Mary White (Fianna Fail)

I will come to that. It is no harm to reiterate the questions raised in the ESRI report. What are the sources of income during retirement for pensioners? How effective are the public and private components of the pension system in providing income during retirement? How do pensioners' incomes compare to the incomes of the working population?

I had given no thought to this until it was put on the Seanad agenda for this week and I had read the report by Dr. Gerry Hughes and Dr. Dorothy Watson of the ESRI. Most people in Ireland do not think about the problems presented by pensions in terms of dealing with what their lives will be like when they are no longer working. The results of the ESRI study show that the average income of a pensioner in 2000 was somewhat more than half of gross average industrial earnings.

The main source of retirement income is provided by the State's pay as you go pension schemes, contributory and non-contributory. The study shows how much income pensioners have and how effective are the public and private components of the pension system in replacing income from work. The key word is "replacement" of income from work. The State pension provides an income for more than 91% of the population. Occupational or personal pensions provide an income for only one third of the population. The ESRI report shows that between 1994 and 2000, the average growth replacement rate in the first year of retirement for pensioner couples was 51% of pre-retirement earnings, while for single people it was 43%.

What is the purpose of the State pension scheme? It is to redistribute income towards low income pensioners and prevent poverty or destitution in old age. It is also to help workers maintain living standards during retirement by replacing income from work at an adequate level. However, as Senator Terry has indicated, there is a large variation across countries in achieving a balance of emphasis between these two objectives. Irish pensioners get the worst deal in Europe. An OECD policy document of March 2005 shows Ireland at the bottom of a list of 30 countries, in terms of gross replacement.

I do not seek to justify why we are at the bottom of the list or to explain why other countries are doing better. However, while there are many reasons why countries such as France and Germany have problems with their economies, one of them is the huge social welfare payments they provide. I am not saying one approach is better than another, but it is part of the reason there is so much unemployment in those countries. There is a good deal of taxation and high pressure on costs and companies. Looking at it in a barefaced manner it is sad to see this trend but it is a component of these countries' economic problems about which we constantly hear. We are getting richer while they are getting relatively poorer. Our economy is growing at 5%, while their economies are not. At the same time they are paying out a great deal. From an equity point of view such matters must be addressed.

According to Dr. Hughes and Dr. Watson in the ESRI report, the system requires serious reform. Further examples of replacement income may be gleaned from the OECD charts. Luxembourg's replacement rate after retirement is 100%. Austria, Hungary, Italy, Spain and Turkey provide high pensions to lifetime workers. Average replacement earnings in Austria, Hungary and Italy are 75%.