Leo Varadkar (Dublin West, Fine Gael) | Oireachtas source

When that is taken into account the subsidy is not as great as people may think. When it comes to the marriage bar, most of the women affected by that where public servants before 1995 who, even had they remained in work, would not qualify for the State contributory pension. Even men would not have qualified for it because pre-1995 public servants do not. They may potentially have qualified for a public service pension but that is a matter for the Minister for Public Expenditure and Reform. Pre-1995 public servants, male or female, married or not, do not qualify for the State contributory pension with the exception of a small number who left the public service and then rejoined it post-1995.

The amendment calls for the drafting of a report to be laid before the Oireachtas, regarding gender gaps in the pensions paid by my Department and occupational pensions paid by public and private sector employees. I am very happy to discuss it in the course of this debate and on other occasions, particularly at the committee, insofar as the matters are covered by my brief. The matter has been discussed before in the Oireachtas and is regularly considered by the entire pensions policy community. We do already know the main reasons women generally receive a lower age contributory pension than men and why the same applies to a much greater extent in the context of occupational pensions. The reason in both cases is that men generally will have paid more for longer to fund their pensions, either through pay-related social insurance, PRSI, contributions into the Social Insurance Fund or through deductions from their salaries for occupational pensions. It is evident that we have areas in the pension system where people pay a contribution to fund an increase in their eventual pension and those who contribute less will receive a lower pension under a particular scheme and those, for example, who make additional voluntary contributions receive more. What matters is there are other elements in the system that result in fairer outcomes. Some of these elements mitigate against this effect while others counteract it and together these result in men and women having different social outcomes.

On the State pension side, reductions in the rate of contributory pension are very much minimised by the banding structures. Someone with a yearly average of between 48 and 52 weekly contributions per year qualifies for a full rate pension. Those with lower yearly averages get a reduced race but those reduced rates are not pro rataor even close to it. Someone with a yearly average of just 20 contributions receives 85% of the full rate that goes to somebody who has made the maximum average contribution of 52. Somebody who has made only 20 contributions gets much better value for those contributions than somebody who made an average of 52 contributions.

It is also the case that the cheaper contributions paid by less well-paid and part-time workers are as valuable as the more expensive contributions paid by higher paid full-time employees. This is very different from the case with occupational pensions. The same also applies to credited contributions provided the person has paid the ten years of PRSI required for a contributory pension. These are the factors that disproportionately benefit women over men. The most recent actuarial review of the Social Insurance Fund found that female employees receive significantly better value for their contributions than their male counterparts. A person over 66 with few or no contributions may also be supported under the contributory pension system if he or she had been dependent on his or her spouse who is a contributory pensioner. In such cases, they can receive an increase for a qualified adult of up to 90% of a full-rate pension. This payment is based on the person's means, not those of his or her spouse. Over 80% of those to whom I refer are in payment of a full rate. If the person is a widow, the social protection system will, in the large majority of cases, provide a full-rate contributory pension, usually with an additional living alone allowance. In addition to this, however, there is the non-contributory State pension. If somebody does not qualify for the full-rate contributory pension, he or she may claim the non-contributory pension. The latter is payable at up to 95% of the full rate of contributory pension. While this is subject to a household means test, there are significant disregards that result in over 90% of persons qualifying at the full rate. Given that approximately half of those over 66 depend solely on the State pension, a reduced rate non-contributory pensioner will generally have more significant means than most of those in his or her age group.

The net effect of these arrangements is to make the average pension payments made by my Department to both men and women similar. This is reflected in the poverty statistics produced by the Central Statistics Office. Today's male and female pensioners experienced different employment histories. In light of the difference in their lifetime incomes and their contributions into the Social Insurance Fund over the years, the outcomes for them vary. It is, of course, possible to do more or less, or to mitigate the differences in outcome, and each Government that reforms the system must balance the desirability of any changes with the extra cost that might accrue in respect of the PRSI system. As a result of changes in work practices, 48% of PRSI contributors are now women and they, of course, would bear a significant proportion of the cost of any changes that might result in such a cost.

The alternative, which I could not support, would be across-the-board reductions in the rate of pensions for everyone. This would include the most vulnerable of the elderly, 50% of whom depend solely on the State pension. It is also worth pointing out that in some countries there is no equivalent to the increase in respect of a qualified adult and that widows receive significantly lower pensions if they have limited insurance records. In many countries, the basic state pension is much lower than it is here.

The issue of gender gap is much more significant in the context of second-pillar pensions. Such pensions are more associated with insuring one's replacement income rather than the avoidance of poverty. A person on a high salary could find reliance on a State pension a significant income shock. Clearly, if somebody has not been in employment for most of his or her working life, he or she will not have had the opportunity to build up an occupational pension. By definition, however, people are unlikely to suffer the same level of income shock on retirement. There are, of course, workplaces where there are no pensions or no access to them or where their adequacy has become increasingly restricted. This affects both men and women.

In broad terms, the public sector is well catered for in this area. A high proportion of the workforce in the public sector comprises women related to the private sector, but that, of course, is matter relating to the policy remit of the Minister for Public Expenditure and Reform. There are gaps in the private sector and recent developments, both here and abroad, serve to indicate that arrangements are under increasing pressure. For this reason, the Government is seeking to develop a universal retirement saving scheme. Work on that project is ongoing. I do not want to pre-empt the final shape of the scheme but I believe it will be of significant benefit to all middle-income earners.

The amendment calls for the Government to frame specific proposals and targets regarding the gender gap. I am not sure if this is the correct approach. The best way to tackle this gap is by making our systems work better at delivering better and more equal results for women and men. In that context, finalising the total contributions approach proposal in a way that recognises the value and impact of home-making and which balances the final proposal accordingly will do more than a stand-alone proposal with no funding line to support it.

The issues raised by the Senator are important and are being discussed on an ongoing basis. The development of the total contributions approach will provide opportunities for detailed discussion on how we can recognise home-making as a credit in that context. I expect to have a consultation process regarding the reform of that system by the middle of next year following analysis of data from the crucial upcoming actuarial view of the Social Insurance Fund. The consultation will involve sharing of such data with stakeholders, including the joint Oireachtas committee, in order to allow them to outline priorities in advance of a final design of proposals. These will, of course, be subject to Oireachtas scrutiny. This is probably the best way that we, as politicians, can engage in respect of this matter.

Of course, all of these issues must be looked at in the round. I would be interested in any proposals that the joint Oireachtas committee makes once we make the data available to it. I will certainly consider any recommendations made but we will need to see how the costs will be met and how any changes will impact on individuals, and not only in the context of different genders.