Jim Walsh (Fianna Fail) | Oireachtas source

I was not in any way decrying the sovereign annuity system from the point of view of returns, which I think is fine. I also accept that as we have read in newspaper reports and elsewhere, many people have built up tens of millions of euro in pension schemes. That has now been changed. From a tax point of view the Government has gone too far the other way. There needs to be an incentive to get people into pension funds and to provide for themselves. We will have a huge future liability in that regard.

However, people should have the option to buy annuities. There are certain safeguards in that people get a guaranteed income stream and are no longer carrying the risk; there are certain arguments in favour of that. People should be able to manage it through the approved retirement fund, ARF, and there are professional managers who will do that. There may well be issues about regulating those more strictly than we are doing and making them more accountable - I believe there are moves in that regard based on information from some people in the industry. Ultimately, where people have worked for their lifetime and have accrued a certain amount of money in their pension pot, both they and their families should be the beneficiaries of that rather than the pension scheme and that option should be available to them.

I fully accept that many people would not be able to make investment decisions.

However, those people already have the management of their funds within the schemes. As they are working, they are subscribing and the employers are subscribing, and those funds are being professionally managed. It should not be too difficult to extend that beyond the retirement date.

I am not surprised that the Minister will not accept the amendment, but it disappoints me because I believe the pension area needs to be looked at much more thoroughly. Not many politicians will say this to the Minister. I ask her to look at the public service defined-benefit scheme, which is a benefit to us, and consider changing it to a defined-contribution scheme. If she did that I believe within a week or two her officials would come up with ideas along the lines I am suggesting which would benefit people who are caught in this position now. They should not be disadvantaged just because they are in the private sector.

There is nothing to prevent the Minister putting a distribution cap on the funds. An argument used in the past was that people would dissipate the fund over a short number of years. Obviously it has been possible to apply a tax on an imputed distribution, which at 5% is far too high given that it is only a 20-year period. It exceeds the annuities and is unfair to people. I believe it was stitched in initially at 3% and was then raised to 5%. Once it goes over a certain level - it may be that €2 million is the right amount - it could be 6%. For those with small pots of money, as most of these schemes will have, based on the earlier discussions, it is not impossible and should not be beyond our wit to devise a scheme which would be in the interests of people who have these pensions.

We discussed mutual funds on Committee Stage. Where people can visualise the growth in the amount of money accruing in their pension pot, it incentivises them to contribute what they can because it is tax efficient - there is a deferred tax arrangement. It could be good from the point of view of getting people into the pension mode and providing for themselves. In 20 or 30 years when probably none of us will be in these Houses, the State may find it impossible to pay public service pensions and the State pension. In anticipation of that Mr. Charlie McCreevy started providing for that ten years ago. Unfortunately the pot of money was used to salvage the banking crisis. The concept is certainly as valid and probably more urgent than it was when he did it. If we do not open our minds to such things, we are losing an opportunity to structure for the future.