Darragh O'Brien (Fianna Fail)

I congratulate the Minister of State, Deputy Brian Hayes, and wish him the best of luck in his endeavours over the next few years.

I am pleased to be here discussing this Bill. A couple of items on the pensions levy were discussed in this House only a couple of weeks ago. Some of the charges with regard to how this is paid for have been discussed in the House previously.

However, there are elements to be welcomed within this Bill. I have no difficulty at all in saying so. The air travel tax, the reduction in VAT and a number of matters here are measures which I hope will work. All of us want to ensure that the country returns to growth, which is crucially important, and we start to reduce the live register numbers and get people back to work. The Government will find support on this side of the House to do that in measures which we believe are correct.

My main fundamental difficulty with this is how this is being paid for. The Minister of State said that it is not a raid on pension funds, but it is. There is no way of getting around that. For example, I received a letter, as the Minister for Finance did, from the retired aviation staff association. This is merely an example of many thousands of pension funds across the country. The scheme has 15,000 members: one third are active, one third have deferred and one third are pensioners. This scheme is under-funded already. The trustees state that it will be necessary to sell assets and reduce benefits to meet the levy. It is as simple as that. That will happen with a substantial number of funds. More than 70% of defined benefit funds here are under-funded. The Minister is going after funds that are already struggling.

I know the Government has a difficult job to do. I was involved in four budgets, trying to find money for initiatives. However, there was much play in the run up to and since the general election about the reduction in the IMF/EU rate and a reduction of 1%, we were told, would deliver €440 million in savings. This raid on certain pension schemes, and not all, will raise €470 million a year. They are not too different in the case of the numbers. However, we were told last week by the Minister for Finance under duress in the Dáil Éireann that any savings on the rate would apply only to moneys not drawn down, and therefore any potential savings would probably be in the region of €160 million. Then we find out today from the Taoiseach that he has not even discussed this matter with President Sarkozy. There are many different voices and different stories being told about this.

Setting the precedent whereby the State will go after capital assets of persons who have been prudent and who have done what successive Governments have asked them to do, which is to provide for their retirement, is a dangerous precedent. If we must levy funds - no taxation decisions are easy - why did the Minister not look at levying the tax free cash lump sums? They are paid on all retirements, whether public or private, whether proprietary directors or a work scheme.

Anyone who retires would pay a levy and it would be for the Government to decide how they would do it. However, in this instance we are hitting approximately 65,000 pensioners and an additional 1,000 members of pension schemes but we are not going near public sector pensions or approved retirement funds. In the House last week the Minister, Deputy Noonan, stated he would examine that matter. The Minister of State will be familiar with the situation of approved retirement funds, ARFs. I worked in the pensions industry. They afford generous tax relief for contributions to pensions schemes and generous retirement options, especially for the self-employed and proprietary directors, of which a normal PAYE worker cannot avail. The very people who are allowed to take out an approved retirement fund are those whose approved retirement funds are exempted from this levy. They are the people who generally have the money because to take out an ARF one needs a guaranteed salary of €12,700 and an approved minimum retirement fund of €63,500. Such people have already built up a substantial pension pot and we are letting them off scot free.

This does not get back to the fundamental point, that is, targeting savings and pensions retirement. I welcome some of the measures the Minister of State is bringing forward but we are setting a precedent. The Government will undermine confidence by bringing in a 0.6% levy over a four year period. At least it has defined the period of time. I am concerned that it will continue past the four year period as many other levies have in the past and the levy could be further increased.

The idea that there was broad consultation with the pensions industry is questionable. The Minister of State used the term "canard" and it is exactly this because that did not happen. The Pensions Board was not consulted on this before the decision was made; it was consulted afterwards. That is a fact; it is not our following a line from the Dáil Chamber but from the Minister who answered a parliamentary question to Deputy Michael McGrath on the matter. The Pensions Board was not consulted on the pension levy until after the decision was made at Government.

What do funds do now? Let us consider the example of the Retired Aviation Staff Association. It must now sell assets in its fund to pay the levy. The Minister of State remarked in his speech that "Provision is made to give pension scheme trustees or administrators the option of adjusting the benefits payable under a pension scheme". That is a nice way of saying the Government will allow trustees to cut the benefits of retired members and existing members of the pension scheme. Effectively, the Government is stating that if a scheme needs to sell assets and seeks to reduce the pension entitlements of the people in the scheme, the Government is giving trustees a free hand and, despite that they promised 50% of a final salary as a pension to a member, now, because of the levy, they will reduce the amount on average by 9%. That is not small cheese. People believe this is a 0.6% levy. Figures from the Irish Association of Pension Funds, IAPF, suggest an average of 9% of a reduction in annuities. Effectively, it amounts to 10% of take home pay of someone who has retired. The longer a citizen has been in a pension scheme, prudent and saving for his or her retirement, thereby reducing the burden to the State on his or her retirement, the more he or she is being punished for joining a pension scheme.

Even worse, the pain is not being shared across the board. Proprietary directors, most of our self-employed and those who have pension funds managed here but who are working abroad will be exempted from this levy. I understand that it is difficult for Government to raise money and that not every measure it introduces will be popular. The Government will find support on this side of the House for unpopular measures in the coming four or five years if we believe they are correct. That much I can guarantee. However, this is akin to taking 10% of a person's deposits to pay for a jobs initiative that was previously a jobs budget and exempting more than half the people who have pension schemes from paying anything. The Minister, Deputy Noonan, has stated that we should examine the approved retirement fund rules to examine all who are paying into pensions if we believe we should introduce a pensions levy. As it is currently structured, it is inequitable and the burden will be carried most by those who have contributed for longer to pension schemes.

I do not believe this is the way to pay for the jobs initiative. Certain items included in it are welcome but the situation is that approved retirement funds are exempted as well. Substantial moneys are involved over a period of time and an average pension fund will pay approximately €2,400 over the four year period, which is not small money. This side of the House will oppose the Bill but not on the basis that there are good things in it. I believed it was a mistake by the previous Government to introduce the air travel tax and I stated as much at the time. It is good that it will be gone on the basis of tying in the airlines to increased passenger numbers and more routes. That is sensible. The reduction in VAT for tourism is a sensible approach as well. However, if the Government decides to come up with another jobs initiative later in the year or next year and if it is short of money, can the Minister of State guarantee me that the Government will not hit those easiest to hit, namely, those paying into pension funds, and increase the levy from 0.6% to 1% next year or decide to use another €300 million because it has a capital project that it will not pay for otherwise? Items within the Bill are more than welcome but we are completely opposed to the way in which the Government seeks to pay for it. That is why this side of the House is opposed to the Bill.