Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

I will just make a few observations before reading the departmental note. The figure that the Senator put out there of €70 million cannot be taken in isolation. The old age pension payment is the biggest payment in the State and amounts to €7 billion. It is €7 billion out of the €20 billion social protection pot. It is not just a question of putting €70 million in on top of that. The State pays €7 billion for old age pensions, something with which I fundamentally agree. The next biggest quantity of money is the public sector pension payment which is almost €4 billion. Therefore, the State is providing €11 billion in pension payments. The €4 billion fund for what some like to call "gold plated" pensions is not a pension fund as such. The money comes from current expenditure. There is no pot of money set aside by the State for the purpose of paying the pensions of our public and civil servants.

In terms of discussions on pensions, only 50% of people in this State have a private pension. The other 50% will rely solely on the old age pension. To consider doing anything that would negatively impact on the take up of pensions would be huge error. To put that into context, there is not a single pension pot in the country that has as much money as people put into it in the last 25 years. Senator Horkan spoke about the fact that the previous Government extracted 0.6% from the pension industry by way of a levy but that was extracted for a good reason. It enabled the Government to reduce VAT in the hospitality sector from 13.5% to 9%. The pension levy money, despite Department of Finance objections, was ring fenced to pay for that provision. Senators may remember that Fine Gael announced its intention to do that before the 2011 election and when it went into Government, it did so.

A reduction in the marginal rate of tax relief on pension contributions would represent an effective pay cut for those PAYE employee members of occupational pension schemes across both the public and private sectors liable to the tax at the higher rate, including mainly middle income earners about whom Senator McDowell spoke. There would be an additional impact on public service employees’ pay if the tax relief on the pension-related deduction, PRD, was also reduced. This is due to the way in which such contributions and deductions are currently tax-relieved under the net pay system whereby pension contributions and the PRD for PAYE employees are deducted from gross pay before applying tax. A change to a lower rate of tax relief could therefore lead to claims for compensating pay increases for significant numbers of PAYE workers.

I can confirm the Government’s intention to publish and commence the implementation of a five-year pensions reform plan in the near future. The objective of reforms contained within the plan will be to establish a sound and fit for purpose pension system for the coming decades that will shape the retirement landscape benefitting our retirees for generations to come. In delivering on the reform plan, the Department of Employment Affairs and Social Protection will conduct a period of consultation with relevant stakeholders, including interest groups, representative bodies and the Oireachtas. The implementation of the five-year reform plan will involve an examination of the supplementary pension arrangements and in that light I do not intend to support this recommendation.