Denis Naughten (Roscommon-Galway, Independent) | Oireachtas source

I move:

That Dáil Éireann shall take note of the Report of the Joint Committee on Social Protection, Community and Rural Development and the Islands entitled "Response to the Report of the Commission on Pensions", copies of which were laid before Dáil Éireann on 3rd February, 2022.

I am a full-time athlete, a Leas-Cheann Comhairle. I am looking forward to participating in the world indoor games because I have definitely qualified after coming up and down those stairs.

I thank the Ceann Comhairle and the Business Committee for the opportunity to debate the report of the Joint Committee on Social Protection, Community and Rural Development and the Islands entitled: Response to the Report of the Commission on Pensions. I thank the members of the committee for their work on this report and for their attendance here this evening. In particular, I thank our researcher and policy officer, Mr. Jack Savage, who carried out a great amount of policy work on the report that has been produced by the committee.

The committee’s report was published in response to the report of the Commission on Pensions and on foot of a request from the Minister for Social Protection, Deputy Humphreys. The provision of the State pension is one of the most important aspects of the social protection system, rewarding those who have contributed to the State through employment, through work in the home or as a family carer.As such, the committee was pleased to be able to provide its views and contribute to this timely and sensitive debate.

The Commission on Pensions published its final report in October 2021. The commission was tasked with providing the Government with a range of options to ensure the sustainability of the State pension into the future. The committee was informed that the ratio of workers to those in receipt of the State pension will decline significantly into the future. Currently that ratio is 4.5 workers for every one pensioner. This is expected to decrease to 2.3 workers to every pensioner by 2050. The commission put forward four options or packages in its final report and recommended package 4.

The committee considered each package during the course of its deliberations before deciding in favour of the implementation of package 3. Packages 3 and 4 contain an increase in PRSI for employees, employers and the self-employed as well as an annual Exchequer contribution to the Social Insurance Fund, SIF. The committee is not in agreement with the specific increases in employee PRSI contained in this package but believes this represents the fairest way to maintain the PRSI base and tackle the forecasted deficit in the SIF.

The major difference between package 3 and package 4, as put forward by the commission, is the increase in the pension age contained in package 4. While this increase is at a much slower rate than previously announced, the committee rejected this increase on a number of grounds. It is the opinion of the committee that the State pension is a fair expectation following 40 years of work. The committee is unconvinced that the increase in the State pension age would have the desired effect of closing the deficit. The committee heard of different figures of estimated savings that were provided by different bodies for this potential increase in the retirement age.

The committee also discussed alternative payments that are provided to individuals who are forced to retire at the age of 65 due to compulsory retirement clauses in their work contracts. The committee is of the opinion that increasing the qualifying age for the State pension, while simultaneously providing alternative payments to those forced to retire, undermines the argument that increasing the qualifying age for the State pension will improve the fiscal position of the SIF. The SIF pays the majority of social protection payments. Therefore, while the money would not be listed as pension expenditure, it would still be paid through the same fund.

While the committee is aware that other social protection payment rates are primarily lower than the State pension, the impact of the age increase will be minimal unless the issues I outlined are rectified.

On the issue of compulsory retirement, the committee has recommended that legislation is developed to remove compulsory retirement clauses from contracts. This is a fundamental recommendation in our report. Furthermore, we are recommending that this legislation must be retrospective and apply to current contracts as well as new ones. It is vital that this aspect is implemented to fulfil the series of recommendations we have made because this is a cornerstone of the recommendations. The committee believes that those over the age of 65 years who wish to remain in employment should have no legal barrier to doing so. The committee heard evidence of the negative physical and mental health impacts that forced retirement can have on people. The committee's recommendations focus on providing those aged over 65 years with a choice, either to continue working or to retire. Each individual has different circumstances and the choice is paramount in this debate.

Similarly, the committee discussed the issue of flexibility and noted that the commission suggested that some people would continue to access their State pension at the age of 65 years if they had 45 years of PRSI contributions. The committee welcomes the suggestion of this level of flexibility and recommends that this should be the case once somebody reaches 40 years of contributions, not 45 years. The committee is of the opinion that this is particularly important for those engaged in manual labour and physical work.

The committee made several recommendations regarding PRSI in its report. The PRSI receipts primarily fund the Social Insurance Fund and that is why changes made to PRSI are important to future provision of the State pension. First, the committee has rejected any attempt to move those over the age of 65 years who remain in employment to class K PRSI. This is because class K offers no benefits and does not count towards an employee's PRSI contributions. The committee is of the opinion that all contributions paid by employees should be part of their contribution record.

The committee has accepted the changes to the class S PRSI that are laid out in package 3. This is for various reasons. Class S PRSI was introduced in 1998 for self-employed workers and is currently 4%, or €500 per year, whichever is the greatest. However, self-employed workers do not have an employer contribution to their record. When class S PRSI was introduced, self-employed workers were only entitled to a very limited number of benefits through the SIF. However, changes in recent years have ensured that self-employed workers are now entitled to 93% of the benefits provided through the SIF. As such, the committee is of the opinion that attempts must be made to equalise the contributions made on behalf of self-employed and employees. However, the committee recommends that any changes to class S PRSI be gradual and well-communicated so self-employed workers are given enough notice and can ensure that they are not taken by surprise. Significant changes to PRSI should not take place over short periods of time.

The committee also discussed changes to class A PRSI. The commission put forward suggested changes to both the employee and employer contribution rates. While the committee agrees with this in principle, the exact rates should be considered further. The committee is of the opinion that Ireland already levies a significant amount of tax on workers and that the PRSI class A contributory rate of between 6% and 7% by 2050 could be unfair. The committee noted in its report that Ireland has a low rate of employer's PRSI contribution when compared with its European counterparts. The committee recommended that increases to PRSI contributions are investigated further to make sure that they are increased in the fairest way possible.

The committee is also of the opinion that the terms of reference provided to the Commission on Pensions were relatively narrow and, as such, prevented it from developing new measures to combat the explicit deficit in the SIF and instead focus on changes to mechanisms currently in place. Before I continue, I wish to make it known that the committee is very thankful for the work carried out by the commission and greatly respects and acknowledges the level of work it carried out in a relatively short period of time. However, the committee decided to look beyond the scope of the commission and has discussed two possibilities that would counteract the deficit in the SIF that is expected into the future. First, the committee discussed the need for new taxes on wealth to be examined. This has not happened yet and while the committee is uncertain on the format whereby this could be developed, new ways to create revenue should not be taken off the table. Second, the committee discussed the issue of auto enrolment. While it has not made a specific recommendation on this issue, it is something that the committee is eager to explore further, to see what type of impact it would have on pension provision.

The committee also considered gender dimensions that currently exist in the pensions system and which must be considered with regard to any changes to pension provision. The committee was informed that women tend to receive pension payments that are, on average, 33% less than the amount received by men. There are several social, historical and cultural reasons for this. The commission notes in its report that women tend to spend approximately two and a half times more time on unpaid domestic and care work than men. In a submission to the committee by the National Women's Council of Ireland the legacy issues of the marriage bar were also highlighted. It is estimated that 57,000 women do not qualify for the full State pension due to the impacts of the marriage bar. The commission acknowledges in its report that the marriage bar required women to resign from their jobs once they were married and disqualified married women from applying for jobs. The committee stresses the importance of acknowledging the societal structures that have previously prevented women from participating in the workforce, which would have impacted their ability to acquire PRSI contributions.

The committee acknowledges that under the total contributions approach a homemaker's credit of 20 years is provided for those who worked in the home. However, the homemaker's credit scheme does not adequately address the inequalities in the pension system, as it was expanded on the previous scheme that excluded women who left the workforce pre-1994. The provision of the homemaker's scheme is important as it acknowledges the importance of work carried out in the home, which is primarily performed by women. These issues must be considered if we are to treat the work of all citizens equally.

The committee also considered the barriers faced by family carers when accessing the State pension. Family Carers Ireland informed the committee that one in eight people currently provide care, and that is set to increase to one in five by 2030. The majority of care is provided by women and the commission states in the report that six in ten family carers are women. While the family carers can avail of the homemaker's scheme, this does not adequately provide for those who care for periods of more than 20 years. The homemaker's scheme is also not available to those who provide lifelong care in homes, as it requires recipients to have ten years of credited contributions. The committee is of the opinion that this situation must be rectified and welcomes the commission acknowledging this in its report. The committee is of the opinion that it is necessary for the State to meet the contribution requirements for family carers to ensure that they qualify for the State pension. This is in recognition of the significant work carried out by family carers. Family Carers Ireland informed the committee that it accepts the recommendations regarding family carers made by the commission, and the committee supports it in asking that these recommendations be implemented in full.

The other cohort of people which was not specifically referenced in our report on pensions but which we had referenced in our previous report in our pre-budget submission to the Minister for Social Protection is foster care parents, where they do not accrue a PRSI record as a result of the foster care payment.

We are saying the provision being extended to family carers should also apply to foster care parents in the vital work they do in our society. I thank all Members for their attendance at this important debate. I look forward to hearing their contributions.

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