Róisín Shortall (Dublin North West, Labour)
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Question 1322: To ask the Minister for Social Protection the planned changes in the national pensions framework in relation to the self-employed and in particular sole-traders. [33442/10]

Éamon Ó Cuív (Galway West, Fianna Fail)
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The National Pensions Framework is the Government's plan for future pension reform. It encompasses all aspects of pensions, from social welfare to private occupational pensions and public sector pension reform. The aim of the framework is to deliver security, equity, choice and clarity for the individual, the employer and the State. It also aims to increase pension coverage, particularly among low to middle income groups and to ensure that state support for pensions is equitable and sustainable.

One of the key elements of the framework is the introduction of a new auto-enrolment system and this will have implications for self-employed people who employ staff, unless they already have more favourable pension arrangements in place. Employees earning above a certain income threshold will be automatically enrolled into this new scheme, unless they are already in a more favourable occupational pension scheme.

For those employees who are included in the scheme, contributions will only be paid on earnings above a certain minimum level and below a certain maximum. The level of these thresholds will be decided closer to the implementation date and they will be set in such a way as to ensure that the scheme focuses on those on low and middle incomes. Within these thresholds, the employee will pay 4% of their salary and the employer will be required to pay a contribution of 2%. The State will also provide a contribution within these thresholds which will be equivalent to 33% tax relief. It is intended that the auto-enrolment scheme will be introduced in 2014 but the Government will review the introduction date depending on the prevailing economic conditions closer to the time.

Self-employed people pay PRSI at Class S and so the changes to the State pension (contributory) which are set out in the framework may have implications for them, depending on their age. The framework provides for State pension age to be standardised at age 66 in 2014 and to increase to 68 in 2021 and to 68 in 2028. From 2020, a total contributions approach will be introduced to replace the current averaging system which is used in calculating a person's eligibility for State pension. In addition, consideration is being given to allowing people to postpone receiving State pension beyond pension age and to make up contribution shortfalls. The current homemakers' disregard will be replaced with a system of credited contributions from 2012.

There are a number of other elements of the framework which may have implications for self-employed people depending on their pension arrangements. Currently, tax relief on pension contributions is at the standard and higher rates. This will be replaced by a State contribution equal to 33% tax relief. Arrangements for the tax treatment of pension lump sums greater than €200,000 will be considered and developed during the implementation of the framework.

The framework also includes a commitment to streamline existing options at retirement so that all those with a defined contribution pension will have access to similar options at retirement. In addition, the range of personal pension vehicles available will be reviewed with a view to rationalising provision in this area. Regulations will be introduced to increase the transparency of pension charges and the Pensions Board's powers in relation to the regulation of pension schemes will be reviewed. The information being provided to scheme members will be kept under review and enhanced as considered necessary.

A technical implementation group was established in May to develop the legislative, regulatory and administrative infrastructure required to put the reforms into operation. In line with the Government decision, the group is chaired by the Department of Social Protection. The implementation phase is expected to take three to five years.