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

My apologies, the Minister is correct. To the best of my recollection, the Fine Gael-Labour Party programme for Government contained a similar commitment. Deputy Burton, when Minister for Social Protection, mentioned this numerous times but we have seen no action on it. The current Minister for Social Protection, Deputy Varadkar, in his recent campaign for the leadership of Fine Gael announced a new SSIA-type pension scheme for Ireland, which appears to be a new idea but is really the auto-enrolment system under another name. As I said, this system as operates in Australia and the UK and so on. Even if we do proceed to the auto-enrolment system it will not obviate the need for further savings. We must continue to encourage people to save and we must also ensure that if such system comes into effect, it cannot be subject to a levy. That pot of money must not be subject to a levy.

The introduction of a levy on private pension savings was, therefore, the opposite of what we should have been doing. In their lifetimes, Irish people today have seen two major financial crises, one in the late 1980s and another starting in 2008. The response in both instances was to introduce a levy on private sector pension funds. As a solution to a shortfall in national income, pension funds have proved an irresistible temptation to Governments that have an urgent need to secure ready cash. This does not only happen in Ireland. Argentina nationalised approximately €30 billion of pension assets in 2008. In 2013, the UK reduced its current budget deficit by taking £24 billion of Royal Mail pension assets. In Hungary, in December 2010, the Government seized €14 billion to reduce public debt. There is an ongoing situation in Poland.

Private pensions are savings that hard-working individuals have carefully put away over the years in order that they can care for themselves in old age rather than rely solely on the State. We are hearing an ever-growing refrain about the pension time bomb and the need for people to save for their retirement. The levy imposed between 2011 and 2015 ran totally contrary to this. We should be increasing rather than reducing a person's incentive to save. This levy undermined faith in pension savings. It is no wonder therefore that the participation rate is falling. People do appreciate the need to save: they just do not trust the system. Hence, the need to discontinue levying private savings. It is akin to seizing part of a person's bank deposit.

Between 2011 and 2015, the levy took approximately €2,393 million from private savings and hit 750,000 people. It undermined the principle of saving for retirement. It had implications for the financial security of individuals in retirement. It penalised those who were most prudent in saving for retirement. It also had other consequences. For example, it added to the difficulties of many defined benefit pension schemes already struggling to pay pensioners their entitlements. The pension schemes were already in crisis before the levy was introduced and its imposition only served to increase the financial strain they were already under. Hundreds of defined benefit pension schemes have either closed or are closed to new members. The levy was a significant contributory factor in that regard. There were other manifest injustices. For example, pensioners in defined benefit schemes paid the levy, whereas those that had their pensions secured by annuities did not. Individuals who transferred their benefits here from overseas, who had not benefitted from one penny of Irish tax relief, were nevertheless subjected to the levy.

A key feature of pension schemes is that the money is locked away until a person retires, which could be for 40 or more years. For this reason, pensions are increasingly perceived by people as being highly insecure and susceptible to the whims of future Governments. We need a pension system in Ireland that is secure, fair and straightforward. Given the manner in which State benefits for the elderly have been eroded in recent times and will be even more difficult to provide for fully into the future, we must ensure that such a punitive disincentivising measure cannot be imposed on our citizens again without their acquiescence. Public sector pensions were also reduced but these are in the process of being restored under the FEMPI legislation and they are secure, including the pensions of Members of this House. It is time we focused on protecting and securing the pensions of workers in the private sector, which is the purpose of this legislation.

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