Seanad debates

Wednesday, 28 March 2007

Social Welfare and Pensions Bill 2007: Committee Stage

 

4:00 pm

Sheila Terry (Fine Gael)

I move amendment No. 11:

In page 46, to delete lines 28 and 29, and substitute the following:

""(fa) to perform the functions conferred on the Board by this Act;

(fb) give balanced and impartial information to consumers regarding pension products, including, not limited to—

(i) tax relief,

(ii) operators' charges,

(iii) tax implications of leaving a sum of money in place, and

(iv) the commutation of tax-free sums of money on point of retirement;".".

The Minister will be very glad that I do not have much time left to speak on these amendments. The purpose of amendment No. 11 is to ensure people taking out pensions would be given accurate and transparent information when doing so. It is not good enough that the Government, the Pensions Board, the Financial Regulator and the industry, when advertising and promoting pensions, do not make clear to people the various aspects entailed in taking out a pension which ultimately may result in not having a very good pension. The amendment outlines some of the areas in which we need greater transparency. Advertisements often claim that participants will get 50% of their contributions back in tax relief. However, it should be much clearer and be referred to as tax deferral. Many people do not realise they will pay tax when drawing down their pensions. It is tax deferral. Perhaps we should consider a scheme in which one pays the tax at entry and draws it down free of tax in retirement.

The operators' charges are not clear to people taking out pension plans, which they should be. We have been told that charges could amount to anything up to 26% of a pension fund. Most people do not know about that. I feel very strongly that when taking out a pension, people should be informed about the implications of taking the tax-free lump sum on retirement. People do not realise it would be more financially beneficial for them to leave in place the tax-free lump sum, thus providing them with an income stream during retirement. If they really needed that lump sum, it would be cheaper for them to borrow it from a bank. They could make the repayments out of their pensions and still have larger pensions than if they had first taken it out. People are not informed of this. I will not delay any further on this, but there is an onus on the Pensions Board, the Financial Regulator and the Minister to ensure people are given the information in order that they can make an informed decision and not be blinded by the industry convincing them to pay into a scheme where they will receive great tax-free allowances and which will give them wonderful pensions when they retire. People must be informed of the possibility that this will not happen, that there may be no indexation, that a company may decide to change from a defined benefit to a defined contribution scheme. All the pitfalls must be pointed out. This has happened before and is still happening and people are not being informed about it.

Comments

No comments

Log in or join to post a public comment.