Leo Varadkar (Dublin West, Fine Gael) | Oireachtas source

I thank the Cathaoirleach Gníomhach for the opportunity to share some thoughts and reflections on the legislation before us. I welcome the Bill, which, of course, I will support. I want to take the opportunity to recognise the Minister, Deputy Humphreys, and her officials for bringing it to this point, and also previous Ministers such as Senator Regina Doherty and previous officials who brought it to the point where we are today. It is not perfect, but it is very good and important. It is very real progress that we need to make as a State. I know this from my own time as Minister for Social Protection between 2016 and 2017, it was part of our work programme and the pensions roadmap. It is great to see that so much has been done by the Minister, her team and others, including the work that has been done particularly on the flexible pension age.

I know the amount of work and time that is put into all these types of measures, including taking into account all the different submissions and conflicting opinions. The late Seamus Brennan first mooted introducing this measure 25 years ago. It certainly has been in the pipeline for a very long time. In many ways, it is a pity it was not done back then. If it had been, there are people retiring today and having to get by on the State pension alone who would now have 25 years of pension savings in addition to their State pension. It is a real shame that it sometimes takes so long to make important reforms like this.

This is significant legislation that will have an impact once enacted and up and running. It will matter more ten, 20 or 30 years from now than it does today. I see it as being very much in the same category as the future Ireland fund legislation that is currently being brought through the Houses by the Minister, Deputy Michael McGrath. These are measures that will make a big difference for our society and our country, not now, not at the next election or even the one after it, but beyond that. It is a good reflection of long-term thinking by the Government.

We often talk in this House and in politics about the importance of making work pay, rewarding work and rewarding those who make a financial contribution to society. Of course, there are many very valuable ways in which people make a contribution to society and it is not always a financial one. However, without people making a financial contribution to society, there would not be funding for education, health, care, security or anything else. That is why it is important that we reward those who work, pay taxes and pay into the social insurance system. That can be done in many ways, whether through higher pay, lower personal taxation, better family leave or better benefits, such as the pay-related benefits the Minister is bringing through. It is also about making sure that many State-provided services are not means tested, which can count against the working person. It is good to see the more universal programmes we have now, including childcare deductions, free schoolbooks, the school meals scheme and reductions in college fees.

One of the best ways we can reward work and make work pay is to make sure everyone has a better pension. When this scheme is up and running, every worker will have an occupational pension in addition to his or her State pension. That is not the case at the moment. In many ways, as the Minister said, the scheme offers a sort of pension-plus, with additional retirement savings available on top of the State pension.

I acknowledge what Deputy Naughten said regarding equality and the impact on women. We have to compare what is proposed against three different measures, that is, where we are now, where we are going to be and where things might be perfect. Certainly, in terms of equality, this is a big step forward, in my assessment. We have a real pension inequality in this State, with people who work in the public service and in big companies generally having very good pensions, as all of us in this House do, while people who work in small and medium enterprises, the self-employed, people who work for NGOs in the voluntary sector and contractors such as security guards, contract cleaners and home helps, for example, rarely have any pension at all in addition to their State pension. Most of those categories of people are on lower pay. Most are women or part-time workers. They are going from having no State pension to having something in addition to the State pension. That is a step forward, certainly from where we are right now.

I am reminded of the disputes over pensions for community employment scheme supervisors. That issue would not have arisen had we implemented this scheme 25 years ago. If we had done so, they would have had a pension. If this measure had been introduced back then, all the people who now work in drugs task forces and local development companies, home helps, people working in voluntary bodies and security guards would have pensions now. In many cases, the contribution to their pensions would have been a direct contribution from the State, not as their employer but as the funder of the organisations for which they work.

This scheme will be useful in giving people a feeling that they have a greater stake in society. Somebody with a relatively modest income will be able to build up a pot of pension savings of €200,000, €300,000 or €400,000 over the course of their working life. That will help people to think differently about money, taxation and markets. If markets go up, the value of their pension pot will rise. They will get a benefit from company profits. Many people feel they get no benefit from those profits at the moment, which, indeed, is very often the case, other than through corporation profit tax. Interest rates will be thought about differently. People will think more about bond deals and the solvency of states. It will get people thinking in a different way about the State and society if everyone has, as everyone will have, savings on retirement of tens or hundreds of thousands of euro. It is a bit like becoming a homeowner. When people become homeowners, they fundamentally see things differently, just as they see thing differently when they become parents. Everyone having savings of hundreds of thousands of euro on retirement will make people think differently and in a better way, in the round, for our society.

We are coming to the table relatively late on this issue. The UK has had automatic enrolment for some time. Singapore has had it for decades. Anyone who has lived and worked in Australia will know about "superann", which is the system that country has had in place for a very long time for all workers. New Zealand has the KiwiSaver scheme. An OECD report indicated that Ireland is one of only a very small number of countries, or perhaps the only one, that does not have some form of system like this. The introduction of the scheme is very much overdue.

If I were to offer any advice to the Minister it would be to push back against any attempts to delay the introduction of the scheme. I can understand the temptation, heading into elections, to put it off because it could be awkward if people see money coming out of their pockets. I understand the pressures SMEs and small companies are facing by way of rising costs. However, there are ways around these things. When it comes to the impact on business, for example, the Low Pay Commission could take this provision into account in its recommendation on the minimum wage for next year. It should do so because this is about pay, albeit deferred pay. There is a risk that if the introduction of the scheme were put off until 2026 or 2027, a new Minister or even a new Government might be less enthusiastic about it. There is a risk that a window of opportunity to get it done, which was missed in the past, could be missed again. I want to make that point strongly.

It is important that people will have a personal pot of retirement savings that belongs to them. It is not like the National Pensions Reserve Fund. The Government cannot raid it. That is the other side of there not being a Government guarantee. It means the money belongs to the individual and is his or her private property. It can never be raided by the Government in the event of a crisis. Giving people a choice regarding their own investments is important as well. It is one of the reasons we should guard against a Government guarantee or excessive Government involvement in how investments are made.

Deputy Naughten made some very valid points that need to be replied to in regard to people being able to make additional or higher contributions. Why would we stop people from doing that if is what they or their employer want to do? The Deputy also spoke about maternity leave. We know the good work that has been done by the Government in recognising breaks in people's PRSI contributions as a result of caring duties. Why not fix that issue now and find a mechanism by which people can make contributions while they are on maternity leave or taking care leave for some reason?

In regard to younger workers, the age threshold of 23 is reasonable. Provision is there for people to opt in before the age of 23 if they want to do so. It is not that they cannot do so. It is just that a cut-off point has been chosen for reasons that seem logical to me. Younger, full-time workers can opt into the scheme. Requiring people who are only working part-time while they are students to opt out probably does not make a huge amount of sense.

The trade unions have raised some issues in respect of anomalies around people who already have PRSAs. I am not sure whether their points are correct but they do need to be responded to. It would be terribly unfair if people who had already set up a PRSA were disadvantaged in some way under this scheme.

We should avoid any calls to allow people to dip into their funds too early. That would undermine the whole purpose of the scheme. I understand the thinking behind such a proposal, but it would undermine the whole purpose of people having pension savings if they could dip into them for other reasons.

The issue around tax treatment really does need to be clarified. It will be done in the Finance Bill. Let us not make that a reason to put off dealing with it. The next Finance Bill is six months away, which gives plenty of time for the matter to be considered. Certainly, we cannot have a double taxation arrangement whereby contributions are taxed on the way in and the way out. It must be one or the other. Otherwise, it would not be fair. Whatever is done in terms of tax and State support needs to be roughly equivalent to what is done in terms of other pensions, or the scheme will fall into real difficulties.

The legislation prohibits local authority members from being members of the board of the new authority. We ran into that issue in other legislation. I do not necessarily understand why it should be the case. The Minister does not have to appoint councillors but he or she should not be prevented from doing so. I wonder why this provision is included. It has been taken out of other legislation.

There is also the question of whether income over €20,000 will create a step effect. We know about all the problems that other step effects cause. All of a sudden, just because you earn €1 over €20,000, you can end up worse off in terms of take-home pay. We need to think about the step effect in this context.

It is not clear from reading the explanatory memorandum what happens with migrants who work in Ireland for only two, three or four years in their 20s, leave and do not come back, or perhaps Irish people in their 20s who, after paying into the scheme for only a few years, emigrate and do not come back here to retire. Is there a way for them to capitalise and take their savings back, or will they have to wait until they are 65?

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