and all of the parties with an interest in these issues have been consulted and invited to be involved in the discussions.

People who are no longer in work during the transition year will be in position to apply for a social welfare payment and will qualify under the normal qualification requirements for the payment. I accept what Deputy Catherine Murphy said and I made reference to it earlier. I have family members who never wanted to retire even though they worked in building and construction. We had to try to persuade them to stop working in it because there are people who genuinely enjoy working. Many people who worked on jobs initiatives in community centres find it heartbreaking at times that they have to retire at 65 when they would like to stay on for another year or more. This particularly applies to widows or widowers. During the recent general election campaign I encountered such people in my constituency. Deputy Higgins mentioned Blanchardstown and I am sure during the campaign he met people who wanted to stay on. I certainly received a significant number of representations from people who wanted to remain in schemes such as the jobs initiative. Working patterns and life patterns are changing. For the most part people are in better health and are more engaged and interested in remaining active as organisations such as Older and Bolder constantly explain. They project a positive image of older people being much more active than might have been the case ten or 20 years ago for people in the same age category, which is all positive.

Deputies Ó Snodaigh and Cowen mentioned the issue of fuel allowances. By the time these changes happen, the fuel poverty advisory group will have reported and, as I said earlier when answering parliamentary questions, we will seriously consider insulating the homes of older people - and those of everybody else - in order to reduce the requirements for expenditure on fuel. As part of the jobs initiative, the Minister, Deputy Rabbitte, has introduced a targeted scheme to improve the quality of insulation in homes, which is particularly important in old local authority estates. The Minister is anxious that local authority accommodation, particularly houses built in the 1970s and 1980s, should be insulated to a much higher standard. Many people who bought their houses have been doing that themselves, but in many estates houses, which are still being rented by the original tenants, leave much to be desired in terms of quality of windows and general insulation. I hope that by the time these changes come through we will see a significant improvement in the insulation of houses and particularly those of older people.

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