Willie O'Dea (Limerick City, Fianna Fail)
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I thank the Ceann Comhairle for allowing me to raise this very important issue arising from the report on pensions the Government commissioned from the OECD. The OECD report reveals a very serious situation - a looming time bomb. As somebody said, the time bomb has been ticking for some time but the ticking is getting ever louder. I raise this issue to ascertain the Government's position on the matter, in so far as one can.

Currently, there are 5.3 people under pension age for one person over the age of 65. By the middle of the century, it is estimated that figure will decrease to two people under the age of 65 for every one person over the age of 65. The Minister will be aware that the reported highlighted that almost 50% of people between the ages of 20 and 60 have made no provision whatsoever for their pensions. The report recommended that the Government should make a definitive choice on the future structure of private pensions even if economic circumstances currently do not enable that to be put in place. The report gives a choice between a means tested pension or a basic pension for everybody. Has the Minister any views on that?

I recall when the then Government received the last report on pensions in 2010, it recommended a system of auto-enrolment where employers would pay a certain amount, the Government and taxpayers would put up a certain amount and the pensioner would contribute a certain amount. I think the proposal at the time was that everybody would be automatically put into the scheme but they would have the right to opt out.

This report takes a different view - perhaps it is right in principle - that the only way to make this sustainable is by compulsion, although I presume one starts at a very low level. It is a bit ironic that on the very day the OECD report was published, a report was published by an organisation called Amárach which stated that one in four people would be pushed into arrears with their bills if their income dropped by €50 per month. We are also aware of the much-quoted findings of the Irish League of Credit Unions that 1.8 million people have a disposable income of less than €50 per month. In those circumstances, it is utterly unrealistic to talk about compulsion at this point in time.

The report referred to the defined benefit pension schemes situation. The Minister will be aware that anything between 80% and 90% of defined benefit pension schemes are currently technically insolvent. I know it is the Government's intention in the pensions legislation, because it is has been said a number of times in this House, to change the priority in the event of the wind-up of a defined benefit scheme to make it more equitable than it is currently where the existing pensioners take everything to which they are entitled while the remainder goes to people who, in many cases, may have been contributing for decades.

There is a looming situation in Waterford Glass and the new provision the Government intends to make will not be made in time to save people who are currently paying pensions in Waterford Glass. I would like to hear the Minister's comments on that and on the recommendation in the report that defined contribution schemes should be better designed. Will the Minister facilitate a debate on the report?

Joan Burton (Dublin West, Labour)
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I thank the Deputy for raising this very important issue. The sustainability of our pension system is of particular concern because, as a country, we have the bonus of many more people living much longer. However, we also have many more children being born. As the Deputy pointed out, there are five people of working age to every one person of retirement age but by the middle of this century, that will have shifted to a likely figure of two people working to one person of retirement age, so it is a challenge.

In that context in April 2012, on behalf of the Government, I asked the OECD, to conduct a focused review of Ireland's pension policy, while taking economic conditions into consideration, and to provide recommendations for long-term reform. The review was published the other day and it looks at the totality of pension provision in the State in the private, occupational and public sectors. The report was informed by extensive consultation undertaken by the OECD. I point out, however, that was not costed and simply sets out the landscape of possibilities, the current situation in Ireland and how we compare with other countries.

As the Deputy will be aware, Fianna Fáil, when in government, commissioned numerous reports on pensions and at one stage it indicated that the old age pension would rise to €300 per week and that it would set out a plan for an auto-enrolment system.

The review also shows us what other OECD countries do with comparable systems. The shared objective of everybody in this House, from all parties and none, is to provide for a sustainable pensions system. As I believe the former Taoiseach, Mr. Bertie Ahern, said, a pensions system is expensive to provide for. The objective is to provide for an adequate and sustainable basic standard of living through direct State supports and to encourage people, through generous tax reliefs, to make supplementary pension provision in order that they may have an adequate income replacement rate when they retire from work. While the State pension is expected to provide sufficient retirement income for the lowest paid workers, many people retiring from work will have a significant income gap if they do not make supplementary private pension provision.

The old age pension is commended in the report as a very significant support because pensioners have the lowest rate of risk of poverty of people receiving income from the Department of Social Protection. That is to be celebrated. However, only 51% of people in employment between the ages of 20 and 69 years have pension coverage. I am particularly concerned that women and low paid workers are in that group and do not make sufficient pension provision.

The relatively low rate of pension coverage is a key concern of the Government. That is why the programme for Government includes a commitment to reforming the pensions system to achieve universal coverage progressively, with a particular focus on lower paid and female workers. It is for this reason the introduction of an auto-enrolment system is being considered.

The report does not make absolute choices. It ranks potential choices in order of preference. The authors have suggested a mandatory system. The second suggestion is an auto-enrolment system, which the Deputy stated Fianna Fáil had proposed in its last pensions document in early 2010. In moving to any system we must be conscious of the economic circumstances of citizens. As a country, we must plan for pensions, even if it might be difficult for people to put aside additional funds for pensions out of already stretched incomes. The OECD and I are very conscious of this. However, to paraphrase Mr. Rahm Emanuel, sometimes a time of crisis is the time to plan for the future, even if one cannot do what one wants immediately.

The policy recommendations involve a number of Departments. Let me summarise the main findings. The economic situation of pensioners in Ireland is comparatively good, both with respect to other age groups in the population and by international comparison. Ireland is facing challenges regarding the financial sustainability of the pensions system as the population ages. Private pension coverage, both in occupational and personal pensions, is uneven and needs to be increased urgently. Pension charges are expensive for small occupational and personal pension schemes. The State pension system lacks transparency. The State pension scheme could be modernised to encourage working longer, in line with the prevailing international trend. The new scheme for the public service is being phased in only very slowly and unlikely to affect a majority of public sector workers for a long time. These are the key findings. None of the options set out has been costed.

With regard to the Deputy's specific query on defined benefit schemes, he will be aware that Fianna Fáil suspended the funding standard in 2008 after the bank guarantee on the assumption that the difficulties with pension schemes, as with the difficulties with the banking system, would be very short-lived. It was believed we would be out of the difficulty in a couple of months. Many defined benefit schemes are experiencing difficulties. I have been engaged in very intensive work with all of the stakeholders involved in the schemes. They are very important and we are examining a range of proposals. The Deputy has issued some thoughts on the matter. He is suggesting the guaranteed amount for existing pensioners could be €6,000, or €12,000 to equate with the State pension. There are difficult decisions to be made.

Reference was made to various surveys of living costs. The irony is that in Ireland there is an extraordinary amount of savings. Some people have considerable savings because they are concerned about the future, while others find it extremely difficult to make ends meet.

Willie O'Dea (Limerick City, Fianna Fail)
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The report makes certain recommendations about public sector pensions. It is stated a single scheme should be devised for both public servants and those who would otherwise have private pensions. Does the Minister agree with this?

The report states the incentives for people to save are not properly aligned with the notion of maximising the retirement benefit for low and middle income earners. Does the Government have proposals to advance in this regard?

Does the Minister share the reservations of the OECD group on encouraging pension fund managers to invest in major domestic infrastructural projects?

Joan Burton (Dublin West, Labour)
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The most important incentives or the tax breaks for people who invest in private pensions reached their height under Fianna Fáil. We know of quite a number of individuals who were able to build up pension pots of €20 million to €30 million as a consequence of the extraordinary pension-related tax incentives Fianna Fáil provided for very-----

Willie O'Dea (Limerick City, Fianna Fail)
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The Minister has been in office for two years. What are her proposals?

Joan Burton (Dublin West, Labour)
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I am just talking about what we have inherited. My view on tax incentives is set out in the programme for Government. I had this discussion over a long period with Fianna Fáil's former leader Mr. Brian Cowen when he was Minister for Finance. Finally, after several years of debate with me, he commissioned a study that indicated there were extraordinary pension pots of €20 million to €30 million arising from the Fianna Fáil tax schemes.

The programme for Government implies the State should not tax-subsidise pension provision where pensions in excess of €60,000 per year are provided for. Most pensioners listening to us will know that a pension of €60,000 per year is a very handsome one for most. The tax relief, therefore, should be targeted at lower and middle income earners. The Deputy will be aware that in the budget proposals for this year the Minister for Finance has agreed to bring forward legislation, commencing next year, to address the structuring of reliefs.

The Deputy referred to alignment. The issue is very simple. Only 51% of people have made private pension provision. Those who are not covered include women, lower paid workers and those who change jobs frequently. The latter leave behind any pension entitlement they accumulate in a given job. The proposal made in the report, with which I broadly concur, is that pension relief should be targeted at the people in question. I hope the Deputy will be able to agree with this.