Sheila Terry (Fine Gael)

I welcome the Minister to the House for this debate and I appreciate the time he has put into it since he moved to the Department of Social and Family Affairs. While I have some hard things to say, I hope the Minister will make a difference. Until now things were in poor shape but the Minister has the will to make a difference for every pensioner and everyone saving for a pension. I agree with much of what he said but I take issue with and will address some of his comments. I will not say anything I have not said before.

I thank the Minister for commissioning the ESRI report, which is independent and gives and unbiased view of the pension situation. It has not been influenced by the Department or any vested interest. Many suggestions I made previously are included therein — I am glad to see I am not on my own when I say what I think. This report backs up the stance I have taken in previous debates and I hope the Minister will take time to look at my suggestions.

Pension provision is about ensuring our pensioners have sufficient income to live on and do not fall into a poverty trap. This report shows that many of our pensioners are living in poverty and neither the Minister nor I want to see that happen. The problem, which has arisen for a number of reasons, must be tackled. This is national pensions awareness week and there are many reports available. The OECD report on pensions shows that workers on average earnings in OECD countries can expect their post-tax pension to be worth just under 70% of their earnings after tax. Ireland, however, is at the bottom of the league of 30 countries, with a net replacement rate for those on average earnings of 30.6%. That is appalling but it does not surprise me.

The Pensions Board must examine how other countries deal with pension provision and ensure pensioners have sufficient income to maintain the standard of living they expected. There are good practices in other countries and the pensions industry in Ireland should examine them.

I have been critical of the pensions industry on many occasions. It was brought to my attention yesterday that a member of the Pensions Board had a letter published in The Irish Times in December referring to statements I made in this House about the board. I take it as a compliment because it demonstrates that I had irked the board. This person stated that she had been on the Pensions Board for two decades. If I were her, I would hang my head in shame. If all the board can come up with is the PRSA, it is a poor day's work.

I am surprised the Minister has patted the board on the back for the PRSAs because they have not worked. When the Minister complimented the board, he stated that 50,000 PRSAs have been opened. Why not give the percentage of the work force who have taken them out? A total of 1.3% of employees have taken out a PRSA. The Pensions Board set a target of 60% by the end of 2005 but the PRSAs have been a disaster because they are simply more of the same unsecured pensions that guarantee nothing. All the Pensions Board refers to is getting people to take out a pension, it never mentions the risk that they may not get an adequate pension on retirement because they are not guaranteed and can switch from defined benefits to defined contributions.

I called for the risks and fees to be publicised but that suggestion was not accepted. Current rules allow ordinary occupational schemes as well as PRSAs to be wound up without paying any benefits at all. Employees have no confidence in the pensions industry and the Pensions Board is not doing anything to ensure people will have adequate pensions when they retire.

I have read the entire ESRI report and the section on who benefits from the saleable tax treatment of private pensions is extremely important. The Minister, however, has given us conflicting figures. He qualified them by stating that the statistics are from 2000 but the tax forgone to support the private pensions system in 2000 and 2001 was €1.5 billion, amounting to almost as much as direct expenditure on the public pension system for the elderly, €1.6 billion in 2001. In November 2004 and March 2005, however, the Minister told me in this House that the figure for the tax forgone to occupational pensions was €2.5 billion. The Minister is giving us misleading information and he should correct that in his response.

On a subsequent occasion in the House, the Minister reiterated that in 2004 the State contributed €2.5 billion to occupational pensions while contributory and non-contributory pensions cost it €2 billion. Many of those pensioners are living in poverty. I have already suggested to the Minister that if he were to withdraw the tax reliefs on occupational pension scheme contributions, overnight he would double the old age pension and still save €0.5 billion. What is happening with the occupational pension schemes? The Minister understands this because he has spoken on the matter on two occasions, as recorded in the Official Report. I am concerned that he did not give accurate information to the House on those occasions.

I go along with the conclusions of the ESRI report, including giving tax relief as a tax credit rather than at the marginal rate of tax, phasing out the tax-free lump sum, lowering the income cap and contributions allowable for tax purposes and tax on the returns on pensions and investments. Many countries have introduced these recommendations. These suggestions from the ESRI must be examined. I hope the Pensions Board will get its act together to deliver a proper pension for all and encourage people to save. Ireland is a nation of savers, as shown by the SSIA scheme. However, the pensions industry simply wants to get it hands on the SSIA money, which the Minister stated amounts to €15 billion. He must not let the industry get its hands on this unless it can guarantee the money will be preserved, not spent on management fees and feeding the fat cats.