Terence Flanagan (Dublin North East, Independent)
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131. To ask the Minister for Social Protection her views on findings in the OECD pensions report (details supplied); and if she will make a statement on the matter. [34283/14]

Joan Burton (Dublin West, Labour)
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The various findings and recommendations contained in the OECD Review of the Irish Pensions System and published last year remain under consideration and continue to inform our development of pensions policy.

The OECD recommended that the single greatest goal in Irish pension policy should be to increase pension coverage through the introduction of a mandatory or quasi mandatory earnings related scheme and/or by improving financial incentives. This key recommendation was aimed at improving the adequacy of pensions by increasing coverage in the funded part of the pensions system.

Changing demographics will see the ratio of working age to pensioner reduce from 5.3 to 1 to 2.1 to1 by 2060 and will result in significant upward pressure on the State finances which are required to fund pension provision. Therefore, there is a need to encourage a long-term savings habit by individuals to supplement income from the State pension for those who will otherwise not be in a position to enjoy standards of living in retirement similar to those in pre-retirement.

Against this backdrop and in line with the OECD key recommendation and with the Programme for Government, the recent 2014-2016 Statement of Priorities confirmed that the Government will agree a roadmap and timeline for the introduction of a new, universal supplementary pension saving scheme. This decision has been taken in response to the adequacy and sustainability challenges in the Irish pensions system which has become an increasing concern in recent years. Development of this roadmap for a universal pension over the course of 2015 will involve detailed consideration of policy and operational parameters, and will include co-operation across a range of Government departments and engagement with all sectoral interests.

A range of other reforms, consistent with the recommendations of the OECD Review, have recently been undertaken or are currently being undertaken. These include, (but are not limited to) –

The State Pension

- the OECD noted that Ireland’s raising of the State pension age to 66 from 2014, 67 in 2021 and to 68 in 2028 will bring increased sustainability to the pension system and recognised that by international comparison Ireland was ‘ahead of the curve’ in already making hard decisions in this area;

- The OECD indicated that the link between social insurance contributions and benefits obtained from the State pension is weak and should be strengthened. In this regard it noted that in April 2012 Ireland began to strengthen this link with the introduction of new rate bands and required level of contributions;

- The OECD further noted that this link between contributions and benefits will be further strengthened by the planned introduction of the ‘Total Contributions’ approach in 2020

Occupational/Supplementary Pensions

- The OECD referred to the existing tax deferral structure providing greater incentives for those with higher incomes to save for retirement. As committed to in the Programme for Government, the Government subsequently took the necessary measures to cap taxpayers subsidy for all future pensions schemes that deliver income in retirement of more than €60,000;

- The OECD recommended reform that would allow for accrued benefits to be cut in the case of Defined Benefit (DB) scheme underfunding and for risks to be shared between plan members and pensioners, as well as plan sponsors. The Government subsequently introduced the Social Welfare and Pensions Act (No) 2 2013 which provides for a fairer distribution of the assets amongst all members when an underfunded DB pension scheme is in wind up;

- In line with the OECD recommendation to strengthen the Irish legislation regarding the protection of DB plan members when plans wind up, the Social Welfare and Pensions Act (No) 2 2013 provides further protection to members of a double insolvency (scheme and employer) in the form of a State guarantee where all of the beneficiaries of the scheme (pensioners, current employees and former employees, not yet retired) will receive at least 50% of their benefits. Existing defined benefit pensions in payment in such schemes will be 100% protected up to €12,000;

- Provisions within theSocial Welfare and Pensions Act (No) 2 2013 facilitated the Pensions Authority (PA) introducing tighter regulation to protect DB scheme members. This entails refusing to accept funding proposals from schemes with less than 50% funding and forcing schemes to take actions to address their very poor funding situations.It allows the PA impose additional obligations to ensure significantly underfunded schemes achieve a base level of funding in the short term.

In relation to public service pension provision, whilst this is a policy area proper to my colleague the Minister for Public Expenditure and Reform Brendan Howlin T.D., it is worth noting that the OECD referred to the many important changes to public service pension provision in recent years and highlighted that in terms of public service pension reform Ireland ‘belonged to the group of more advanced countries in this area”. This analysis by the OECD did not include the subsequent pension savings achieved by the Government under the Haddington Road Agreement.

Restructuring of the Pensions Board

In Qtr 1 2014, the governance of the Pensions Board (17 paid members) was restructured. This followed a Government decision on the recommendations of the Critical Review Group provided for by the Public Service Reform Programme. The new structure accommodates two distinct arms consisting of:

- a three-person Pensions Authority, comprised of an independent chair and 2 ex officio members of government bodies, to provide operational oversight of pensions regulation. The Pensions Board changed name to the Pensions Authority. The new governance structure commenced in March 2014 comprising a senior official from each of the Departments of Social Protection and Finance, and the re-appointment of the former Chairperson of the Pensions Board as Chairperson of the Authority; and

- a separate unpaid Pensions Council, with a majority of members representing consumer interests, which will advise the Minister on pensions policy. The selection of candidates for positions on the Council is underway and will be completed shortly.

Merger of the Office of the Pensions Ombudsman with the Financial Services Ombudsman

- A Steering Group has been established and work is underwayto progress the merger recommended in the Critical Review. The timeline for implementation has yet to be fully finalised but it is hoped to complete the merger by mid-2015. Legislation will be required to effect the merger between the two offices.