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

I am informed that I am sharing with Deputy Cathal Crowe but if he does not appear, I will continue on.

I thank the Cathaoirleach Gníomhach very much and I am very reluctant to interrupt Deputy Healy-Rae whose speech I was enjoying immensely.

I sincerely congratulate the Minister on bringing this legislation forward. It is very timely in view of the fact that it has been approximately 25 years in gestation since the late Séamus Brennan first mentioned it. In the UK, auto-enrolment has been in place for 12 years now and in New Zealand it is 17 years. It has worked extraordinarily well in both those countries. However, there are significant differences in how they operate as opposed to what is proposed here. The one thing that this legislation will achieve is that it will make a small dent - I would not say a very significant dent - in the pensions apartheid we have in this country. When I mention pensions apartheid, I make the distinction between the public and private sector. A recent actuarial report revealed that the State is contributing approximately 7% of salary per week towards private pension provision whereas in the public sector, the figure is between 25% and 30%. In some professions, it actually goes over 50%. In addition the public sector pension is a defined benefit scheme. One does not have to depend on the vagaries of the market and is not exposed to that. One retires on a certain salary and one receives a certain percentage of one's salary. That goes up in accordance with the increases in the corresponding grade in the public sector for those who are still at work.

The auto-enrolment scheme will provide a defined contribution pension scheme for people over the age of 66 who qualify for it . There is a world of difference between a defined benefit scheme and a defined contribution scheme, the former being much more valuable. However, for all that, the legislation is very welcome, particularly after all of this time.

There are one or two questions I would like to ask the Minister. I have not had time to study the Bill in great detail as of yet, as it is a very long Bill. Looking through the Bill as much as I could today, I notice a significant increase in bureaucracy. There is the central processing authority, then there is a new body being created called the national automatic enrolment retirement savings authority, the functions of which are not quite clear but perhaps when I read the Bill more carefully, they will become clearer. Everything is supervised by the Pensions Authority. That is a huge build-up of bureaucracy. Do we really need the central processing authority? At the moment, social insurance is being deducted. The employer takes it off the employee and he or she hands the employer's and the employee's share over to the Revenue Commissioners and they operate the system. The machinery is already there so what is the need to create all of this new machinery, which, I imagine, is going to be quite expensive?

First, I do not understand why this is being handed over to the private insurance and pensions industry to be managed. It is a State scheme. People will say that it does not make any difference and that if the NTMA were given the job to manage these funds, it would have to invest in the private sector anyway. However, the experience of many people during the recent financial crash has totally eroded confidence in the private pensions business. That has been my experience from talking to people and from my engagement with a number of victims of their investment policies. This is what it resulted in when people finally reached pension age, in many cases to find out that their savings had been literally wiped out.

Second, the returns enjoyed by NTMA compare very favourably with what is being achieved in the private sector. In addition to that, as I believe Deputy Ó Cuív pointed out earlier, if this huge fund stays in State hands to invest, we can control the investment to some extent and ensure that much of it stays here rather than giving it to the private sector, which will invest the vast majority of it abroad.

There is then matter of profit versus exclusive concentration on the pensioner, which would be the approach of the State and of the NTMA, if one does not have to keep one eye on what profits will be derived from being involved in this particular scheme. With a State scheme, it would make logical sense that the State should directly invest the money, through the NTMA, where the expertise is. That would be the normal process. If we are departing from the norm here and if we are handing it directly over to the private sector, there must be some justification for that. I would like if the Minister in her response to explain why it is being done this way rather than being done directly by the State, which is the norm.

There are a number of further different issues in the legislation which she might also address when she is winding up. For example, I understand that if people are part of an existing scheme, the employer is not obliged to transfer to the auto-enrolment scheme. What, if the existing scheme is less valuable to the employee than the automatic enrolment scheme? I am sure that that is probably provided for.

My other question relates to the cap of €80,000. My interpretation of that is that in year ten, when we are up to 6%, then 6% and 2%, that a person on an €80,000 income would have to contribute 6%, which is €4,800. However, if they are in receipt of an income of €200,000, it is still €4,800. Is that calculation correct?

I take the points made by Deputies Murnane O'Connor and Mattie McGrath and others on the burden on small businesses. The centrepiece of the Taoiseach's Ard-Fheis speech was help for small business and he was going to achieve that mainly by a reduction in employers' PRSI. Will this offset the reduction in employers' PRSI so that we will finish up where we started?

Finally, I notice that more and more legislation provides for regulations to be introduced to deal with some of the detail of how we deal with bogus self-employment and with its creation, etc., in this context. We never get the opportunity to debate the regulations. Will the Minister consider that because I think that the regulations under this legislation will prove just as important as the legislation itself?

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