Tuesday, 10 October 2006
Question 103: To ask the Minister for Social and Family Affairs if he has completed his review of the Pensions Board report on mandatory pensions systems; if he has made recommendations to Government on the report; if not, when he expects to be in a position to do same; the actions he will take on this issue; and if he will make a statement on the matter. [32083/06]
As the House will be aware, because of slow progress being made towards our overall targets in the pensions area, in early 2005 I asked the Pensions Board to undertake the national pensions review. This was published in January 2006. In its report on the review, the board reaffirmed the various targets recommended in the original national pensions policy initiative, including a supplementary pensions coverage rate of 70% for those aged 30 years and over. The board also suggested a continuation of the existing system of voluntary supplementary pensions provision with improved incentives for participation.
However, as I said before, no truly voluntary pensions system has delivered the coverage rates for which we are aiming and if we are to achieve our overall targets, we may have to consider more radical approaches. I therefore asked the Pensions Board to explore and report to me in more detail on the general issues surrounding mandatory or quasi-mandatory supplementary systems outlined in its report on the national pensions review.
I published this second report, with the consent of the Government, last August. The report is a technical examination of the practical issues associated with a mandatory supplementary pension system. It is not a recommendation by the board for or against the introduction of a mandatory system. The board has, instead, examined several options and concluded by giving an outline of what such an arrangement could look like.
The model put forward by the board for consideration is aimed at low to middle earners which entails mandatory contributions of 15%, shared between employers, employees and the Exchequer, on earnings between €15,000 and €60,000. This would be backed up by an improved social welfare pension, which would increase from a current level of 33% of gross average industrial earnings to 40%. A timescale of ten years was suggested for full implementation if this model was approved.
The two reports developed by the Pensions Board over the past year require serious debate and analysis before we decide finally on the type of retirement provision we want for our older people and the contribution we will make during our working lives to that future.
In this regard, pensions featured very strongly in the negotiations on the new social partnership agreement, Towards 2016, and the final agreement features a number of commitments in this area. As part of the agreement, the Government is committed to publishing a Green Paper on pensions policy outlining the major policy choices and challenges in this area and taking account of the views of the social partners.
The two reports completed by the Pensions Board will input greatly to the Green Paper, as will the views from the partnership talks and the National Pensions Forum. A group of senior officials in my Department have already begun work on the Green Paper and it is my intention to produce it over the coming months.
There will then be a consultation process after which the Government is committed to developing a framework for comprehensively addressing the pensions agenda in the long term.
When the Minister says he plans to publish a Green Paper in the coming months does he mean this side of Christmas, this side of Easter, by this time next year or when? What does he mean when he refers to the coming months? The Minister has been talking about this issue for some time and now action is needed.
The State pension currently stands at 33% of gross average industrial earnings. In 1987 it was 38%, therefore the figure seems to have decreased quite a bit.
What is the Minister's view on the various options put forward by the Pensions Board? Is he in favour of the Kiwi Saver in New Zealand or the mandatory pension scheme in Australia? What is the position on part-time workers and pensions? Does the Minister agree that part-time workers are particularly disadvantaged where pension coverage is concerned?
It will take as long as it takes. The officials in my Department have started drafting the Green Paper and are finding the process very useful. The Green Paper will outline the major policy choices that face the country and most people would agree this is the right way to proceed. We know the size of the problem, that the choices are not easy and that they must be paid for. One idea the officials proposed for consideration entails a mandatory contribution of 15%, shared between employers, employees and the Exchequer, on earnings between €15,000 and €60,000.
I have stated a few times that it is important not to shy away from considering the mandatory or quasi-mandatory systems. I am determined to shine the light on them and examine them closely to determine whether we can afford them. More important, we should determine whether we can afford not to have them, given that over half the population, including 500,000 working women, do not have occupational pensions. It is incumbent on us to take some action.
This is not an easy area and mandatory pension contributions can be misinterpreted as additional taxation. However, saying this is like saying PRSI contributions should not have been made mandatory. PRSI contributions are mandatory and nobody in the country would put his hand up and ask that they be made voluntary. I am determined to keep the options of mandatory and quasi-mandatory pensions on the table as we engage in the Green Paper process. Meanwhile, we will consider other proposals, for example, the suggestion by the Pensions Board that we should have an SSIA-type system rather than tax reliefs. This was one of the major proposals and we are continuing to make good progress in examining it.
That means we will have a debate on this issue and have the options before us. However, we already have the options before us in that the Pensions Board has issued two reports and there was an intense media debate on the issue. We now need concrete proposals from the Government. We have had many discussions, debates and reports but no action.
Is it correct that 53% of Irish women have no private pension coverage, as the Minister suggested, and that 43% of men have no such coverage? While the Minister is fiddling with all the reports, this issue is continuing to feature. When will we see action? The Minister has issued many press releases on the subject. How serious is he taking it? How serious is the so-called pensions time bomb for workers or is it all a mirage?
A very serious issue is developing with regard to pensions and, as far as I understand the matter, the figures the Deputy has mentioned are correct. One solution is to ignore the problem and allow all the tax breaks to benefit the top 20% or 30% of earners, who are benefiting from them at present. Another solution is to hype the voluntary system, perhaps by turning tax breaks into cash breaks, to see whether it will attract more people thereto. The third system is to consider a more quasi-mandatory or mandatory system. By "quasi-mandatory", I mean a system in which people are enrolled automatically but can opt out.
I have decided to engage in a process with regard to the latter option because, as I said from the beginning, one needs to bring the country with one on an issue such as this. No Government would impose a mandatory pensions system without securing consensus in the political and financial systems. I am trying to build such consensus. We have largely done so and pensions have reached the top of the agenda in the national pay talks, the media and this House. The first priority question today, for example, concerned pensions and it is therefore obvious that the issue has reached the top of the agenda.
The next stage in the process is to combine all the research in a Green Paper and try to elicit from the parties opposite their views thereon. I saw a Fine Gael press release that opposed mandatory pensions and expressed a preference for the SSIA-type route. In calmer times, when we are not considering the matter in light of the forthcoming election, Deputy Stanton might revisit that statement. Being in favour of mandatory pensions probably does not represent a very popular election platform, but it will surely be popular in 20 or 30 years among the 500,000 women without pension coverage, about whom we have spoken many times in the House. At that stage, they will not care who wins the next election — all they will care about is whether we did the right thing.