Thursday, 12 July 2012
Topical Issue Debate
I thank the Ceann Comhairle for selecting this matter which straddles a number of Departments. I am particularly interested in the area of employment rights. With the scrapping of the transition pension from January 2014, in effect the pension age is being standardised at 66. Even though we do not have any default age for pensions, many contracts of employment specify 65. Citizens Information states there is no single retirement age for employees, but that very much depends on the person's ability to sustain himself or herself.
The retirement age is usually set in a contract of employment. Some contracts have a mandatory retirement age and where there is a mandatory age it is usually 65. Recently the Employment Appeals Tribunal ruled on a case in which a person was being forced to retire at 65. She was challenging it under the Minimum Notice and Terms of Employment Act because nothing in her contract stipulated that the age was 65. However, the Employment Appeals Tribunal ruled against her on the basis that it was custom and practice in the company to retire at 65. From 1 January 2014 people who are required to retire at 65 on the basis of their contract will find there will be no transition arrangement until the age of 66, requiring them to apply for a jobseeker's payment. However, this infringes on their rights as employees because they are either being made redundant or let go and they will be required to apply for jobseeker's benefit. While they may have the requisite number of contributions, there is a difficulty with them being required to be available for work to get this payment, which is actually approximately €40 less than the transition payment.
Does this mean the people working in semi-State organisations will be able to work up to 66? Will there be a change in the redundancy arrangement so that somebody being let go at 65 will be able to apply for redundancy? If a person voluntarily leaves work will he or she be entitled to jobseeker's payment? Many anomalies are being thrown up here and while people are starting to ask questions about the changes to pension entitlements, there are knock-on effects on employment rights. Employment rights are the same as property rights or any other kinds of rights. I do not believe the Department of Jobs, Enterprise and Innovation is picking up on that aspect of change that has been made in the Department of Social Protection.
I am taking this on behalf of the Minister for Social Protection, who is on EU business in Cyprus. Legislation governing employment rights is primarily a matter for the Minister for Jobs, Enterprise and Innovation who advises that in general, the employment rights legislation administered by the Department of Jobs, Enterprise and Innovation does not contain an upper age limit. In particular, no legislation imposes a particular retirement age in the private sector. The upper age limit for bringing claims under the Unfair Dismissals Acts 1977-2007 was removed by a provision in the Equality Act 2004. The effect of that amendment was that a person, aged over 66 when dismissed, may now take a case under the Unfair Dismissals Acts unless he or she has already reached the normal retiring age for employees of the same employer in similar employment, if one exists.
Apart from being included in a contract of employment between an employer and employee, the normal retirement age may be a matter of custom and practice that has developed in a particular sector or workplace. Additionally, the upper age limit of 66 years for receipt of statutory redundancy payments was removed by the Protection of Employment (Exceptional Collective Redundancies and Related Matters) Act 2007. The Employment Equality Acts 1998 to 2008, which are administered by my colleague, the Minister for Justice and Equality, aim to protect against discrimination in regard to access to employment on a number of grounds, including age.
The Employment Equality Acts contain a provision permitting the inclusion a specific retirement age in a contract of employment. However, it is noted that rulings of the European Court of Justice under EU employment equality directives in regard to the issue of compulsory retirement ages may have implications in this regard and these will need to be examined. In the absence of a compulsory retirement age being specified in legislation, there is no current impediment from an employment rights legislation perspective to an agreement being reached in the workplace between an employer and an employee to a person continuing on in employment.
In regard to pension reform, I want to take this opportunity to again explain why we are making changes to State pension provision. As Irish society has changed, pensions policy has evolved to reflect these changes. A key focus of the Minister has been to ensure the State pension is sustainable in light of demographic changes and the associated increases in pension costs. This is compounded by the wider need for sustainable public finances. Our primary consideration in making the changes we have made to reform pensions has been to ensure the system is on a financially sound and sustainable footing. Ireland is not alone in this; all ageing western societies face a similar challenge.
The underlying and fundamental issue is demographic. The OECD put this conundrum well when it stated, "Policy makers are facing the challenge of providing a short-term response to the crisis without losing sight of the longer-term structural reforms needed to put pension on a solid footing in light of population ageing." Addressing this demographic problem is what lies behind the changes to the age at which people qualify for the state pension. It is also why the Government has asked the OECD to examine current pension policy in light of the economic downturn and to ensure it meets the needs of future generations. The central objective is to reform the system of social protection in order that it is viable into the future.
The pension reform measures under way, including the raising of State pension age which has been already provided for in primary legislation, address some of these issues. While the current State pension age of 66 remains, the State pension which applies for one year for persons aged 65 will cease from 2014. Thereafter, State pension age will increase to 67 in 2021 and 68 in 2028. There is considerably more in the reply, which I will pass on to the Deputy.
The essential point I am making relates to the gap of a year in provision in the case of an employee who has a contract of employment up to the age of 65 . I cited a ruling of the Employment Appeals Tribunal which provided that because it was custom and practice to retire at age 65, the person concerned had to retire at that age. A problem will arise in the gap year when no transition pension will be provided.
I understand the provisions of the framework on equality and the European Court of Justice in regard to discrimination on age grounds. It seems the onus is being put on individual employers to renegotiate contracts of employment for employees up to the age of 66, yet the custom and practice in those companies can be challenged at the Employment Appeals Tribunal, although such a challenge would probably not be successful as the tribunal has already ruled against such a challenge. In 2014 employees aged 65 will be let go, they will have to wait a year before they can get their pensions and in that period they will be in receipt of jobseeker's benefit but they will not be genuinely seeking work. This area needs to be examined in terms of people's rights to ensure it will not be left to individual employers to arbitrarily decide an employee can remain at work until they reach the age of 66 because it is custom and practice, while at the same time a person who must retire at the age of 65 will have no means while waiting a year to get his or pension at the age of 66.
I hear what the Deputy is saying. The core principle of sustainable social protection systems in advanced economies is that citizens receive benefits in proportion to their contributions. This has been always part of our pension system and changes to State pension provision which were announced recently put an increased emphasis on this as the system had not maintained a sufficient link between contributions and payments. We will always continue to provide the normal supports to those who cannot, for whatever reason, continue working or find themselves in financial difficulty. In this regard, the Deputy may wish to note that in 2011, almost half of those who received the contributory State pension were already on a social welfare payment before they reached pension age. For those with an income need, social welfare schemes will continue to be available for those who fulfil the eligibility criteria. The Government and the Minister for Social Protection are determined to defend and protect our State pension as the cornerstone of a secure and comfortable old age and the changes to State pension provision will go a long way towards this goal.