Jimmy Harte (Labour) | Oireachtas source

I welcome the Minister. The pension problem is one of the biggest issues facing this country. I recall as a young man looking at the pension model when I started in the insurance business. It showed that when one started earlier one was on a bicycle on a slope, but the longer one waited, the steeper the climb on the slope became. Nobody realises how difficult it will be for this country to sustain the pensions of a population that is getting older and living longer.

The first pensions regime was set up by Otto von Bismarck in the late 19th century to stop German labourers going to America to earn money. At that stage, however, average life expectancy was 50 to 55 years. It was probably envisaged that people would not have to get a pension. Things have moved on a great deal since then. There is also the issue of public service pensions and private pensions. They are very different. People who were contributing to a private pension in the last few years have seen their funds slashed enormously. In addition, many people in business cannot afford to set aside the €1,000 to €1,500 per month that they were putting into their pension previously and have stopped contributing. Their fund could be growing or dropping by now. It is a time bomb waiting to go off, even if it is a cliché to say that.

This country is in a slightly better position than other countries. We have a younger population which might be able to sustain the pensions for some time, but in European countries, particularly in Germany, the population will become more weighted towards the older age groups and the younger age groups might not be able to sustain their pensions. We must protect the pensions of people with private pension funds. In a court case last year the banks tried to grab the pension fund of an individual because they were in massive debt. Happily, the court ruled against that. The banks would love to be able to call on people's pension funds so I am glad the decision went that way. However, there is always the fear that they could try again and succeed. The protection of the pension fund is critical for people in business and for people who wish to invest in a pension.

I do not believe we have really grasped the enormity of the problem there will be 25 or 30 years hence in terms who will fund the public pensions. As has been said, there are people who, for their own reasons, have not worked and they will get the same pension as people who have contributed throughout their working lives. It is only fair that the latter group be given preferential treatment, even if it was a small lump sum when they retire, as one gets with a private pension or public service pension. The ordinary old age pension for many people is just a continuation of their earnings or, perhaps, a reduction. Perhaps some type of incentive should be given for people in that position.

The other issue is that the pensions industry is keen that some of the pension fund could be released before pension age, depending on whether it is a company pension or a private pension. At present, if one has a private pension and one reaches the age of 65 years, one can withdraw a quarter of the pension fund as a tax free lump sum. We should consider some type of mechanism whereby five years before retirement age a part of the lump sum could be drawn down. Many people could clear their mortgages. It has been shown that many people in the 40 to 65 year age bracket are suffering more than we thought with mortgages that should never have been allowed to extend beyond the 65th birthday. There are people who could use some of their lump sum towards ending their mortgages a few years earlier than retirement age. I do not believe they would spend it on a yacht or holidays around the world. It could be designed so that it could only be released for the purpose of clearing a stressed mortgage. It would help the people concerned and give them an incentive to save in the meantime because there are generous tax allowances for pension contributions.