Jim Walsh (Fianna Fail) | Oireachtas source

I move amendment No. 2:

In page 9, between lines 19 and 20, to insert the following:
“9. Section 48 of the Principal Act is amended by inserting the following after subsection (1A):“(1AA) No member of a defined benefit scheme shall be obliged to purchase annuities where he or she opts for an ARF or an AMRF or both.”.”.

President John F. Kennedy often used to quote George Bernard Shaw's saying: "Some people see things and say 'Why?' But I dream of things that never were and say 'Why not?'" The Minister is in real danger of falling into the former category. What we see here are the problems and why we cannot do something when, in fact, there are very good ways we could deal with this and there are many companies which we are now letting off the hook because of it.

I am aware that in respect of this amendment the Minister will also get notes from the civil servants who probably already advised her. The real problem is that people working as civil servants, people in politics and people in the public service enjoy Rolls Royce pension schemes that one could not buy in the private sector - I said that from the first day I came in here and saw what the schemes were. There are many people who work extremely hard in the private sector and who are left high and dry at the end of their careers without having pensions. This Government's policy, in particular, has been so counterintuitive against the incentivisation of people to participate and to have pension schemes that I find it appalling.

I would have thought this would have been recognised, particularly with a woman in this position, given very few women have pension schemes and those who have would have long gaps because of the period they are out of the workforce when having their children. This applies across the board. Women who follow careers in America spend an average of 11% of their work life outside of their employment category. We should ensure that those people are at least as well secured and looked after as those of us who are fortunate enough to work for the State.

In this amendment, we ask that "No member of a defined benefit scheme shall be obliged to purchase annuities where he or she opts for an ARF or an AMRF or both." I see now that we should also have included the defined contribution schemes as well as the defined benefit schemes.

I and other people who are directors or shareholders in a company can build up our pension schemes and we can invest in our own private pensions, or we can invest in an ARF or AMRF. However, many people, as employees, are not allowed to do that and they have to purchase annuities. On Committee Stage the Minister's note, which may also be what is drafted for her today, concerned the sovereign annuities. I checked on sovereign annuities and found that while the return on them might be calculated slightly differently, because they are based on bonds and the investment might be more secure, nonetheless, the central point I was making is still the same.

Let us take a person on the cusp of retirement who has a serious illness and the prognosis might be that the person is not going to live for more than five or six years. That person is obliged to buy an annuity. Let us suppose there is €400,000 in the fund, and while I do not know precisely what current annuity rates are, they were 3% a few years ago and are probably 4% or 4.5% now. It means, in effect, that the most the person will get back from the capital sum is 20%.

Therefore, it makes no sense for them to put their money into an insurance scheme to give them an annuity when the profit and the majority of that scheme will accrue to the benefit of the insurance company.

Alternatively, they could go into an approved retirement fund, ARF, or approved minimum retirement fund, AMRF. Presumably it would be an ARF because an AMRF would be a smaller amount of money - only up to €12,000. If they were to go into an ARF, at least the residue of the amount after their death would actually accrue to their wife or family. We have no made the choice in respect of the first amendment that the companies which are profitable, which is what this is about, are more important than the poor single individual in the pension scheme who is waiting on their pension and finds that the pension is closed. This individual will be seriously disadvantaged. The pension will be cut.

Are we going to draft the legislation for the benefit of the insurance companies who pay the annuity, which is the way it works now? These companies obviously do it on an actuarial basis with a comfort zone built in for them. I have looked at some of these. It can take up to 25 or 30 years to get one's annuity back. This is just the capital sum without any return on the amount of money one is giving to people - they should be making a profit on it if they are in the business of managing funds. That is very unfair. People should have a choice. If they want to make that choice, they will have a guaranteed income for the rest of their lives however long they live. That is fine. They should have that choice. I am not trying to deprive them of it. The present situation is unsatisfactory.

I am seeking the sensible and reasonable option of allowing people the choice of keeping their capital sum and putting it into an ARF which will be managed for them and where that pot of money will be their own and form part of their estate when they die unless this Government and this Labour Party Minister feels that the priorities of the insurance companies and their profits are superior to those of the individual pensioner. I do not share that view and I hope the Minister does not share it either.