Tuesday, 6 December 2016
Social Welfare Bill 2016: Committee Stage
I understand my amendment has been ruled out of order but I would appreciate it if the Minister would address the concerns highlighted in the amendment. We will come later to an issue about which concern has been expressed on all sides of the House. It relates, in particular, to older women and the gender pension gap but this issue-----
-----is specifically related to the making of voluntary contributions. In this House last week, the Minister spoke about his concern to ensure that contributions are being made, that he wants to encourage the making of contributions, and that he wants to increase the fund that is available. I do not believe that our pay related insurance fund will ever be adequate in terms of our pension and other needs, especially given that we have one of the lowest rates of employer PRSI in Europe. We will always look to other parts of taxation to intervene constructively in our pension and pay related social insurance systems to supplement that. However, taking in good faith the Minister's comments on the importance of contributions, an anomaly has arisen whereby it has become harder for people to make contributions and to increase their contributory record.We have the situation whereby, in the past few years, even as the number of contributions required has risen and pushed many women to a lower income, the barriers to making voluntary contributions have also gone up. Previously, up to a few years ago, one would have had to make 260 contribution weeks before being allowed to make a voluntary contribution. That has now increased to 520 contribution weeks before one is allowed to make a voluntary contribution. In effect, that means people need to have paid in ten years of previous contributions before they are allowed to make a voluntary contribution.
There is also the particularly needless obstacle, namely, one has to apply to make those voluntary contributions within 12 months of the last completed tax year during which one paid compulsory insurance. In many cases, particularly those forced out of work at 60 or 65, people only realise the shortfall they have in their contributions at a later stage. This provision makes it difficult for them.
There are also several issues which affect the self-employed. Many of them may go for a gap of longer than a year between making contributions because they may be hoping to restart a new business or start new employment. They then find themselves coming back into the PAYE sector. Many people who ran a business for 40 or 50 years may have found themselves as a PAYE worker in their last five or ten years of employment. They are very much blocked by this obstacle from making supplementary contributions.
There is a significant gender dimension for women who are returning to the workplace. There is also a dimension for those who are moving from being self-employed to becoming PAYE workers and then facing a gap which they cannot bridge. There is also very much an issue for returned emigrants who try to make up the gap. Will the Minister consider, either in this Bill or elsewhere, making it easier for people who want to contribute to our system? Will he facilitate rather than block those who want to pay PRSI stamps? I would appreciate the Minister's thoughts on this. I understand we will not be able to press the amendment today. However, I would like to know what the thinking is in his Department about this anomaly.
I want to apologise to the Minister in advance that I will not be able to stay for the whole of the debate because I have a radio interview later.
My matter is a personal interest but it does affect a number of people. Is the number of weeks' payment required, which has gone up quite considerably, retrospective? The reason I ask this is because I was in a scheme in Trinity College Dublin. About halfway through my period of employment there, the terms were changed and we stopped buying PRSI stamps. I inquired into it and I was entitled to a kind of truncated pension. I never took it up.
Partly on behalf of other members of the staff of Trinity College Dublin who were in the same position at the time, as well as people in other companies, I am curious to know if the number of weeks being increased affects people who historically had established rights. Will they now lose them because of the increase in the number of weeks?
As an aside, I gave up that pension because I thought there were enough people dragging out of the State and I had more than enough money to live on. It turned up in the bloody newspapers that I was a pension fraud and a social welfare cheat, swindling Trinity College Dublin out of a pension for years.
It is important to remember the Social Insurance Fund, out of which contributory pensions are paid, is back in surplus this year for the first time since 2008. As it stands, we do not need to increase employee's or employer's PRSI or have recourse to the general taxpayer. It is important, however, that we keep it that way.We all know the consequences of underfunded pension schemes and an underfunded Social Insurance Fund are that people do not get the benefits or pensions that they had expected to get on their retirement which is why it is important that we, as law makers, always have regard to the fact that anything we propose that may increase liabilities and costs has to be met by contributions on the other side. Having got the Social Insurance Fund back into surplus, I am determined that it should not go back into deficit because we need some headroom to prepare for the next time unemployment goes up, and all the other developments with an ageing population.
The amendment put down by Senator Higgins deals with two aspects of the voluntary contribution system. First, it is proposed that the deadline for applying to become a voluntary contributor should be increased from the current 12 months after the contribution year in which the individual had paid or credited a PRSI contribution to five years from the end of his or her last paid or credited contribution. On a technical point, the amendment refers only to extending the period of five years from the last credited contribution, whereas current arrangements relate to the period from the last paid or credited contribution. It is essential that access to voluntary contributions continues for those who leave employment or self-employment and is not confined, as proposed in the amendment, to those who had a credited contribution.
However, the appropriate time period for application to become a voluntary contribution is something that has been under examination by my Department for some time. We agree with the Senator's contention that the current period is too tight and that there should be more flexibility for all those who cease employment or self-employment. As the Senator rightly pointed out, this is a particular difficulty for those who are self-employed and who make their final returns for the year after each year of assessment etc.
Accordingly, while this amendment has been ruled out of order, I have decided to extend the period available for application to five years from the date of the last paid or credited contribution in line with the Senator's proposal. I can do this by way of regulation at the earliest possible date. This will enable those who give up work for one reason or another in the last five years to now decide whether they wish to become a voluntary contributor.
The second aspect of the voluntary contribution scheme which this amendment addresses is the reduction in the minimum paid contribution threshold for access to the scheme from 520 paid contributions or ten years in a working life of 40 or 50 years to 260 paid contributions, which would be five years in a working life. It has always been a condition of the voluntary contribution scheme that people can only become voluntary contributors if they satisfy the essential first condition for the receipt of a contributory State pension, namely, to have paid 520 contributions in either employment or self-employment or a combination of same. This is a condition for access to the voluntary contribution scheme and has changed in line with the minimum contribution conditions of the State pension scheme. The State pension condition increased the number of paid contributions to 520 in 2012, in line with the original legislation from 1997, and the voluntary contributions increased in line with that.
To answer Senator Norris's question, it is not retrospective. It only applies to those who are applying for their pension now and those who had already received their pension do not have it reassessed and reduced. I do not know how that relates to Trinity, however, as Trinity would be a different pension scheme. It is not the State contributory pension; it is a private or public sector one.
Those are different arrangements to those of the State pension - contributory.
I do not propose to make any changes to the minimum paid contribution condition for accessing the scheme, as that would allow individuals who do not qualify for the State pension because of their existing paid contribution record between five and ten years to qualify just by paying voluntary contributions. That would have a significant impact on the Social Insurance Fund and would negate the basic requirement for the State pension of having paid contributions when working for a minimum of ten years.
It is important that we have in place a sustainable State pension system that is well funded in the years ahead. Accordingly, it is not considered reasonable that we would expect somebody to have ten years of contributions paid at a minimum to access the pension and that underlying rule applies to voluntary contributions as well.
However, I am prepared to accept the Senator's proposal to allow people to make voluntary contributions for up to five years after they finish work and I will make regulations to put that into effect.
First, I thank the Minister for taking on board the proposal in respect of five years. It is constructive and it will make a difference to people.I understand that the Minister indicated at the Oireachtas joint committee that he intends to look at a wider level at the contributions and the contribution system. I encourage the Minister to take this issue on board and to look to it. While 520 is the desired contribution level for a full pension, the fact is that many people are on reduced pension rates. It would be significant to allow this for people.
No doubt the point will come up in later amendments, but we know that at the moment two thirds of those on the full pension are men while one third are women. Moreover, we know that women are twice as likely to be on the two lowest tiers of the reduced rate contributory pension. If this measure were changed, there could be a route forward. There could be an information campaign to encourage people. I am looking to allow women in particular to be able to move from the lowest two tiers of the contributory pension. This is an interest of mine in terms of pensions. Women are twice as likely as men to be on those lowest two reduced rate tiers. This is important in terms of economic independence. We are not simply discussing income. It is a key concern in the sense of economic independence of women. Later we will come to the question of the gender pension gap. This issue may merit further review. I thank the Minister for taking on the point about five years.
I do not have an amendment relating to employers PRSI but it will come through. This should be examined. Last week the Minister spoke about other peoples' money. At the moment we have the family income supplement, the back-to-work family dividend and many other in-work payments as well as the housing assistance payment. The many payments we have currently going to the working poor effectively amount to other people's money. Those in work but also in poverty are being supported, rightly, by the Department. I believe those payments are right. A greater demand is being placed on people. There is a question for employers in this regard. I know the Minister has spoken about raising wages as part of that, and rightly so. As part of the review we might also consider the question of whether employer's PRSI should be examined again and strengthened.
I commend the Minister and I congratulate Senator Higgins on accepting half of the proposed amendments, even though the amendment was ruled out of order. That shows a flexible and positive approach in allowing the Seanad to contribute in this important way to the development of legislation.
I referred to a pension relating to Trinity. I thank the Minister for his response, which adequately answered all my questions. The pension I was referring to was one whereby in addition to our contribution to the pension fund administered by Mercer, a commercial company, we also paid stamps for a contributory pension. Therefore, it was the State pension.
I want to wander a little because the Minister referred to the question of pensions. This may not be directly within the Minister's remit. If it is not, I would like him to take it back to Government. There is an appalling situation involving Independent Newspapers. People are losing vast amounts of their pensions. This company is in profit. I am asking the Minister to take this back to Government specifically because this situation could not obtain in England. In the United Kingdom a company that is in profit cannot walk away from its pension obligations. There is a defect or lacuna in the legislation here. I am asking the Minister, as a matter of urgency, to take this back to Government to ensure that after the debacles of Aer Lingus, Clerys and so on we do not have yet another case of where a company that is in profit is allowed to run away from its obligations to people who have pensions with them.
I am unsure whether this is within the Minister's brief. I know that when I raised the question of the Trinity French lecturer who had a difficulty regarding a pension and the same-sex thing and so on, the Minister said it was not his brief. I understand that. I am asking him to take this business back to Government and resolve it as a matter of urgency. A simple tranche of legislation could close this loophole which is so disgracefully used by bosses against their workers.
There are many arguments for and against raising employer's PRSI. Perhaps we will have them another day. There are arguments in favour and arguments against as well.
The difficulty we have with the 520 week rule or the 260 week rule is that it is simply not the solution in the medium term. Few people get any other pension by contributing to this extent. A person can get a full pension by contributing for 520 weeks for ten years. In any other line of work, to get a full pension a person has to contribute for 20 or 30 or 40 years. The way it works at the moment is that it has to be the right ten years. If the ten years are spread out over the wrong period, a person in that situation ends up getting less. That is why the solution is to move away from a 260 or a 520 week rule to the total contributions approach. We have discussed that before and I know we will discuss it again.
Reference was made to the Independent News and Media defined benefit pension schemes. I have no wish to open up another debate on a different issue. I will be speaking on the issue later tonight in a different forum. There are different types of pensions and we have discussed this before. Any defined benefit pension is a private trust managed by trustees and it has its own deed of trust.
Employers and employees pay into that trust and have benefits that are projected. However, they are neither guaranteed by the employer nor by the State. What Independent News and Media has done will have to be subject to the approval of the High Court. I have spoken to the Pensions Authority and the Attorney General about what could be done in that case. I know that in a different case the High Court adjudged that Aer Lingus would have to consult the trustees of its pension fund before it restructured its capital. The matter needs to be heard in the High Court. I am consulting the Pensions Authority and the Attorney General over what role the State might be able to play in the public interest in that regard.
Some of the things that have been said about the rules being different in the United Kingdom are not quite the case. The rules in the United Kingdom are better and they protect defined benefit pensioners in a better way, but the pension protection fund in the United Kingdom only works where the company is insolvent. This company is not insolvent. That protection fund was built up through levies on those pension funds for years. We have not had such levies. We had a levy for a brief period but we have not had 30 or 40 years of levies on pension funds to build up such a fund. Even if we were to set it up now, it would be empty and of course it could not apply retrospectively. In the United Kingdom, it is the case that employers can withdraw from defined benefit pension funds, but they have to clear the deficit before doing so. They can and do withdraw. It happens regularly. Again, any law that we would apply in that regard in Ireland could not be retroactive. It could only apply to future deficits and liabilities.
The Minister has shown tremendous flexibility today on the voluntary contributions. There are some issues with respect to voluntary contributions. I may be wrong but I am of the opinion that most local authorities did not advise their elected members that they had the option to make a voluntary contribution. I know the Minister has ruled my amendment to be out of order. It relates to retrospective recognition for the over 66 class K contributions for pension purposes.
It would be good if the option to make voluntary contributions were open to those who had been paying class K contributions if they cannot get their class K contributions recognised.
Another issue relates to the lacunae that exist between Departments. For example, the Department of Education and Skills recognises that a person not involved in teaching between the period of June and September does not have a break in service.However, the Department of Social Protection recognises the period as a break in service when considering entitlement to class D PRSI. As a result, a number of people in the education sector have been ruled ineligible for class D and have been forced to pay class A PRSI. What difference does it make? The difference is very simple. I have always believed there was a problem with the change introduced in 1995 where half of the public service pension was paid from the Department of Social Protection. That problem has raised its ugly head in the not so distant past where a person living in the North of Ireland retired from a public service job in the South, was under the age of 65, and was not being given their supplementary pension because they were not domiciled in the State. The move in 1995 to change the public service pension had a significant impact on the entitlements of public servants, which is far more than we were led to believe at the time. There is a serious problem with it. When we talk about backdating and looking at things, we need to try to iron out some of the anomalies that exist and ensure that everybody is treated the same. The Minister is trying to do that and I thank him. I may have bounced this matter on him so he may not be fully up to speed on what I am talking about, but we can discuss it further if necessary.
I will come back to the Senator with confirmation on the local authority members. My understanding is that if somebody is a local authority member and went full-time as a councillor in the last five years but prior to that was paying PRSI as part of their farm income, self-employment or as an employee, they are able to make voluntary contributions. I will have to double check that. By putting Senator Higgins's proposal into regulation, anyone who had not made a credited contribution within the past five years would be able to make voluntary contributions. Let me check that before the Senator writes out to councillors telling them in case I am mistaken.
On the other issue on the education sector, we will have to check it out and come back to the Senator. I do not have the information to hand but my officials will check it out and reply to the Senator in correspondence.
I have one final point on the class S PRSI. I was contacted by a farmer recently who told me he is not being given his contributory old age pension because at some stage during his contributions to class S, he received some form of farm payment which means he is not eligible. It is an interesting situation. The Minister will not have an answer to that straight away but perhaps it is something he could look at.
It is great to see paternity leave increasing and moving through legislation. I want to give a compliment because it is something we campaigned for in the National Women's Council in the past. I want to note it as a positive move.
I will be very brief. This is the complimentary bit. The extension of dental treatment is a very positive measure. For those working in the area of heart disease, this is an example of something thoughtful happening because the provision of dental treatment leads to significant savings on heart treatment at a later date.
I move amendment No. 2:
In page 7, to delete lines 17 to 20 and substitute the following:“(a) by the substitution of the following for the definition of “public office holder”:“ ‘public office holder’ means a member of the European Parliament for a constituency in the State, being a member who is in receipt of the salary specified in section 2(2) of the European Parliament (Irish Constituency Members) Act 2009;”,(b) by the deletion of the definition of “public body”.”.
The Minister knows where this amendment is coming from. It concerns class K PRSI which I asked the Minister about when he was in the House on Second Stage. We should treat everybody who was paying class K in the same way. That includes members of the judiciary and the Oireachtas. I will not labour the point.
I do not propose to accept the amendment at this time. The amendment proposes that the class K contribution of 4% made by a range of public officeholders, including the President, Members of both Houses of the Oireachtas and members of the Judiciary, be abolished. Class K contributions were introduced at a time when the State was experiencing an unprecedented financial crisis. Payment of class K contributions was one of the measures that ensured public officeholders made their contribution to the resolution of that crisis. In particular, the introduction of these contributions meant that officeholders, in general, pay the same marginal rate of all statutory deductions from their salaries as most employees. The Bill before the House provides for the abolition of class K contributions for local authority members from 2017.
I am paying attention but I will make one point. I am sorry for interrupting the Minister. It is actually quite difficult to follow some of the legislation because we are referring to principal Acts that we do not have before us and which are being amended. That makes it a little bit more complicated. I was just curious about class K contributions because they are in the next amendment, whereas this seems to talk about public officeholders.
Unlike Members of the Oireachtas and the Judiciary, local authority members do not have occupational pension cover. For that reason, they are being brought into social insurance cover, particularly for pensions. This amendment will provide for the abolition of class K for all officeholders with the exception of members of the European Parliament. If adopted, it would mean that officeholders such as Deputies and Senators would no longer pay PRSI at the 4% contribution rate. In other words, Deputies and Senators would have a 4% net rise in their take home pay.
It would not be a sustainable position for one relatively small group of people in the public service, who in the main are well remunerated, to be granted an additional pay increase on foot of this amendment. It is not clear if the Senators submitting this amendment envisage any other changes in PRSI liabilities and associated cover for relevant officeholders being made. The amendment does not provide for this. It is simply not sustainable or desirable that public officeholders should gain access to the State pension contributory on top of their occupational pension. I understand that the value of public service pensions, including fast accrual schemes such as ours, is something that the Public Service Pay Commission has been asked to take into account in its work. It is not an opportune moment to start recalibrating the take-home pay of politicians or enhancing their benefits.
Class K PRSI is a tax on public service. That is the long and the short of it. One pays 4% and gets nothing for it. The Minister is on record as saying that nobody should pay for social insurance unless there is a benefit from it. It is a farce to say that Deputies, Senators and other people covered by class K PRSI cannot avail of a contributory old age pension. In my case I can make a voluntary contribution of €660 to maintain my contributory old age pension entitlement. The only thing covered is the old age pension, if I am not mistaken. The Minister is taxing public servants at 4%. If he wants to tax me for being a Senator, he should get the Minister for Finance to put a tax of 4% on the salaries of Members of the Dáil and Seanad into a Bill and I will pay it. I do not want a 4% rise. I do not want the social insurance system used as a tax so we can be saved blushes when we walk out the door and say we are paying PRSI too.At the end of the day, Senators and Deputies worth their salt are paying the voluntary contribution in order to maintain their entitlement to a contributory old age pension. We are only fooling ourselves and the public with this, but we are really not getting away with it. We should scrap class K PRSI and if the Government wants to charge a tax on Senators, Deputies, members of the Judiciary and the President, it should be honest about it and do it. The social insurance scheme should not be used to make a fool of the rest of us. It is not right in any way. It was a cheap shot in 2008 or 2011 to satisfy the blushes of Deputies and Senators, so they could look at the public and say they were paying their share into the Social Insurance Fund. Let us be honest that it is a nonsense. I know the Minister did not bring in this measure but he has the opportunity to get rid of it.
I was a councillor for 12 and a half years. My understanding is that class K was always there, but it was there at 0%. Class K existed, but one paid nothing and got nothing. I raised this back in 2011 at a Local Authorities Members Association, LAMA, conference when Deputy Joan Burton was the then Minister for Social Protection. The issue is that people are paying into a scheme that is called PRSI, social insurance, but there is nothing for it. Whether it is councillors, officeholders or anybody else, class K should be addressed. If the Minister wants to reduce it to 0%, change it to 0%, which would effectively give a 4% increase. I am not looking for a 4%, but why are officeholders-----
That is okay for Senator Norris. The only people in the entire public service who do not get some form of cover for their PRSI payment are these officeholders, local authority members, members of the Judiciary, Deputies and Senators. I raise this issue on behalf of the councillors. What is the idea of one paying 4% of one's entire salary into a PRSI fund with no single benefit for a class K contribution? Let us not call it pay related social insurance. As I have said before, it should be called income related social insurance because one is paying PRSI on dividend and other income. It is not about me. I do not care if there is a 4% supertax on public sector officeholders, including the Judiciary and the President - so be it - but let us not pretend we are giving social insurance to people to whom we are not giving it because they are paying 4% and there is nothing for it. If one wants to get the money out of officeholders a different way, so be it, but let us not pretend it is social insurance when it blatantly is not.
We often see unintentional consequences. Has the Minister examined the possible unintentional consequences of a future claim in respect of K class PRSI? Senator Norris states he is quite happy to take the 4%. Using this as an example, if Senator Norris took a case against the State, saying that he is being disadvantaged and the Minister is resolving the problem for one set of officeholders yet penalising another, is there a danger of an unintentional consequence? There is case law on designing a tax or a payment that only affects one group of citizens. Has the Minister taken advice on it? I am not looking for a 4% increase. I am happy to pay the 4%, but should we be paying the 4% under class K or should it be a levy on a public officeholder?
I will ask for it, but there are other class K 4% categories as well, such as reasonably well paid public servants. It was added as a recession measure to pre-1995 public servants earning above a certain limit. I am sympathetic to the case the Senators are making, that people should not pay 4% PRSI and get no benefits. That should apply to everyone, even Deputies, Senators and judges, but if we were to make any change to this, we would have to look at it in the round. Unlike local authority members, public officeholders, Deputies, Senators and judges have good arrangements for pensions and get a lump sum when they retire. Severance arrangements are available to elected Members to tide them over should they lose their seats. It is a very different situation not just when compared with local authority members, but with other normal employees. The effect of amendment No. 2 would be a 4% increase in take home pay or more for Deputies and Senators. I do not think that is a good idea, given that we are preaching pay restraint and other things for other groups of people.
On the question of local authority members being able to make voluntary contributions for the past five years, that will not be of particular value to those who are currently serving on a local authority because they will be moving to class S. It may, however, be of use to those who retired from a council in the past couple of years.
The social welfare contributions for councillors over 66 years are being repealed. The point I was making was that they had been paying class K contributions for the past five or six years.
I appreciate there is a problem with class K contributions. In 2013, class K was extended to all unearned income, which included things such as rental income, income from shareholdings, dividends and so on. The point is that if we look at it in the round, it is a tax. It is a tax on unearned income, a tax on public service.
In fairness, the Minister has shown that he understands that concept. It would be far better to deal with it now and get it out of the way. Let the Minister for Finance bring in a levy on public service. I will pay it. I have no difficulty whatsoever paying it, but it should be done honestly and straight. The people who have significant income from shares or rent should be hit with a levy as well. They will probably pass it on to the poor unfortunate tenant, but let us not use the social insurance system to collect a tax. The Minister has an opportunity to do that now.
The Senator makes a very valid point that perhaps an additional levy would have been better applied using income tax or USC legislation rather than social insurance legislation. I cannot deal with that now because it would require a finance Bill to make the change. I am obviously not in a position to do that, but the point the Senator makes is valid. If it is really social insurance, it should have some social insurance benefit linked to it, which it does not. I will certainly discuss it and take it in the round with the Minister for Finance, Deputy Noonan, and the Minister for Public Expenditure and Reform, Deputy Donohoe. It could be regularised in the years to come.
I will withdraw my amendment and give the Minister a chance to discuss it with the two Ministers in question. He may come back with a change of mind. I will resubmit it on Report Stage. If the Minister is not in a position to do anything, I will not delay the proceedings and will withdraw it immediately.
I wish to speak briefly on section 12.I am happy there will be a report on the changes to the one parent family payment, OPFP. In preparing the report on the financial and social effects of the amendments, reference is made to taking into account the effect on welfare dependency and the poverty rates of those in receipt. I would like to be clear that in looking at the financial and social effects, the Minister is not limiting them to the questions of welfare dependency and the poverty rates. He should also consider outcomes such as the number of lone parents entering education, which is an important financial and social effect, and the quality of work lone parents are taking up. Many of the financial and social effects are not simply measurable by poverty rates or whether people are on the live register or in employment. There is an issue about the quality of outcome for lone parents. This issue has been coming up because people have found that longer-term options that they might have been interested in have become more difficult for them to pursue, but I will look to see what the report finds.
The joint committee is also looking into this area and we will publish a report and recommendations. Will the Minister indicate that he is interested in a dialogue between these two documents? I am sure that will be the case.
I may seek to table an amendment on Report Stage, either to this section or one of the others, regarding lone parents and maintenance payments. We discussed this issue previously but there is no mention of it in the Bill. This ties in with welfare dependency and poverty rates when women are means tested against child maintenance payments ordered by the court that they do not receive. Has the Minister considered how that could be addressed in the legislation? If not, I might look to work with him to see if there is something we can do to insert a provision on a later Stage.
I have not even got to the point where we have draft terms of reference for the report, but I would not envisage it just being about welfare dependency and poverty rates. We are interested to know what impact the changes have had on their participation in education and what type of work they have taken up. All this cannot be ascribed to the reforms that have been introduced because the economy has changed as well, but we are genuinely interested to gather this information for ourselves. The report will not be limited to welfare dependency and poverty rates.
We did not give detailed considered to the maintenance issue for this legislation. People should not be means tested against maintenance they do not receive. I acknowledge we discussed this previously and I would be concerned if that was happening. When people are means tested, they are tested against their actual income and not against income they do not receive. I would be happy to consider any proposals in this regard. I will have to check with my officials because it should not be the case that people are means tested against income they do not receive.
As well as examining the issue highlighted by my colleague, there were considerable impacts when people moved from the OPFP to individually having to seek maintenance payments. The Department has figures on this and it is an important financial and social effect, which has had an economic impact. It would be important to capture that. Perhaps it is a corollary effect but it will feed into an understanding of the impact of the measures. We can come back to it when the Minister is developing the terms of reference and offer a submission then.
I move amendment No. 4:
In page 8, between lines 13 and 14, to insert the following:"13. The Principal Act is amended by the insertion of the following section after section 178F:"178G.(1)The Minister shall, not later than 9 months of the passing after theSocial Welfare Act 2016, cause to be produced a report in respect of the gender pension gap in the first tier and second tier of the pension system, including consideration of the causes and contributing factors, financial and social impacts, international best practice and proposals and targets in respect of narrowing the gender pension gap in Ireland.
(2) The Minister shall, not later than 10 months after the passing of the Social Welfare Act 2016, cause a copy of the report under subsection (1) to be laid before each House of the Oireachtas.".".
We touched on this issue earlier. It has come up and it will continue to come up. I understand there is legislation before the Dáil in this regard as well. It is an area of considerable concern. The amendment asks the Minister and the Department to address the gender pension gap, which has widened from 35% to 37%. I have mentioned the first and second tiers of the pension system. Given I am unlikely to press the amendment, it would be worth examining the first, second and third tiers of our pension system in this respect. There is a deeply embedded inequality in the system. Last week, the Minister referred to winners and losers. That is not constructive language but if we use it, women have been systematically the losers in our pension system for a long time. The origins of that inequality lie directly in measures such as the marriage bar, which was explicitly recognised as an unequal measure that forced women to leave the workplace and which the State had to cease due to European pressure. We have asked about legal advice and legal concerns and I would encourage the Minister to look into this. There are concerns that under the EU equal treatment directive, the impact of the marriage bar is still being felt by women in Ireland in a reduced rate pension entitlement. This unequal measure is still having a knock-on effect.
On Second Stage, the Minister referred to extending the cost of extending a homemaker's credit retrospectively. The figures previously quoted by the Department relate to 1994 going back to 1953. It is much more difficult to make the case against going back to 1973. Ireland has been clearly ruled out of order since that year in respect of the marriage bar. There was an onus on the State from 1973 to rectify the inequalities between women and men. This is a significant legacy issue which continues to have an impact on women. It is not an academic exercise. It affects women every week and it affects not only their incomes but their economic independence.
The State has moved backwards in respect of pension inequality for women. Women predominate in the education and health sectors of the public sector, for example, and they have suffered due to a loss in pension and a lack of career progress. This was recognised by the ESRI as having a hugely disproportionate impact on women in terms of their income and long-term pensions. Research by Age Action Ireland and many other organisations demonstrates that only one third of those in receipt of the full contributory State pension are women while women are twice as likely as men to be on the lowest rates of pension. Means testing of the non-contributory pension is an issue for many women. They feel they cannot take a means test because it will affect their partner's means. This again raises the issue of economic independence. Many women, therefore, tend to exist as qualified adults within the system, relying on a supplementary payment paid directly to their spouse. There is provision whereby it can be requested to be paid separately, but in the majority of cases, it is an additional payment to the spouse. There are deep holes in the system, and when putting forward roadmaps for the future, we need to establish trust with the half of the population who have been mistreated and who have witnessed their mothers and grandmothers being mistreated by the system.
A universal supplementary retirement savings scheme or whatever form it may take was being considered for the second tier of the system by the previous Administration. However, we need to examine how other forms of contribution will be recognised, for example, the contribution made in terms of care. Care has a clear cost. As the Government tries to put child care systems in place, the cost has become clear. We are also aware of the cost of home care.Every hour of care given by an individual is an hour and a considerable cost saved to the State. The cost of care is being entirely carried by those who are caring, predominantly women. They carry it during their working life and into retirement. The Minister spoke about women living longer and that upset a couple of older women who spoke to me about it. That is not an adequate response to be giving in respect of the pension age because every week people have to eat and pay for their heating. To live longer on a basic or minimal income is not to accrue some long-term benefit or nest egg. This is the money they survive on and they have a very strong sense of its inadequacy. Moreover, insult is added to injury because people aged over 80 in receipt of the contributory pension get €10 extra, which is positive and right because those who have lived to that age deserve something for their work in establishing our State but qualified adults, predominantly women, do not get that €10 increase when they are in their 80s. The pension and income gap between men and women through the system increases when women are in their 80s.
This is a very serious legacy issue of lack of equal treatment. If we want to credibly move forward with the pension system in Ireland, we need to reform and fix the gaps in the first tier. I am urging the Minister to produce a report on this. The Oireachtas Joint Committee on Social Protection will issue a report on pension policy, most likely to include issues of the gender pension gap. I urge the Minister to take on this proposal and to perhaps indicate that he will be willing to take on some of the committee's recommendations. I specify the first and second tiers because the question of how we recognise other forms of contribution will be complex for the second tier.
The third tier is the private pension industry. While I know this is not within the Minister’s remit, it is crucial because this is what gives the Minister the leverage and funding he needs to deliver the kind of repair work that is required. I have sent a proposal separately to the Minister for Finance asking him to examine the current system of private pension tax relief at the marginal rate which greatly and disproportionately benefits high earners and is a subsidy from those in the bottom third of incomes, the half of the population earning €28,500, very few of whom have any form of private pension but who are paying tax. This money is then given as a subsidy in the form of tax relief to those on the highest incomes who can, in some cases, write off up to €40,000 a year in tax relief through pension schemes which are not delivering a dividend or interest but serve as a holder for money. That is part of the wider issue that was raised about some of the failures we have seen in the private pension schemes, which also get additional tax revenue from the State in that they are exempt from capital gains tax on their property portfolios. This is a private pension tax system which is being deeply subsidised and which has let down its members and those who were relying on it at the cost of funds which I believe should be directed into our first and second-tier system. I am not asking for extra money to come from the sky but I am asking the Minister to engage constructively with the Minister for Finance and to demand the moneys that I believe should be directed through the Department of Social Protection and I will press for that.
I commend Senator Higgins on bringing this amendment to the House. I greatly admire her erudite and deep knowledge of this topic. The pension gender equality movement is very lucky to have her as an advocate and I would like to see myself as part of that movement.
There needs to be a full review of the contributory pension entitlements for women. There is a real and present inequality. Lip service is given to this issue in committees, the Dáil and the Seanad but nothing has been done. I will address it later with my amendments. There will be a cost in ensuring that this inequality is fixed. It is, however, an acceptable cost and as Senator Higgins pointed out, there is a legacy of mistreatment of women in Ireland, not just physical and emotional but also financial. This needs to be addressed urgently.
Many issues relating to pensions fall partially within my remit and many are broader issues. The tax treatment of pension contributions is primarily a matter for the Minister of Finance. The thinking behind it of course is the people do not pay tax on the money they put into their pension fund because they pay tax on the income when the pension is paid. Many people would have great difficulty with having their income taxed twice, before they put it into the pension fund and again when they take it out.
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.
On the question of pre-1995 public servants, quite a lot of women re-enter the system. That is a common situation which has arisen whereby people have come back into the system, perhaps after a period of ten or 20 years raising children. It is also the case that many women, having left, return to work in their late 40s or 50s. During the recession, a number of women who were not working but who had previously been public servants up to 25 years ago re-entered the workplace. Such a situation might be more common that one might think. What we find here is that they are playing catch-up. The issue we addressed in the context of voluntary contributions and the question of averaging, which will be addressed in a later amendment, are two aspects that come into play in terms of those women who re-entered the workplace post-1995 and might be supported in building up their contributions records or having records which allow them to obtain adequate or appropriate incomes. I appreciate the detailed and thoughtful response from the Minister and look forward to engaging with him further on the matter.
The Minister is correct in respect of the question of the occupational pension gap being wider. However, the marriage bar also had an impact in the context of occupational pensions. While it related to public service, the marriage bar also involved the setting of a convention across society. This convention was mirrored widely in the private sector as well because it represented a strong signal from Government that women who were married should not have been in the workplace or given access to the same routes of progression as men. A significant number of issues arise, including those relating to progression in the workplace, such as who progresses, who is making contributions, etc.
This is a complex issue, it is not simply about gender. There is a requirement in the programme for Government on gender proofing and while the Minister wants to look at the issues in the round and seek a general outcome, a gender analysis is essential. Such an analysis would be useful and would make the Department's systems work for all the population. In broad terms, half of the members of the population feel strongly that they have been ill served by the system. I suggest that the Minister ensure that a gender analysis is carried out and that we do not merely focus on outcomes for men and women. He should consider teasing out some of the issues to which I refer. There is good research that will assist in this regard.
I will not deal with of the other points. There is a 37% gender pension gap. I understand that is across the second tier - and even the third tier, as well as the first tier - but it is significant. It is an anomalous gap which, if it was in any other area of society, would be of concern.
I appreciate that the Minister indicated that he is interested in examining the issue relating to home-makers. That matter is dealt with in the context of a later amendment.
I thank the Minister. I will not press the amendment at this point. I look forward to further engagement on the matter instead and I reserve the right to resubmit the amendment on Report Stage.
I very much appreciate the Senator's approach to this extremely complex matter. I have only half come to terms with it in the past couple of months. There are so many different issues at play and I want to consider it in the round. The Senator and I both agree that the latter will have to involve a gender analysis because we need to see how these policies and changes impact on gender. It needs to be broader than that as well and consider the impact on individuals, on poverty and on income replacement, and also what would be the cost involved and how would that cost be borne. It is a big chunk of work for us all to do throughout 2017 but I am keen to do it.
I move amendment No. 5:
In page 8, between lines 16 and 17, to insert the following:"Child benefit – amendment
14.Part 4 of the Principal Act is amended by the insertion of the following section after section 220:"Regulations
220A.Regulations may provide for requiring an employer to give such information to the Minister as he or she may require for the purposes of determining entitlement to child benefit. These regulations may only provide for such an exchange of information when—(a) the Minister can demonstrate that it is required in order to verify the habitual residence condition in relation to entitlement to child benefit,
(b) the Minister can demonstrate, in cases of a parental separation or divorce, that the employment information of the spouse of a child benefit customer is required in order to prevent delays in the processing of a child benefit claim,
(c) the Minister can demonstrate that it is required in cases where a significant and onerous delay in the payment of child benefit would occur if the Department waited until a child benefit customer’s social insurance contribution records became available at the end of the particular tax year.".".
I mentioned on the previous occasion that I would return to the issue of child benefit in terms of opposing the section. Child benefit is a very important payment and it should be protected. The universality of child benefit is its most important feature because regardless of people's family situation, their employment status or where they are from, the State provides support to them as a parent. It is a payment I really believe in. It may not appear to be the case yet but I believe it is the universality principle of this Part of the Bill that is being challenged, so I read the Official Report of the Minister's contributions in the Dáil and the briefing notes he sent to the members of the Joint Committee on Social Protection and identified the exact reasons the Minister provided for requesting these additional powers. As a result, my amendments were deliberately designed to give the Minister the ability to make the regulations to allow him contact employers regarding entitlement to child benefit for the reasons he outlined, some of which I will now outline.
On Committee Stage the Minister stated: "While it is absolutely correct to say that the employment status of an Irish parent is immaterial to a child benefit claim, all child benefit customers claiming under domestic legislation must satisfy the habitual residence condition." That is a fair enough reason for wishing to contact employers and that is why I have included a provision in paragraph (a) of my amendment allowing the Minister to issue regulations when "... the Minister can demonstrate that it is required in order to verify the habitual residence condition in relation to entitlement to child benefit".
Regarding paragraph (b) of my amendment, on Committee Stage the Minister stated:
[...] difficulties can arise in the case of child benefit when information on employment is required and where the information does not refer to the customer but to the spouse or partner of the customer. This is particularly difficult in separation or divorce cases where the customer may not have the co-operation of the spouse, partner or former partner in terms of supplying the required information. This can lead to a situation where there is an entitlement to child benefit but where the processing of the claim can be impeded. Contacting employers directly removes this difficulty for customers in that situation.
Based on what the Minister said on Committee Stage, and this seems to be a strong, customer-focused change, I have allowed for it in paragraph (b) of the amendment which reads: "[when] the Minister can demonstrate, in cases of a parental separation or divorce, that the employment information of the spouse of a child benefit customer is required in order to prevent delays in the processing of a child benefit claim".
With regard to paragraph (c) of my amendment, on Committee Stage the Minister stated:
My Department has access to social insurance contribution records. However, these records only become available at the end of the tax year and are not available to the Department in real time. This means that they can only be updated in arrears but while my Department routinely requires employment information for benefit purposes in real time, to await updated social insurance records would delay payment to customers. The practical thing to do, and the most customer-focused solution, is to contact employers directly where the customer is not in a position to easily provide the necessary information him or herself.
Again, that seems fair and that is the reason for paragraph (c) of the amendment which reads: "the Minister can demonstrate that it is required in cases where a significant and onerous delay in the payment of child benefit would occur if the Department waited until a child benefit customer's social insurance contribution records became available at the end of the particular tax year". That seems fair and rather than opposing the entire section, I have taken on board the reasons for which the Minister said he would need the powers to make his role more effective and improve the experiences of those in receipt of child benefit. I am happy to work with him on that and offer a compromise with the amendments I have put forward. However, the Minister should not be given a blank cheque that would allow him to be able to access all employer data on everyone receiving child benefit, which is what effectively his original amendment allows the Department to do. I hope the Minister can accept those amendments, and I thank the Minister.
My colleague is being reasonable, more reasonable than I would be regarding this amendment. She has brought forward an amendment that looks to the various circumstances as outlined by the Minister regarding accessing the information.
From my perspective, I have to oppose this section of the Bill because opening that dialogue regarding child benefit is an issue of serious concern. A couple of issues arise, the first of which is about family status. The briefing from the Department on that refers to a concern about the relationship between the employer and the employee being impacted. It states that the Department of Social Protection is aware of its obligations as a data controller and makes every effort to avoid breaching these obligations. That is not enough.
We have legislation that relates to family status so from the employer's perspective, an employer is not meant to inquire into or in any way treat an employee or a prospective employee differently in respect of his or her family status. In allowing an employer to open a conversation with employees on child benefit, a spouse, a partner or their children, the Minister is putting employers in an inappropriate situation whereby they are looking into to the family status of their employees and are in a dialogue with a Department in respect of the family status of one of their employees. That is dubious, and it is one of the grounds in our equality legislation. It is a serious concern.
There is a debate on whether child benefit should be tied to the question of the habitual residency condition or the status of parents. We have had debates on that at various times and the issue has not been resolved. Strong cases were made to the effect that child benefit is a payment in respect of the welfare of children. It is not a bonus for parents but rather a recognition of children. Since the children's rights referendum we have placed children's well-being and their rights at the centre of the debate and looked to practical means by which to vindicate those rights and ensure that the well-being of children is delivered as a State. Child benefit is one of the ways in which the State delivers its duty to children. Parents are the facilitators of that in that they are entrusted to effectively deliver that well-being, but the case could be made that their well-being is very different from the family income supplement and the back to work family dividend. It is a specific payment for children from the State that is entrusted to parents for them to administer to children. Bringing the employment status and so on into the mix is a serious concern.
I become concerned, and with due respect to my colleague, when I hear delays being given as an excuse. The way to get this done quickly is to sign the waiver that allows us to access the information we need. We do not want those who do not give permission for this to face a longer delay. It is a question of whether to expedite or not. We saw the case recently about car insurance, which was withdrawn, in which those seeking car insurance were told that if they signed a waiver to allow all their social media feed be accessed by the car insurance company, they would get a faster decision and a preferable rate. However, it was rightly recognised at the time that what people were actually being told was that if they did not sign those waivers the decision on their application will be slower and they will get a less preferable rate.
I do not believe it is the Department's intention but there is a danger that people will feel that if they do not give information or support access to their employers, the Department could somehow delay or make it more difficult for someone to get child benefit.Of course, there is also the option of trusting people and checking in with them at the end of the year. We do it in taxation areas and that trust is seen in some schemes. There is a huge range of areas in society in which we trust people. Then we check at the end of the year when we have the figures and if there is an anomaly it is addressed at that point.
My colleague has been very reasonable and has put forward small and constructive amendments. However, I have a deeper concern about this overall amendment.
I wish to make a brief observation. I agree with my colleague's sentiment that we should be narrowing the criteria for the State to be able to have access to employers' and employees' information, payslips and so forth. What plans would the Department have for such information? We should not go down the slippery slope of using it for the purpose of statistics for means testing child benefit. One might think that is a big jump but I can envisage the possibility of the information that is collected being used in an argument for means testing child benefit, whereby one could say that so many people earning X amount of money are also receiving child benefit. It should never be used for that purpose.
I assure Senator Ardagh that our policy is that child benefit will remain universal. There are no plans to means test or tax it. However, if we were of that mind, we would have access to that information through people's PPS numbers in any case. However, that is certainly not the purpose for which we would use this information and we collect this information already.
I emphasise that the key point of this provision is to facilitate the most effective means of ensuring prompt payment of child benefit to our customers. The purpose of the section is to underpin the process whereby the Department contacts employers to verify continuing employment specifically for child benefit purposes. The provision is modelled on existing provisions for other social welfare schemes, such as FIS, back-to-work family dividend and maternity, paternity and carer's benefit. The Department is already empowered by these provisions to contact employers to verify employment details to establish entitlement, new or ongoing, to benefits.
In general, the onus is on customers to prove to the Department that they qualify for the social welfare payment for which they are applying. This includes child benefit, whether payable in accordance with EU regulations or under domestic legislation. EU and EEA citizens and Swiss nationals working in Ireland qualify for child benefit under EU regulations. Their children may be resident either here or in their home countries. Where children are resident abroad, customers are required to confirm their continued entitlement to child benefit every six months. This includes a statement from the customer or their spouse or partner's employer confirming that the employment is expected to continue.
While it is correct that the employment status of an Irish parent is immaterial to a child benefit claim, all child benefit customers claiming under domestic legislation must satisfy the habitual residency condition. One of the factors being taken into account in determining habitual residence is the nature and pattern of the person's employment. A person is exempt from satisfying the habitual residence condition if they or their spouse or partner is currently employed. For these reasons it is sometimes necessary for the Department to have access to information on the employment of the customer or his or her spouse or partner for child benefit purposes.
In a small number of cases, situations arise where it is less problematic and more convenient for the customer if the Department can contact their employer directly to confirm their employment. The volume of these inquiries is very small. Currently, it averages approximately ten cases per week, and almost all of these relate to claims under EU regulations. As I explained during the debate in the Dáil, there are instances when the employment details required are not those of the customer but relate to the spouse, partner, ex-spouse or ex-partner. In such instances, the co-operation of that person is not always forthcoming. This can lead to situations where a customer does have an entitlement to payment, but where that entitlement cannot be established or where establishing that entitlement could be delayed. The most efficient and customer-focused way in which entitlement can be determined in such circumstances is for the Department to seek the required information directly from the employer. Having this provision in place will ensure that the Department has a robust legislative basis to make these inquiries where the need arises. We do this already, but we wish to ensure we have a solid legislative basis for doing so.
The Department has records of social insurance contributions. However, as was mentioned earlier, these only become available at the end of the year and can only be updated in arrears. That could lead to a delay. Employers are only ever contacted on an individual, case-by-case basis and never on a bulk basis. We are keenly aware of our data protection obligations. Any personal data collected by the Department are collected for specified, explicit and legitimate purposes and are not further processed in any way that is incompatible with those obligations.
I appreciate what Senator Ruane's amendment seeks to do and the safeguards it seeks to put in place. It refers to examples I gave during the Dáil debate, which would be encompassed by this provision and the regulations that would be made on foot of the provision. However, it is the practice that the detail is set out in the regulations rather than in the primary legislation. As I said previously, if this section is enacted I will make regulations which will set out the information that will be sought from employers for child benefit purposes and the circumstances in which it will be sought. As part of the drafting process, the Department will liaise with the Office of the Attorney General to ensure that the regulations are appropriate and proportionate. When made, the regulations will be supplemented by the operational guidelines to which deciding officers must have regard. The guidelines, as always, will be published on the Department’s website.
I appreciate there are some genuine concerns that this provision could be abused or that there might be an alternative agenda here. I am not asking anybody to give me a blank cheque. To further allay concerns Senators may have, I am happy to bring the draft regulations before the Oireachtas Joint Committee on Social Protection in order that its members will have an opportunity to fully examine them and make their views known. I give a commitment that I will not sign the regulations unless the joint committee is happy with them.
I move amendment No. 6:
In page 14, between lines 21 and 22, to insert the following:“26. (1) The Minister shall review the operation of the Homemaker Scheme and the eligibility criteria for the State Contributory Pension and shall bring forward a report to the Joint Committee on Social Protection on same within 3 months of this Act being enacted.
(2) The Minister shall review the operation of the Family Income Supplement to see how it could be improved to encourage and facilitate people to re-enter the workforce and shall bring forward a report to the Joint Committee on Social Protection on same within 3 months of this Act being enacted.”.
Much of the information on this has been given by Senator Higgins and she spoke eloquently on it. I will go a little further and discuss the homemaker scheme and the homemaker disregard. Fianna Fáil Members of the Oireachtas have heard from many people, particularly women, who were shocked to learn upon retirement that they were not eligible for the full State contributory pension. The gap is 37%, as has been outlined already.Fianna Fáil believes the eligibility criteria for the contributory pension need to be reviewed. In particular, the operation of the homemaker scheme needs to be reconsidered to address the anomaly in calculating the contributory pension. At present, people who took time out of the workforce prior to 1994 to care for children or elderly relatives are disadvantaged. In many instances, their entitlement to the State pension is greatly reduced. Although Fianna Fáil recognises that amending the homemaker scheme would have significant costs and administrative implications, we believe consideration should be given to examining the feasibility of amending the method of calculating contributory pensions. The system already disregards time spent in the home since 1994 for the purposes of calculating the yearly average contributions. We should explore the feasibility of backdating this further, perhaps to 1973 or 1953.
This amendment also contains a proposal with regard to the family income supplement, FIS, scheme. Fianna Fáil acknowledges that FIS is a vital payment for low-income families. We believe the Minister should consider reviewing this payment to make it more effective than it already is. A number of suggestions are worth examining in this context, including a reduction in the number of hours of work required to qualify for this payment in the case of one-parent households. This should be done to recognise that those who are parenting alone need more flexible arrangements and that almost 59% of lone-parent households experience deprivation. We have to examine how the social welfare system is operating and how it can be reformed to make it more effective and responsive to the needs of those who rely on it. The method of calculating FIS payments is quite complex. There is no single rate. A rather complex method of calculation is used. It can be difficult for prospective applicants who are considering taking up employment to know what their FIS payments might be. Therefore, it is important to examine how FIS is calculated and how it can be simplified so that prospective applicants are more readily able to ascertain what their income from FIS and paid employment might be.
I ask the Minister to consider commissioning reports on both of these issues. I will probably not press this amendment today. No Senator has pursued the question of the gender pension gap today, but it is something we will have to pursue some day. I hope the Minister notes that.
I would like to speak in favour of this amendment, particularly in so far as it relates to the homemaker scheme. The discussion on amendment No. 4, in my name, reflected the need for the first, second and third tiers of our pension system to be repaired in the long term. This amendment relates to a more urgent issue. The Minister has acknowledged that the current position is unequal. Everybody knows it is unfair that a person who has worked for a greater number of years can be entitled to less, but that is basically where we are.
I am aware that the policy for some years now has been to move towards a total contributions approach by 2020, but problems have arisen while we have been waiting for that to happen. I might be wrong, but I understand this has been an issue since 2004 or 2006. I know the National Women's Council Of Ireland made a submission at that time. We have been waiting for the total contributions approach for some time. We cannot simply wait this issue out for another four years.
This urgent and direct issue of clear inequality can be repaired. It is not appropriate that we would expect people to wait for the next four years for the total contributions approach, or some other system like a supplementary retirement savings scheme, to be put in place and for systematic repairs to be made to the first tier. As a result of the ridiculous anomaly that exists at present, people are not allowed to average the actual contributions they have made over their lives in a way that would be appropriate. Under the situation we are leaving in place, just a small number of years can be disregarded. The wider question of moving from a disregard to a credit is part of the bigger picture that is the total contribution debate.
I urge the Minister to tell us whether he expects that by the time he comes before us in the aftermath of budget 2018, he will have looked into the anomaly in the homemaker scheme that has been highlighted by Senator Ardagh. I know he has indicated he wants to look at this anomaly, but does he expect to be in a position to bring forward proposals to address it in budget 2018, rather than waiting until 2020? I think the shorter timeframe of three months suggested by Senator Ardagh is appropriate because this specific issue cannot wait and needs to be addressed promptly.
I know Deputy Shortall has highlighted issues with defined benefit schemes in light of the ongoing INM scandal. I reserve the right to return to this issue on Report Stage. I strongly support the amendment before the House.
I propose to respond to this amendment, which calls for reports to be laid before the Houses following reviews of the homemaker and FIS schemes, by speaking about the two schemes in turn. I am always happy to discuss these issues in the course of these debates and on other occasions inside and outside the Oireachtas.
The homemaker scheme has been discussed previously in the Oireachtas. This Government and previous Governments have outlined the background to the scheme and explained why it has not been backdated. The contributory State pension is based on contributions paid into the Social Insurance Fund, which in turn finances contributory benefits on a pay-as-you-go basis. The State pension, the widow's and widower's contributory pension and the State contributory pension are the three main pensions paid by the Department of Social Protection to people over the age of 66. Prior to the introduction of the homemaker scheme in 1994, there was no provision for the recognition of periods of homemaking. It is estimated that the net cost to the Exchequer of applying the homemaker scheme to periods of homemaking prior to 1994 would be €290 million in 2017. This would increase annually. It is clear that the introduction of such a change would not have left any room for increases in the basic State pension this year and very little room for measures to support other groups. The increase we announced in the recent budget will benefit all pensioners over the age of 66, regardless of their PRSI records.
The current yearly average system is due to be replaced by the total contributions approach from around 2020. I would certainly like to do it sooner than 2020 if that is at all possible. The position of homemaker credits will be considered carefully in the context of that reform and will have to feature in it. While the Department of Social Protection will keep the homemaker scheme under review, any improvements to the current system which could result in further costs for the Exchequer will have to be considered in a budgetary context. I want to consider such improvements in the context of budget 2018. I do not think it would be possible to make all of the changes, or address all of the anomalies, in one budget. I would like to show form in 2018 by doing something to show some progress in this area.
This amendment also calls for a review of the operation of FIS to see how it could be improved to encourage and facilitate people in re-entering the workforce. As part of A Programme for a Partnership Government, the Department is examining the effectiveness of FIS and a range of other supports that are provided to jobseekers and people in employment with a view to developing a new working family payment. This payment will seek to ensure working families have an incentive to make the transition from welfare to employment. The overall aim of FIS is to encourage employment among low-income workers with children. More specifically, FIS seeks to minimise labour market disincentives for parents who take up work, to prevent in-work poverty among households with children and to tackle child poverty through income support to children in low-income working households. The objectives of FIS have remained intact since it was introduced in 1984. Like all Department of Social Protection schemes, it has been consistently reviewed and has been the subject of some significant changes over the years. The eligibility criteria relating to the number of hours worked have been amended, the basis for assessing income increases and thresholds has been changed and there has been a reduction in the FIS multiplier.
The number of families receiving FIS doubled between 2008 and 2015 from approximately 28,000 to approximately 56,000. A number of factors, including demographic and labour market trends, income reductions, increases in the thresholds, information improvements and changes in the tax and welfare systems, have led to the increase in the takeup of FIS. One of the main benefits of FIS is the security of the payment. When the level of FIS is determined, it continues to be payable at that level for a year, regardless of any change in family circumstances, such as an increase or decrease in earnings, as long as the person continues to be employed. This aspect of the scheme ensures income stability and minimises administrative effort. One of the best ways to tackle child poverty is to enable parents to get into work. The family income supplement and back-to-work family dividend payments will continue to support parents in taking up and remaining in employment, especially those furthest from the labour market. The Department is currently examining the effectiveness of FIS and a range of other supports for jobseekers and people in employment in the context of the development of the new working family payment. I hope this payment will be a centrepiece of the 2018 budget.Considerable work and analysis needs to be done to develop the payment. Work undertaken to develop the new payment will be guided by two principles. First, it should ensure that work pays and that no family is better off on welfare than at work, and, second, though equally important, it should have a positive effect on child poverty.
Making work pay cannot just be about welfare payments and top-ups; it must also be about higher pay. The Government also commits to supporting an increase in the national minimum wage, including a modest increase from 1 January 2017. The Government will also strengthen the role of the Low Pay Commission to examine the gender pay gap and strengthen regulations on precarious work. Once the analysis and the design of the working family payment has been completed, I will bring it to the joint committee for a detailed discussion.
This is a learning curve but I will allow the Bill to go through in order that it will not delay payment increases. Sinn Féin has tabled a motion on the gender gap, which will be debated in the Dáil tomorrow. We will learn a little more and I seek cross-party support, particularly from Fianna Fáil given Senator Ardagh has eloquently defended women and referred to the gender gap that has been in place over our lifetimes.
I welcome Senator Ardagh's co-operation in this regard. We are all keen to get this legislation through before the recess not so we can go on holiday, but so the measures that are due to kick in on 1 January do so, including an improvement in the disregards for lone parents. I appreciate the fact that the Senator will withdraw the amendment. I intend to feature the WFP and the changes to the home-maker's scheme in the 2018 budget and I commit to publishing reports on both issues within six months, well before the next budget, because it is clear from the debates in both Houses that Members want the WFP or something more for children than was provided in the next year's budget, and a measure to close the gap in pension provision for women and men. I will have those reports for the joint committee in the next six months and I will get something done on both issues in the next budget.