Feargal Quinn (Independent)

I welcome the Minister. Senator Tom Sheahan referred to the Minister's enthusiasm. He also referred to the small man which I saw Minister bristle at as I tend to do. I have found a wonderful way to grow taller, that is, to switch to metric. I used to be only 5 ft. something, I am now 166 cm.

A part of the Bill I did not welcome was the reference to the retirement age of 70 years. I spent last night with Professor James Watson who discovered DNA in 1953 and is now 84 years of age. He spoke in Trinity College last night with much enthusiasm. I am not sure if he is still paid by Cold Spring Harbor University in New York.

Last week I spoke with Betty O'Reilly who works in Superquinn in Sutton at the bakery counter and who is celebrating her 85th birthday this week. She comes back for a few hours each week. Senator Sheahan asked about those Members of this and the other House. I passed my 70th birthday some years ago and I am happy that nobody has told me to get out. I hope my electors continue to stay.

The Minister spoke with real interest in and commitment to the Bill. I welcome the Bill as it will modernise and rationalise public sector pensions and will bring about significant savings. I note the significant change where one's pension will be based on one's average salary throughout one's career. That is welcome. I am glad action is being taken especially considering future trends. For example, the OECD expects government's expenditure on pensions to rise from 8.4% to 11.4% of GDP between 2010 and 2050. Clearly there is a problem which the Minister has explained. It is clear that spending on public sector pensions creates a need for higher taxes and increased costs for things like businesses. It restricts the money that the Government has available for investment in infrastructure, education, health and other areas. This then restricts the capacity of the economy to supply goods and skilled labour. Should we go further and implement a cap on public sector workers to bring it more in line with private sector workers? Mr. James Fitzsimons, writing in the Sunday Independent said that, "At the lower end of the pay scale, it is true that the [public] pensions are small and do not provide for a lavish lifestyle but they are ten times better than the State pensions that the rest are expected to live on. ... Public sector schemes are largely funded on a pay-as-you-go basis."

In the late 1980s when Minister for Finance, Mr. Albert Reynolds called in a number of us who were involved in different functions to attempt to do away with the pay-as-you-go system and establish a fund but never did so.

Nothing is put aside during the employees' career. Instead, the pensions are paid from tax revenue. When everyone else's pensions were affected by the global downturn, public servants claimed that theirs were not because they had no fund to be affected. The fact is that the State put nothing aside. That is what their pensions were worth: nothing. However, they will not accept this. It is not as if the rest of us would claim that they should not have any pension but things have changed. In a country where we are forced to borrow €20 billion a year to run the public service, nobody can claim their pensions are safe.

These are intriguing points to consider. An interesting example comes from Brazil where a proposal would cap the defined-benefit plans of future federal-government employees at around $2,000 - the same level as private sector workers. Those who want more would have to contribute to a separate fund. It is said that would make the system less unfair and, in the long term, considerably cheaper.

In the state of Rhode Island in the US which has a population of about 1 million. It has had to change state pensions in order that the state does not go into bankruptcy. The State Treasurer, Ms Gina Raimondo, persuaded the state legislature to overhaul the pension plan. She said, "We focused on the math...it should not be a political decision, but a financial one." The changes included suspending cost of living adjustments, delaying retirement and transferring all workers into a hybrid scheme, with a defined contribution plan, as is the norm in the private sector.

She fought to change the State's assumed return on pension investments from an unrealistic 8.25% to 7.5%, which is still very high. It was interesting to note that these changes affect current employees as well as the newly-hired state employees. The changes will save around $4 billion per year and the state has a population of 1 million people. If we are serious about pension reform, surely we should follow the example of places like Rhode Island. Such a move is blocked by the Croke Park agreement but we must consider the example.

Regarding pensions in general, we must seriously consider giving some people access to cash now rather than wait. One of the ways this could be done is by allowing people to draw down part of their private pensions or additional voluntary contributions to spend now. Could they be allowed to access 10% to 15% so they could fund small businesses or pay off debts when needed? Such a move would release €1.3 billion into the economy. This would mean pressure would be lifted from people and allow them to pay things like their mortgages. The Government recently dismissed the idea but we cannot go on forever with the current position. South Africa offers access to pension savings and research by Alexander Forbes, a consultancy, finds that 70% of members take their benefits in cash before retirement. It is also believed that allowing people early access to a portion of their pension encourages people to sign up to a pension scheme.

Australia's pension system requires compulsory enrolment in a pension scheme but members are allowed to take all of their benefit as a lump sum at the age of 55. Many people use the money to pay off debts and some spend it. They have a choice. In that case they may eat up all their savings and have to fall back on the means-tested state benefit at the age of 65. Should people not be able to access funds now if they have voluntarily paid a pension or have several pensions and need to pay the mortgage? Giving citizens access to pensions earlier frees up pension funds, allowing people to spend and stimulate the economy rather than save cash. That is what we need at the moment.

There is a misconception that people would be worse off in the future but early withdrawals might reduce other lifetime costs by virtue of them being met earlier. Such a proposal will also mean that people may be more willing to invest in pensions at an earlier age. We live in a free society and we should allow people to make choices, good or bad. It would be good for the country if people had more freedom and more independence. If people spend part of their pension they may have to fall back on living solely on the State pension. If that is so, that is so.