Sheila Terry (Fine Gael)

Five minutes should be long enough for the Minister of State, Deputy Parlon, to catch his breath. I thank him for coming to the House to reply to this matter. I urge the Minister for Finance to consider providing incentives for private sector workers to leave their pension funds intact by forgoing the 25% tax-free lump sum, thus ensuring a higher income stream in retirement.

I am pleased that at last we are hearing more from the Government on the provision of adequate pensions. At the weekend, one newspaper had a headline to the effect that the Taoiseach had promised a budget boost for pensioners. That is welcome. Today at a Labour Relations Commission conference in Croke Park he described the practice of some companies of reducing pension benefits as a tension point for workers. He stated he did not believe the pension issue was affecting the viability of companies, especially in profitable sectors. However, he did acknowledge that some firms in the manufacturing sector could be under pressure.

I welcome the fact that at last I seem to be getting somewhere on this issue. Perhaps the Government has begun to realise the pensions issue relates to pensioners today and those about to become pensioners. We should not be as concerned as we have been, and as the Pensions Board is, with pensions of people in 25 or 50 years. We should be concerned about those in difficulty today.

It is illogical to compel people to pay into a pension fund throughout their working lives and then penalise them for leaving it intact. The Government encourages people to withdraw 25% of their pensions in a tax-free lump sum. We want to ensure pensioners will have an adequate income. I cannot understand why we encourage people to draw down 25% of their funds which are tax free.

I want people to enjoy tax free benefits as much as possible. Why not give the same tax benefit to leave the fund intact? Removing the lump sum reduces the pension fund by 33%. If we want people to live comfortably during retirement, we should encourage them to leave pension funds intact.

Well-documented figures show the majority of pensioners today survive on the State pension. The private sector pension makes up an extremely small portion of retirement pensions. Will the Minister consider using the budget to give the same tax incentive now given to people withdrawing the 25% lump sum to those who opt to leave it in situ? It would do pensioners and the State a service by providing an adequate income.

The pensions industry is behind this drive as it suits it to give out a tax-free lump sum. It makes a killing on the exchange rate it uses when exchanging the tax-free lump sum for pensions. According to statements made by the IAPF chairman and the Pensions Ombudsman, the pensions industry makes a profit of up to 233% on people opting for a tax-free lump sum. This enormous profit is taken by the industry when the uninformed pensioner is consigned to a grossly reduced pension. That same pension decreases in value as the person gets older. Many difficulties must be addressed. If the Minister of State takes this on board it would help increase the income stream of pensioners.