Tom Barry (Cork East, Fine Gael)

I welcome the opportunity to speak on this important Bill, which will address the pension shortfall that will arise if this situation is allowed to go unchecked in the next 20 to 30 years. The growing cost of public sector pensions, currently €3 billion a year, is a matter of huge concern which needs to be dealt with immediately. The Irish people want to see reform and real change and, most of all, they want to see an equitable and fair society.

The spectre of the previous Financial Regulator, who sat on his hands and received an outlandish golden handshake on his retirement after falling asleep at the wheel, greatly annoyed the Irish people. However, a similar situation surfaced recently when the Government Secretary General retired on a retirement package of €713,000. This highlighted the fact this whole area needs immediate and direct intervention. It makes it even more difficult to stomach given this particular civil servant was sitting at the Cabinet table for almost a decade and directly contributed to the advice which almost bankrupted this country. It is strange and bizarre that he could be rewarded for doing so.

We all talk of how wrong this situation is, rightly so. For the record, however, I wrote to the outgoing Secretary General last month outlining that I felt the lump sum payment he received was wrong and that it should be returned immediately. I did not comment on his pension as I feel everybody is entitled to a pension as it relates to the work that person has done over a lifetime. However, I feel the method of calculation of the pension was wrong, which is what is being rectified in the Bill today. I did not want the opportunity to arise where this individual could say no one formally asked him to return those moneys. I have not received a reply, which is quite understandable as the only reply that is necessary is for those moneys to be returned.

It is very important to deal with the situation which was and is occurring, where lump sum payments and pensions received by certain people far outstrip what this country can afford. It is important for the Government that these pension payments to public servants, including TDs, are seen to be fair and equitable.

When we think back on the circumstances that combined to create this unsustainable situation, benchmarking stands out. Benchmarking was, in effect, a ploy where the sole objective was to buy votes and elections at a cost of €1 billion per year to the taxpayer. Benchmarking was also inequitable within the public sector as higher grades got a special deal that more or less doubled their benchmarking allocation - one could almost say they were paying themselves. The inequality within the public sector saw top earners on €250,000 while a starting grade began at approximately €20,000 - a tenfold differential, up from a sixfold deferential some years previously.

Senior public servants wanted to be benchmarked against bankers, whose foundations, as we well know, were built on quicksand. It has to be noted that no method was available for negative benchmarking. While we are all aware of the comment that funds can go down as well as up, benchmarking was allowed to go only in one direction. Negative benchmarking has occurred in the agricultural sector, in which I am involved, for many years. While people of course do not like to see a reduction in their incomes, previous Governments were very remiss in the way in which, and the cavalier attitude with which, they encouraged people to spend. At no point did I hear anyone say, "We are going to give extra money now, as things are going relatively well, but we encourage you to be prudent". Quite the opposite. The attitude was that the party was still going on and there would be a soft landing. There are plenty of backsides in this country that have bruises on them from landing on a hard floor.

One last absurd situation which occurred in benchmarking was the fact that public service pensions were also benchmarked. Benchmarking was meant to relate to extra productivity. How could one look for productivity from someone who was retired? It does not make sense.

The Bill is based on career earnings rather than what a person is earning on retirement so savings will be made in this regard, which is good. In addition, for the likes of myself, the pension age will be increased to 68 years of age - if I manage to reach that point - which will contribute to further savings. The Bill could and should be extended even further, and should apply to existing workers who are not yet retired. This is the situation in the UK but, apparently, the Croke Park Agreement does not allow such a situation to occur. I will ask one simple question to anyone who is working today and contributing towards a pension: is it better to know you will receive slightly less than you are currently being promised, but you are certain of your money, than to be promised a lot of money and be told at a later date that it is not deliverable? There is a value in certainty. People can plan if they have certainty and know the pensions they will get are realistic and solid.

The public service pension scheme is unfunded and the pension reserve funds, as we know, are virtually gone. It is important we have a discussion regarding current pensions. This should be entered into now, in a sensible fashion, rather than waiting to deal with it in a reactionary fashion when problems arise.

We have seen recently how the pension industry acted in a cavalier fashion. The fund managers in charge of these pensions gambled with other people's money, and they lost. It is important to maintain confidence in the pension industry because, as we speak, there is no confidence in the private pension market, where the industry has acted in a cavalier fashion and run the funds into deficit.

The management fees of these pensions are too high and totally unacceptable. People ask whether putting money into a fund is only helping to liquify an almost insolvent situation. The only reason to put money into a pension fund at present is to obtain tax relief but, if tax relief reduces, it becomes a very unattractive option. What sounds very attractive is to pay one's tax and put one's money on deposit where up to 5% can be guaranteed and the funds are solid. Current plans to reduce the tax relief from 41% in 2011 to 20% in 2014 may have to be reconsidered in the light of the loss of confidence in the pension fund industry. In the context of a possible increase in the tax relief for lower earners, we might see an increase in the pension funds available, allowing management charges to be lower as high volumes are needed to ensure low charges.

The Government is anxious to encourage people to invest in their future and it is serious about dealing with the private pension industry. It is important, as we are addressing public service pensions, not to forget private sector pensions. It is wrong to create a divide between the two sectors as such a divide will not benefit either.

In conclusion, I welcome the Bill, which brings a sense of reality to the level of pensions to be paid in the future. It addresses the fact we need to be able to pay for the pensions we promise. It is but another trademark of how the Government approaches its business and is avoiding the potential calamity where, one day, due to changing demographics, public service pensions may become unaffordable. Nobody wants to see a situation, at retirement age, where there is uncertainty over pensions. This would lead to the anxiety and fear among older people of not being able to manage in one's latter years, a time when people should be able to enjoy the fruits of their labour, knowing their contributions to this country are recognised and valued by all.

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