Sheila Terry (Fine Gael)

I welcome the Minister for Social and Family Affairs, Deputy Brennan. I will preface my comments by echoing what the Minister said in his closing remarks. It must be frightening for the many people who face into retirement without a pension. This is an easy statement to make and with which we all agree. It is also frightening, however, for the many thousands of people who have paid into a pension fund but are now facing into retirement with an inadequate provision. I hope to outline why so many people have no pension or an inadequate pension. While I am angered by some of the details in the Minister's report, I recognise the good work the Government has done with regard to pensions and its commitment to effect further improvements in this area.

I am mostly concerned to discuss occupational pensions. I have asked for a debate on pensions on many occasions and I thank the Leader that it has finally taken place. I hope the Minister will consider the recommendations I will offer. I understand that he is still finding his feet in his new Department but I trust that he will take a new view on how to assist the many people who have occupational pension schemes and those others who are considering taking out such pensions but feel it is not worthwhile.

Pensions should be guaranteed. Why should anybody bother paying into the pension funds which are being advertised when they know they will not pay out to the value one would expect, and have not done so historically? The industry or the Government should provide a bonding system to protect members. We must address the inequity between the guaranteed pensions for the State sector, where employees enjoy secure employment, and the insecure pensions available to the private sector. The Pension Benefit Guaranty Corporation, PBGC, is the United States Government agency set up to protect private sector pension scheme benefits. An employer in that country must get approval from the PBGC before winding up a scheme. If a scheme has insufficient funds to meet its commitments, the PBGC guarantees the funds. Financing comes from insurance premiums paid by the companies which have their plans covered from investments and from assets of pension plans taken over, but not from taxes. The Minister should consider whether such a model could be adopted here to ensure protection for the many people who have and want private pensions.

Pensions should be dealt with by one of the Departments. It could be argued that there should be a Minister with responsibility for pensions, perhaps the Minister for Social and Family Affairs. The regulatory body of life assurance companies and pension funds is in the hands of the Department of Enterprise, Trade and Employment. The Pensions Board regulates occupational pension schemes while the Department of Finance controls the pensions reserve fund and the SSIA scheme. This latter scheme, if slightly modified, would make an excellent pension vehicle.

The Director of Corporate Enforcement and the Comptroller and Auditor General should investigate the operation of pension funds and quantify any damage done to members' benefits. They should consider the poor value for money we are getting in terms of tax concessions that have been made to the industry. Why is the industry making significant profits while pension benefits are more at risk than ever before? It should be established whether employers who wound up their pension schemes because of under-funding enjoyed contribution holidays in the preceding years. It will be found that most of them did and that is disgraceful. If those contribution holidays had not been permitted, the schemes would not be in such serious difficulties. Companies benefited while pensioners today and of the future will suffer.

The continuation of the Pensions Board as currently constituted should be reviewed. Since its foundation, private sector pensions cover has been reduced from 66% to 50% with a significant swing from defined benefit to the less secure defined contributions schemes. The board's performance in monitoring and supervising the administration of occupational pension schemes leaves a lot to be desired. Once a member leaves a scheme because of early retirement or because the scheme is wound up, he or she is not even retained as a statistic in the board's records. It is disgraceful that the board is only concerned with members who have schemes. If a member is told by his or her company that its scheme is being wound up or is under-funded, as often happens, the people with frozen benefits disappear from the radar as far as the board is concerned. There are no facts and figures about these people. This should not be allowed. Companies should know about every employee who has ever had a pension in their employment and what happens to such employees when their pension benefit is eroded or put in jeopardy.

Participation in private sector pensions schemes should be optional. I did not like to hear the Minister say that if the current system which operates on a voluntary basis does not work, he will consider something else. He did not use the word "compulsory", but I believe that is what he meant. Under current circumstances if he made it compulsory for employees to join schemes, that would be disgraceful. I will outline why I believe that to be the case.

The current system, which may be unconstitutional, whereby an employer who is contributing to a pension scheme may make it a condition of employment that employees join the scheme — which does not guarantee any benefits — should be discontinued. I ask the Minister to discontinue such compulsory obligation. If a person gets a job in a company that has a pension plan, employers oblige the employee to join it, even if it is a waste of time, so to speak, which it has been in many cases. Many people who have paid into a pension fund for years because they were obliged to do so are facing retirement with an inadequate pension. Until this system is protected, there should be no mention of making it compulsory for employees to join such schemes. It is wrong to force a person into such a bad situation.

I ask the Minister to examine the current inequity where higher paid workers enjoy a higher percentage tax relief on pension contributions than lower paid workers. If a person is earning €100,000 a year and that person contributes to a pension fund, the tax benefit he or she will get because of paying the higher rate of tax will be higher than a lower paid worker who also contributes to a pension fund. Euro for euro the lower paid worker's tax relief on pension contributions is less. That is an inequity which should be addressed.

The Government has consistently refused to acknowledge that there are tens of thousands of workers whose employment termination was driven by the pension industry. These workers are now suffering major erosion of their pension payments from schemes they were compelled to join. The threat to the solvency of some pension schemes is accepted by the Government as a valid excuse for not granting a statutory right to the preservation and revaluation of pension benefits earned in respect of pre-1991 service for private sector occupational pension scheme early leavers. People's pension entitlements should be guaranteed. That is a trend that runs through what I have to say.

The Pensions Board is more concerned with attracting new members. Perhaps the Minister agrees that is what it is supposed to be doing. The board is more concerned with attracting new members than with protecting the interests of its existing members and early leavers. The Minister seems to be of the same view. He seems to be concerned about the pensioners of the future. While I agree with that approach, I hear no mention of the pensioners or workers of today, which I find frustrating. The Pensions Board is supposed to protect the interests of people, but it is not doing so. What it is doing, and it has a pensions awareness campaign paid for by the taxpayer, is all about attracting new members to buy more schemes. However, once they join the board seems to wash its hands of how those schemes work out. That is not good enough.

People are paying into pension schemes and nobody is monitoring the entitlements they should get. The Pensions Board's claim that its only interest is in the number of active members as this reflects its income, is deplorable. That is a fact which is stated in its report.

Can the Pensions Board be impartial? I would say it cannot be because it relies on pension scheme operators for funds. It accepts sponsorship from those in the industry for their away days. A substantial number of the board members come from the pensions industry. I can understand why the Pensions Board reflects the opinion of the pensions industry more often than it ever reflects the opinions of the workers.

Today's workers are paying for the current State sector guaranteed pension, the future State sector guaranteed pension through the pension reserve fund and, in many cases, for their own insecure occupational pension. In addition, they are being encouraged by the Pensions Board to contribute to the pensions of their children and grandchildren. Never before were so few asked to provide for so many. When the Minister talks about providing for future pensions, who is paying? Workers are paying for their own pensions. They have paid for it through the sale of Eircom and the Minister is asking them to pay for future pensions. What about workers today who are hard-pressed and have come through hard times? They are being asked by those in the Pensions Board to pay to look after their grandchildren and their children. They need to get a life.

A good broker would recommend investing in the stock market only with money one can afford to lose. We have all heard that before. However, we are bombarded with advertisements encouraging us to buy pensions which enjoy tax relief only to be invested in the volatile stock market. The Minister is aware that most Irish people do not buy shares on the stock market. Many people had their fingers burned in the Eircom share debacle, which may have been their first and only time to buy shares. People are careful with their money. However, they pay money into pension funds and hand it over to brokers to manage and play with on the stock market like it was Monopoly money. People would not do that with their money but they hand it over it to brokers because they are encouraged by the Government to pay into a pension fund, which they believe will provide for them in their retirement. The Minister is fooling the people in this respect. It is dishonest.

I want to address the pensions industry. Two senior officers of a large national union, one of whom is on the board of the Pensions Board, have recently advocated child pensions, the SSIAs to be diverted into pension funds and mandatory adoption of PRSAs. I would expect these officers to be more concerned with the interests of workers and to seek to protect their pensions rather than advocating those issues and simply trying to secure additional funding for the pensions industry. The unions seem to have been brainwashed by the industry.

The industry is collecting money from ordinary workers which attracts full tax relief. For those people whose marginal tax is at the high rate, the Government is contributing €1 for every €1 paid. The industry is not taxed on the profits from its investments. It is not obliged to guarantee any return. It can freeze and has frozen payments for pre-1991 early leavers. If the fund runs out of money, as is happening quite frequently these days, when it comes to paying pensions, it can wind up the scheme leaving the members with nothing. It is nice business for the industry but bad business for the ordinary worker. As George Bernard Shaw once said, "Every profession is a conspiracy against the lay man". That aptly applies to the pensions industry.

As a result of the way administration expenses are calculated, the administration costs have gone up while pension benefits have gone down. The pensions industry is taking everything and giving very little back. The industry must learn something from the success of the SSIAs. The Government contributes one euro for every four contributed to a SSIA while it contributes one euro for every euro in the pension schemes. However, PRSAs have been a failure. The Minister says he wants to wait a further two years to see if they will be a success. I doubt that they will.

It is obvious why they have failed. With so many snouts in the pension fund trough, pension funds are being squandered. It is time the pensions industry got its act together. If private pensions could be presented in a formula as simple, transparent and fair as the SSIAs, there would be a much better take-up of pensions than there is today. If the industry is unable to do this, the Government should step in and do it. In only five years more than 1 million adults, with considerable help from the Government, will have voluntarily saved €14 billion. Who is to say how much we would save for our retirement if the Government could organise a simple special savings pension account? The high take-up of SSIAs and the high rate of home ownership proves that the Irish are not squanderers but savers.

The Government must ensure that the pensions industry does not get its hands on the SSIAs, which it is eyeing like hawks. The industry has proved it is incapable of preserving pensions and it now wants to squander the savings of more than 1 million people. The Minister must not let that happen. The Government must retain control of pensions to protect this money and encourage people to continue saving, whether for retirement or not, and make sure those savings are protected. I have no confidence that the pensions industry will protect that money. It will squander it.