Brian Lenihan Jnr (Dublin West, Fianna Fail)

He envisages in this legislation a measure that will come into operation when many of us, as a matter of actuarial probability, have passed away. In discussing this Bill we must consider that it is providing in legislation for a framework that will begin to impact in 2044. That gives a somewhat arid speculative tone to this debate but I understand the concerns expressed by those in public life and the teaching profession about the possible implications of this measure.

Senator Bannon inquired why the Taoiseach was excluded from the definition of a new entrant. He appeared to be concerned that some material benefit accrued to ex-taoisigh in this provision when in fact it will do no more than maintain their existing positions, as is true for the rest of us. There will be no distinction in the future between the Taoiseach and other Members as far as his or her Member's pension is concerned. A Taoiseach elected after the next election will be in the same position as the other new entrants but, uniquely, this legislation will not affect the Taoiseach's position in so far as the pension stems from the office. That marks the importance of the office. Senator Bannon and others raised the question of the introduction of pensions for local authority council members. Since May 2000 severance payments of up to three times the annual representation payments are payable to council members depending on the period of service, hence salary is payable from the forthcoming local elections. I will draw the Minister's attention to the Senators' concerns in that regard.

Senators Mansergh and McDowell suggested that our dependency could be more favourable than that which I outlined in my introductory speech on Second Stage. That is possible and I hope it is the case but we cannot be certain of that, and as some Senators commented, developments in other European states have moved in the opposite direction. Senator Browne referred to the ageing and greying of Europe and in some countries the dependency ratios are approaching crisis levels. The political response to this in Germany, France and Scandinavia has disimproved the terms of existing pensions in those countries. That is why I suggested at the outset that the Minister is very far-seeing in this area, not alone in this legislation and in acting on the recommendations of the Pensions Board but also in the establishment of the pensions reserve fund. It is clear that many of these countries left it too late to introduce the necessary measures. We have time to plan and I can assure Senator McDowell that the figures will be updated. Even if the dependency ratio is better than the projected rate we will have a major problem in the future. The Minister is anxious to ensure that only new entrants will be affected, if they continue to enjoy very good pensions by private sector standards.

While I understand Senator Browne's concerns, we live in a time of great demographic change. The average life span has lengthened and we must legislate to take account of that. We cannot ignore it. The attitude of a person entering a job today is fundamentally different from that of a person entering a job several decades ago. The modest increase in the actual retirement age for most public servants is between 60 and 65. Many stay until they reach 65 and there will be no saving in respect of such persons.

Senator Mansergh thinks the envisaged saving of €300 million seems rather low but that is calculated in current price terms. Public service pensions cost approximately €1,500 million, so €300 million, or 20% of that figure in current terms, is a substantial sum especially when this item of public expenditure is a recurrent annual item in the budget. The €1,500 million outlay on public service pensions makes it a saving of approximately 20% which is significant. Senator Bannon referred to "bad faith" on the official side in not proposing a retirement band between the ages of 62 and 67 which the working group discussed with the union and the staff. That option was discussed in the context of efforts to reach an agreed package but the Minister found it impossible to reach agreement and indicated in his 2004 budget speech that he is willing to make various improvements in pension terms, such as for those on a low income, and he has dropped the 1% contribution recommendation.

Senators O'Toole, Bannon, Ormonde, Fitzgerald and Kitt referred to teachers and politicians. The recommendations on teachers stem from the commission's recommendations and will arise only 30 or 40 years hence. Senator O'Toole suggested that every teacher must continue to the age of 65. This does not take account of a package of flexibilities which the commission recommended, such as actuarially determined early retirement, or neutral early retirement combined with the purchase of additional pensionable service. There is also the option of moving to less demanding work as a person approaches retirement.