Paschal Donohoe (Dublin Central, Fine Gael)

I am pleased to have an opportunity to speak to this Bill. I will focus on why it is to be welcomed, outline some of my concerns about parts of it and conclude by making some observations about general pension provision policy in Ireland. However, I will begin by responding to points made in the Chamber earlier today about the Bill and points made elsewhere about the cost of public pensions and the need to reform the current system.

A number of claims about the Bill were made by Deputies from the Independent group. I utterly refute what they said about the Government's attitude to public pensions. They spoke about the alleged iniquity in the application of the pension levy on private pension funds. They made wild claims that the Government was attempting to steal money from people to fund the bailout of the banks. This is wrong on many counts. Two points, in particular, stand out. First, the same individuals spent many years calling for the wealth located in private pensions to be invested in job creation in Ireland. The moment the Government made an attempt to do so, they were the first to argue and vote against it. Second, I would like to remind them in response to what they said about where the money is going that when the pension levy was introduced, the Government made it clear that every cent would go into creating jobs, reducing employers' PRSI, decreasing the rate of VAT and funding a number of schemes across government designed to get people working and active again. All of the money has been used for these purposes and will be so used during the next four years.

It has been suggested the Government's policy is not doing enough to reduce the cost of current public pensions. It must be pointed out in response that those who are receiving public pensions have already seen significant reductions in the last 12 months. Public pensions of between €12,000 and €24,000 were cut by 6%; pensions up to €60,000, by 9%, and pensions of more than €60,000, by 12%. The aim of these measures which were introduced by the last Government and are still being implemented was to reduce the cost of the current pensions bill. The measures implemented are being taken into account. This point is frequently missed when people talk about what needs to be done to reduce the cost of the public pensions bill.

The Bill which is being proposed by the Government should be supported by Deputies for four reasons, some of which have been touched on by other speakers. I want to reiterate them. The first is that the Bill clearly addresses the sustainability of the cost of pension provision in the future. A point missed by those who previously spoke about the Bill is that current pension liabilities have to be met from current expenditure. The Government has to choose whether to spend money on providing accident and emergency services or special needs assistants, or meeting the State's pension obligations. The Bill seeks to bring the cost of future pension provision down. It reflects the fact that if this is to happen, people will have to work for longer and make a greater contribution to their pensions. Nobody, including those who will have to work longer to that end, wants to do this. Surely the greatest thing we should seek to avoid is getting to the point where people look forward to drawing down their pensions, only to find that sufficient money is not available to pay them. The Bill has been designed precisely to avoid this.

The second reason is that the Bill will introduce a simplified model for funding and designing public service pensions. It will do this through the establishment of two funds. People will pay into one fund to meet the cost of the pensions they will receive. The second fund they will pay into will meet the cost of the lump sums they will receive when they leave their employment. It is a far simpler model than the myriad schemes that have been available before now. This aspect of the Bill seeks to bring simplicity and clarity to how people contribute to their pensions and how they draw them down.

The third reason is that the Bill deals with an anomaly regarding top-up payments. The current practice is for the State to top up the number of pensionable years of individuals in certain professions who are on the verge of retiring to allow them to have a particular level of pension on retirement. The Bill will remove that anomaly and thereby ensure taxpayers will no longer have to assist persons who, in many cases, have earned very generous salaries across their working lives. This feature of the current system has been a source of anger. This legislation is seeking to clear up that matter.

The fourth reason is that the Bill will base pension entitlements on average salary across people's working lives, as opposed to their final salary. Unlike some Opposition speakers, I believe that is a much fairer and clearer mechanism. This change reflects the fact that people are paid different salaries at different points in their careers and pay into their pension funds at different rates at different times in their working lives. A model that calculates pensions on the basis of average earnings across the period represents a much fairer way of determining what level of pension a person will be entitled to receive.

I would like to mention two aspects of the Bill that concern me and should be teased out as it moves through the Houses. Section 19(1)(a) limits the pension that will be available to an individual to a maximum of half his or her final salary. I will explain my concerns in this regard. People are working for longer nowadays because they are healthier, because they need to in many cases, or because they want to. Towards the end of one's working career, one might decide to take a different job, perhaps on a lower salary than one received in the early or middle parts of one's career. A person in his or her mid to late 60s who is preparing to retire might choose to do a job that attracts a salary far below that he or she has earned throughout the rest of his or her career. If section 19(1)(a) is implemented, the pension such a person will draw down could be less than the contribution he or she has made to the pension fund across his or her working life. If this is not really an issue, it should be explained. If it is an anomaly, as it appears to be, it should be dealt with as the Bill moves through the House.

My second concern relates to public servants who decide not to work full-time for various reasons. They might take a career break, for example. I am worried about the consequences of such decisions for their pensions. When working parents are making decisions on child care and looking after their families, they might decide to take up the option of working part-time or not working for a period of time. When we are considering a Bill such as this, we need to consciously reflect on the pension provision we want to make for such persons at the end of their working lives. I do not think their pensions should automatically be based on their average salaries, or the number of years over which they have attained that average salary. As someone who is in that position, I think the State needs to pause, decide how it wants to deal with this issue and make adjustments, if necessary.

I will conclude by speaking about the overall pension provision issues. We need to revisit this debate. The Government needs to engage more broadly with the industry. The policy documents in regard to private pension provision in the State detail many of the objectives in regard to coverage as well as how many people are in pension schemes. Of course, as we now know, we have a growing problem of the same pension funds now being in deficit. In conclusion, the issue of pension sufficiency needs to be given the same weight of consideration as pension coverage.

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