Clare Daly (Dublin North, Socialist Party)

It is not possible to examine the issue of public sector pensions in isolation from the attacks that have already taken place on the State pension and the crisis in the private pension industry. I remind the House of the criminal decision taken earlier this year to increase the State pensionable age to 68. Approximately 11,000 people who will reach the age of 65 in 2014 will have to work an additional year to avail of the State pension. People will have to work until they are 70 in areas like cleaning, catering and construction to get the State pension.

We must also acknowledge the crisis in the private pension industry in light of the reports that hit the headlines this week. Retirement funds are essentially being defrauded by pension operators. Workers who were employed for 40 years in companies that would have been deemed to be on the "A" list, such as Waterford Crystal, are facing pensions of €100 per week. They would have been better off if they had left their contributions under the mattress. In the semi-State sector, pension schemes like the Irish airline superannuation scheme, which I paid into, are facing deficits of hundreds of millions of euro. Workers continue to pump millions of euro down a black hole in schemes from which they will never receive benefits.

This crisis in the private sector does not arise because people are living longer nor is it the case that we cannot afford to offer them a decent retirement. It is the result of the under funding and mismanagement of schemes by employers and the race to the bottom among semi-State companies which are outsourcing positions to non-pensionable jobs. It is lunacy that pension provisions continue to be given to the private sector to manage.

Contrary to the Government's statements on this legislation, it will not deal with the pay of those on the fat cat salaries at the top. We have no problem with those at the top levels paying more but this fudges the intention behind this Bill, which is to yellow pack future recruits to the public sector by giving them inferior pensions. Public sector workers will not enjoy a big pot of gold at the end of the rainbow without contributing anything. Since 1995 the State pension has been integrated with the public sector pension, which means workers are contributing through PRSI, but in reality we should be subtracting €12,000 for each of those public service pensions to get a true sense of what the public sector workers are getting in return for the substantial contributions they are making. I will outline a case study in that regard. A person who joins the Civil Service as a clerical officer at the age of 25 might be paid approximately €22,000. If that person works his or her way up the scale to executive officer level, they might be on a salary of approximately €48,000 after about 25 years. If they have made 40 years of contributions into a pension scheme, they will be paid a pension of approximately half of their final salary, approximately €23,500 per annum. We must bear in mind that the contributory State pension of €12,000 is integrated into that. Therefore, the pension the person will be getting on foot of the contributions they have funded themselves will be approximately €11,500. It is hardly a massive pension.

The prospect of lengthening the working life to 68, with a retirement cap of 70, has been suggested. It is lunacy to force people to work longer and thereby deny young people coming out of college the right to employment. It has been calculated that for every nine public servants who will work until the age of 70, the equivalent of one new public sector job will be lost. It is absolute madness. The proposal to ask public servants to work until the age of 66, then the age of 68 and finally the age of 70, while maintaining the position that their pension contributions are reckonable for a maximum of 40 years, is daylight robbery. Someone who joined the Civil Service at the age of 21 - he or she might have become an usher in here - might not retire until the age of 68. In the case of such a person, seven years of pension contributions will be reckoned for nothing. They will not get the value of that money back at all. It is an attempt to legalise daylight robbery. Current employees who started to work in the public service after 2004 could be working for up to four years without getting any benefit back from their contributions. As has been said, it is conceivable that people will end up paying more into these schemes than they will get back.

I disagree with the move from basing the calculation on final salary to basing it on career average salary. That will hit people by taking money from their pockets. The Minister for Public Expenditure and Reform, Deputy Howlin, has packaged it by saying it is not a cause of worry because it will have more of an effect on higher earners. That does not stand up to statistical evaluation. Most people who slowly rise through the ranks will end up taking a hit because of this measure. Regardless of how it is dressed up, it is undoubtedly an attack on the living standards of retired public servants.

No one is opposed to workers contributing to their pensions as long as the money in question is used to support people during their retirement years and to look after elderly people in general. It is understandable that people who have been hit by extra taxes believe it is lunacy to raid the pension fund to bail out bankers and to fund speculation and so on. It is an indictment of the present system that it somehow sees the fact that people are living longer as a bad thing to be decried by society. It is a great achievement for humankind that people often have 20 years after their working lives to do things they never dreamed possible. It should not be a problem at a time when massive untapped wealth is not being invested by those who do not feel they can make a profit on it. At a time when millions of people are unemployed, we are forcing people to work until the age of 70 or beyond. It shows how dysfunctional the present economic system is.

The real con is that the Government is not looking at the pensions problem holistically. It seems to be under the illusion that it is possible to solve it based on the private sector. It is just not going to happen. Deputy Ó Snodaigh made the point that Irish pension funds are being invested abroad. He is absolutely correct. Almost €100 billion from such funds has been invested outside this country. With proper Government intervention, those funds could be invested in Ireland. These moneys could be used to get people back to work and get the economy going. It would not be a question of raiding pension funds as the Government has done. It would be a question of investing moneys securely, getting a return on that investment and protecting the pension scheme. The Government could leverage that by saying that if these moneys are not invested at home, some of the massive tax concessions that are given to pension funds will be reconsidered.

We are looking at this completely the wrong way around. We need a radical overhaul of the pensions system in its entirety. A similar pensions scheme should apply across the board to public and private sector workers. Such a scheme has been advocated by economists from Trinity College and TASC. They have suggested that rather than going down the ridiculous road that is being pursued at the moment, we should universalise the social welfare pension in a way that would provide a guaranteed income to all older people. They believe the appropriate level would be 40% of average industrial earnings at the age of 65. They propose that in tandem with such a measure, a new social insurance retirement fund should be established as an alternative to continuing to pour money into the black hole of pension funds. The fund would cater for workers by giving them an earnings related income.

Such a mandatory defined benefit scheme would operate alongside the universal State pension scheme. Contributions could be guaranteed at 50% of the final wage or salary, up to a specified minimum. That would be a far better system and would deliver far better returns. It could be facilitated by rejigging the existing system and removing many of the supports that are given to private pension funds. For example, the ceilings on earnings for tax relief purposes could be reduced. If the Government were serious about making a real contribution to dealing with the pensions issue, this is what it would be doing. It would not be scapegoating public sector workers in this regard. I will conclude by saying the unions have been incredibly quiet on these issues. They have let their members down. This battle will be taken into the next Stage of the debate on this Bill.

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