Jim Walsh (Fianna Fail)

Much good work was done in the pensions area, particularly under the stewardship of Charlie McCreevy when he was Minister for Finance. He opened it up and we must continue to progress that. Apparently, almost half the working population is without an occupational pension. While the Government has had the foresight to invest in the National Pensions Reserve Fund, which will be built up over the years, effectively, it will meet only social welfare and perhaps public sector pensions. There is a need for people in employment to be able to avail of an occupational pension in addition to the social welfare one. Often, the systems are integrated.

Unfortunately during the 1990s many blue chip companies and employers moved away from the defined benefit schemes to defined contribution schemes. That was done because of black holes appearing in pension funds as a result of the downturn in the stock market. There has been a recovery and the stock market has been doing well, particularly in recent years. As they have moved away from such schemes, there is a need for the State to play a part in ensuring occupational pension funds are in place and are properly regulated. Normally, I would resist placing further impositions on employers because there are too many impositions and regulations and perhaps too much employment taxation by way of PRSI, etc., on them from which they do not derive a great deal of benefit. Competitiveness is also a huge issue.

We should be much more proactive in the area of occupational pensions. Any employer of significance should ensure staff, who may have given a lifetime of service, have a modest or a reasonable occupational pension. There should be some mechanism whereby the employer and employee contributes to such a pension. In the case of good defined benefit schemes, the employer was probably paying in anything from 10% to 14% and the employee anything from 5% to 6%. There was a ratio of 2:1. This should be considered in order to regulate the system in some way.

There is also a need to look at other aspects of this from a regulation point of view. Investments and the managers of those investments — often stockbrokers, pension funds, insurance companies, etc. — need to be regulated to ensure the benefit accrues to the investor who may not be au fait with the process. Often the fees applied are astronomical and should be curtailed.

While some relief has been given to people with private pension funds so they do not need to subsequently invest in annuities, there is a need to look at a system where anybody in any type of occupational pension scheme is not obliged to fall into the annuity scheme. Annuities provide mega profits for insurance companies. I have heard figures whereby of the amount invested, the annual payment runs at 3% to 4% which means the individual must live for at least 30 years to get back his or her capital sum even though the insurance company has this fund available to it throughout the period. This is a technical area which needs to be examined.

People starting work now will seek to qualify for pensions in 2050 and by then, the demographics will have changed. We need to plan now for those changes. There is a need for regulation given the direction in which many employers have gone in regard to occupational pensions in the past decade.