Joan Burton (Dublin West, Labour) | Oireachtas source

I thank the Deputy for raising this very important issue. The sustainability of our pension system is of particular concern because, as a country, we have the bonus of many more people living much longer. However, we also have many more children being born. As the Deputy pointed out, there are five people of working age to every one person of retirement age but by the middle of this century, that will have shifted to a likely figure of two people working to one person of retirement age, so it is a challenge.

In that context in April 2012, on behalf of the Government, I asked the OECD, to conduct a focused review of Ireland's pension policy, while taking economic conditions into consideration, and to provide recommendations for long-term reform. The review was published the other day and it looks at the totality of pension provision in the State in the private, occupational and public sectors. The report was informed by extensive consultation undertaken by the OECD. I point out, however, that was not costed and simply sets out the landscape of possibilities, the current situation in Ireland and how we compare with other countries.

As the Deputy will be aware, Fianna Fáil, when in government, commissioned numerous reports on pensions and at one stage it indicated that the old age pension would rise to €300 per week and that it would set out a plan for an auto-enrolment system.

The review also shows us what other OECD countries do with comparable systems. The shared objective of everybody in this House, from all parties and none, is to provide for a sustainable pensions system. As I believe the former Taoiseach, Mr. Bertie Ahern, said, a pensions system is expensive to provide for. The objective is to provide for an adequate and sustainable basic standard of living through direct State supports and to encourage people, through generous tax reliefs, to make supplementary pension provision in order that they may have an adequate income replacement rate when they retire from work. While the State pension is expected to provide sufficient retirement income for the lowest paid workers, many people retiring from work will have a significant income gap if they do not make supplementary private pension provision.

The old age pension is commended in the report as a very significant support because pensioners have the lowest rate of risk of poverty of people receiving income from the Department of Social Protection. That is to be celebrated. However, only 51% of people in employment between the ages of 20 and 69 years have pension coverage. I am particularly concerned that women and low paid workers are in that group and do not make sufficient pension provision.

The relatively low rate of pension coverage is a key concern of the Government. That is why the programme for Government includes a commitment to reforming the pensions system to achieve universal coverage progressively, with a particular focus on lower paid and female workers. It is for this reason the introduction of an auto-enrolment system is being considered.

The report does not make absolute choices. It ranks potential choices in order of preference. The authors have suggested a mandatory system. The second suggestion is an auto-enrolment system, which the Deputy stated Fianna Fáil had proposed in its last pensions document in early 2010. In moving to any system we must be conscious of the economic circumstances of citizens. As a country, we must plan for pensions, even if it might be difficult for people to put aside additional funds for pensions out of already stretched incomes. The OECD and I are very conscious of this. However, to paraphrase Mr. Rahm Emanuel, sometimes a time of crisis is the time to plan for the future, even if one cannot do what one wants immediately.

The policy recommendations involve a number of Departments. Let me summarise the main findings. The economic situation of pensioners in Ireland is comparatively good, both with respect to other age groups in the population and by international comparison. Ireland is facing challenges regarding the financial sustainability of the pensions system as the population ages. Private pension coverage, both in occupational and personal pensions, is uneven and needs to be increased urgently. Pension charges are expensive for small occupational and personal pension schemes. The State pension system lacks transparency. The State pension scheme could be modernised to encourage working longer, in line with the prevailing international trend. The new scheme for the public service is being phased in only very slowly and unlikely to affect a majority of public sector workers for a long time. These are the key findings. None of the options set out has been costed.

With regard to the Deputy's specific query on defined benefit schemes, he will be aware that Fianna Fáil suspended the funding standard in 2008 after the bank guarantee on the assumption that the difficulties with pension schemes, as with the difficulties with the banking system, would be very short-lived. It was believed we would be out of the difficulty in a couple of months. Many defined benefit schemes are experiencing difficulties. I have been engaged in very intensive work with all of the stakeholders involved in the schemes. They are very important and we are examining a range of proposals. The Deputy has issued some thoughts on the matter. He is suggesting the guaranteed amount for existing pensioners could be €6,000, or €12,000 to equate with the State pension. There are difficult decisions to be made.

Reference was made to various surveys of living costs. The irony is that in Ireland there is an extraordinary amount of savings. Some people have considerable savings because they are concerned about the future, while others find it extremely difficult to make ends meet.

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