Willie O'Dea (Limerick City, Fianna Fail) | Oireachtas source

I am pointing out the difference between the treatment of these people by the State - which the Government can change - and the treatment of those who have to provide for themselves. If my information on that is wrong, I apologise.

I disagree profoundly with those commentators who suggest that the way of the future is the total elimination of defined benefit pension schemes. That will leave a situation where people in the public sector are fully protected with index-linked, fully-guaranteed pensions, for which the taxpayer is liable for every cent while at the other end of the scale, people will be at the mercy of the market and fund performance because they will all be in defined contribution schemes. There is a place for defined benefit pension schemes if we are prepared to look creatively, not at soft options but at the artificial way in which liabilities are measured.

The Bill makes no reference to or provision for early access to pension funds, a matter which has given rise to considerable debate in recent times. Does the Government have any proposals in this regard? Various measures were introduced in various finance Bills but there are outstanding recommendations for substantial change in this regard.

There is also a continuation of the situation whereby profitable employers are still allowed to walk away from pension problems by simply winding down their schemes if they are in deficit. The Government will be aware of an OECD recommendation that a minimum of 90% funding should be in place before a scheme can be closed when a company's financial position is healthy. I ask the Minister to address that point and explain why it is not part of the Bill.

Only 54% of the workforce has pension coverage as we speak. This takes on a very alarming aspect when the public sector is excluded because in the public sector, pension coverage is at 90%. In the health and restaurants sectors, for example, pension coverage averages only 23% according to a recent study conducted on behalf of the Pensions Board. In the wholesale and retail sector, coverage averages 36%. This is despite the fact that eight out of ten people surveyed who do not contribute to a private pension scheme said that the State pension would not meet their needs in retirement. The key issue is how to improve coverage. Among OECD countries, only Ireland and New Zealand do not have compulsory pension saving. An OECD report this year recommends a radical shake up of State pensions, with a new universal pension scheme for all, financed by taxes and contributions. It outlines the pros and cons of a compulsory contribution system. The Minister said in the Seanad that she intends to bring forward further proposals but I wonder how near we are to even beginning to solve this problem, seeing as it has taken three years to get this far.

In addition, pension costs must be tackled and we already have a report on that, which is fairly extensive. The private pension industry makes vast sums of money for fund managers, administrators and intermediaries at the expense of savers. A report commissioned by the Department of Social Protection last year shows exactly how exorbitant charges impact on pension schemes, particularly smaller ones. It showed, for example, that a person who saves €250 per month from the age of 35 could end up with a fund of €200,000 after 30 years, leaving him or her with an annual pension of €10,000 in retirement, if there were no charges. However, the average charge of 2.18% per annum would reduce the fund by €62,000 and the pension by €3,100 per annum, a 31% reduction. That money is simply swallowed up in charges by middle men and middle women.

There are many anomalies in the Irish pension system. I received an e-mail recently from a 57 year old man who has been contributing 4% of his salary to the TSB pension scheme for the last 20 years. That scheme has now been wound up but the levy is still being taken from his pension savings. I received correspondence only this morning from a person who has subscribed for years to the defined benefit pension scheme run by Johnston Press. He was made redundant in August 2010 and the company pension scheme was subsequently wound up. He has only €20,800 left, which will give him a pension of €380 per annum. He must pay tax on that because his wife is working, which means he will finish up with €4 per week, net. However, because the lump sum exceeds €20,000, he cannot take it, even though he wants to take it to fund his daughter's third-level education. Due to the fact that his lump sum is slightly over €20,000, instead of getting that money, he will have to be satisfied with a net payment of €4 per week. That is an anomaly that must be examined by the Department.

A lot of the representations I have received on pensions concern access, particularly by deferred pensioners, to the trustees when they are making decisions, most notably on restructuring. I have not seen anything in the Bill which addresses that issue and will be asking the Minister to include some provision in that regard or at least to explain why it is not included in the legislation. It would be a good idea to have some sort of appeal system, particularly in the event of a proposed restructuring of a pension scheme. Those who could be hurt financially by decisions of trustees should be able to appeal those decisions to the Pensions Board. My party will table an amendment along those lines on Committee Stage.

In conclusion, the Bill is a variant of legislation I put forward myself several months ago so, from that point of view, I am not opposing it. It deals with an unfairness in the system. However, in view of all of the problems faced by pension schemes in this country, it is only a very tiny part of the jigsaw. That said, it does represent a slight improvement on the current situation and from that point of view, my party will not be opposing it.

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