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Dáil Éireann debate -
Tuesday, 10 Oct 2006

Vol. 625 No. 1

Priority Questions.

Pension Provisions.

David Stanton

Question:

103 Mr. Stanton asked the Minister for Social and Family Affairs if he has completed his review of the Pensions Board report on mandatory pensions systems; if he has made recommendations to Government on the report; if not, when he expects to be in a position to do same; the actions he will take on this issue; and if he will make a statement on the matter. [32083/06]

As the House will be aware, because of slow progress being made towards our overall targets in the pensions area, in early 2005 I asked the Pensions Board to undertake the national pensions review. This was published in January 2006. In its report on the review, the board reaffirmed the various targets recommended in the original national pensions policy initiative, including a supplementary pensions coverage rate of 70% for those aged 30 years and over. The board also suggested a continuation of the existing system of voluntary supplementary pensions provision with improved incentives for participation.

However, as I said before, no truly voluntary pensions system has delivered the coverage rates for which we are aiming and if we are to achieve our overall targets, we may have to consider more radical approaches. I therefore asked the Pensions Board to explore and report to me in more detail on the general issues surrounding mandatory or quasi-mandatory supplementary systems outlined in its report on the national pensions review.

I published this second report, with the consent of the Government, last August. The report is a technical examination of the practical issues associated with a mandatory supplementary pension system. It is not a recommendation by the board for or against the introduction of a mandatory system. The board has, instead, examined several options and concluded by giving an outline of what such an arrangement could look like.

The model put forward by the board for consideration is aimed at low to middle earners which entails mandatory contributions of 15%, shared between employers, employees and the Exchequer, on earnings between €15,000 and €60,000. This would be backed up by an improved social welfare pension, which would increase from a current level of 33% of gross average industrial earnings to 40%. A timescale of ten years was suggested for full implementation if this model was approved.

The two reports developed by the Pensions Board over the past year require serious debate and analysis before we decide finally on the type of retirement provision we want for our older people and the contribution we will make during our working lives to that future.

In this regard, pensions featured very strongly in the negotiations on the new social partnership agreement, Towards 2016, and the final agreement features a number of commitments in this area. As part of the agreement, the Government is committed to publishing a Green Paper on pensions policy outlining the major policy choices and challenges in this area and taking account of the views of the social partners.

The two reports completed by the Pensions Board will input greatly to the Green Paper, as will the views from the partnership talks and the National Pensions Forum. A group of senior officials in my Department have already begun work on the Green Paper and it is my intention to produce it over the coming months.

There will then be a consultation process after which the Government is committed to developing a framework for comprehensively addressing the pensions agenda in the long term.

When the Minister says he plans to publish a Green Paper in the coming months does he mean this side of Christmas, this side of Easter, by this time next year or when? What does he mean when he refers to the coming months? The Minister has been talking about this issue for some time and now action is needed.

The State pension currently stands at 33% of gross average industrial earnings. In 1987 it was 38%, therefore the figure seems to have decreased quite a bit.

What is the Minister's view on the various options put forward by the Pensions Board? Is he in favour of the Kiwi Saver in New Zealand or the mandatory pension scheme in Australia? What is the position on part-time workers and pensions? Does the Minister agree that part-time workers are particularly disadvantaged where pension coverage is concerned?

I am determined neither to make nor dodge a general election timescale.

I never mentioned it.

It will take as long as it takes. The officials in my Department have started drafting the Green Paper and are finding the process very useful. The Green Paper will outline the major policy choices that face the country and most people would agree this is the right way to proceed. We know the size of the problem, that the choices are not easy and that they must be paid for. One idea the officials proposed for consideration entails a mandatory contribution of 15%, shared between employers, employees and the Exchequer, on earnings between €15,000 and €60,000.

I have stated a few times that it is important not to shy away from considering the mandatory or quasi-mandatory systems. I am determined to shine the light on them and examine them closely to determine whether we can afford them. More important, we should determine whether we can afford not to have them, given that over half the population, including 500,000 working women, do not have occupational pensions. It is incumbent on us to take some action.

This is not an easy area and mandatory pension contributions can be misinterpreted as additional taxation. However, saying this is like saying PRSI contributions should not have been made mandatory. PRSI contributions are mandatory and nobody in the country would put his hand up and ask that they be made voluntary. I am determined to keep the options of mandatory and quasi-mandatory pensions on the table as we engage in the Green Paper process. Meanwhile, we will consider other proposals, for example, the suggestion by the Pensions Board that we should have an SSIA-type system rather than tax reliefs. This was one of the major proposals and we are continuing to make good progress in examining it.

Is the Minister saying the Green Paper will not be published this side of the general election, after which someone else may be doing his job?

I am determined to publish it before the election.

That means we will have a debate on this issue and have the options before us. However, we already have the options before us in that the Pensions Board has issued two reports and there was an intense media debate on the issue. We now need concrete proposals from the Government. We have had many discussions, debates and reports but no action.

Is it correct that 53% of Irish women have no private pension coverage, as the Minister suggested, and that 43% of men have no such coverage? While the Minister is fiddling with all the reports, this issue is continuing to feature. When will we see action? The Minister has issued many press releases on the subject. How serious is he taking it? How serious is the so-called pensions time bomb for workers or is it all a mirage?

A very serious issue is developing with regard to pensions and, as far as I understand the matter, the figures the Deputy has mentioned are correct. One solution is to ignore the problem and allow all the tax breaks to benefit the top 20% or 30% of earners, who are benefiting from them at present. Another solution is to hype the voluntary system, perhaps by turning tax breaks into cash breaks, to see whether it will attract more people thereto. The third system is to consider a more quasi-mandatory or mandatory system. By "quasi-mandatory", I mean a system in which people are enrolled automatically but can opt out.

I have decided to engage in a process with regard to the latter option because, as I said from the beginning, one needs to bring the country with one on an issue such as this. No Government would impose a mandatory pensions system without securing consensus in the political and financial systems. I am trying to build such consensus. We have largely done so and pensions have reached the top of the agenda in the national pay talks, the media and this House. The first priority question today, for example, concerned pensions and it is therefore obvious that the issue has reached the top of the agenda.

The next stage in the process is to combine all the research in a Green Paper and try to elicit from the parties opposite their views thereon. I saw a Fine Gael press release that opposed mandatory pensions and expressed a preference for the SSIA-type route. In calmer times, when we are not considering the matter in light of the forthcoming election, Deputy Stanton might revisit that statement. Being in favour of mandatory pensions probably does not represent a very popular election platform, but it will surely be popular in 20 or 30 years among the 500,000 women without pension coverage, about whom we have spoken many times in the House. At that stage, they will not care who wins the next election — all they will care about is whether we did the right thing.

The Minister brought the election into the debate, not I.

It is everywhere.

Tax Code.

Willie Penrose

Question:

104 Mr. Penrose asked the Minister for Social and Family Affairs his views on amending the Social Welfare Acts in order to allow the spouses of farmers and other self-employed persons to make voluntary PRSI contributions in order that they will ultimately be able to qualify for contributory pensions in their own right; and if he will make a statement on the matter. [31953/06]

Family members working together are generally not insurable under the Social Welfare Acts. Spouses of employed or self-employed contributors are specifically excepted from social insurance contributions in respect of their working activity with their spouses. However, there is scope within the provisions of social welfare legislation to enable spouses who are partners in an enterprise, or who work together in a legally incorporated business, to be insurable and thereby accrue entitlement to contributory pensions in their own right.

At the heart of the issue lies the fact that current social welfare provisions recognise that family members regularly support each other without having any intention of entering into formal contractual arrangements. Employment under a contract of service as an employee, or as a contract for services as a self-employed person, is, by its very nature and necessity, a formal agreement between two or more parties. All contracts bring with them rights and responsibilities that, in this instance, include compliance legislation relating to PRSI, taxes and employment rights.

In general, close family members must show an express agreement to overcome the presumption that parties did not intend to be bound in a legally binding contract. Evidence of a partnership between spouses or the incorporation of a business will overcome this presumption and establish liability for Class S contributions providing income is above the annual threshold of €3,174. These provisions apply to couples engaged in farming activities and other self-employment activities, for example in retailing or in providing professional services.

The exception of spouses from PRSI liability in respect of a shared occupation does not preclude them in certain circumstances from accessing the voluntary PRSI contribution scheme. Access to this scheme requires a minimum number of 260 paid contributions. Where a person has been previously insured as an employee or a self-employed person, is no longer compulsorily insured and is under 66 of age, he or she can opt to pay a voluntary social insurance contribution.

Voluntary contributions will maintain social insurance cover for pensions such as retirement, State, widow's and widower's pensions, guardian's payment and the bereavement grant, depending on the rate at which voluntary contributions have been paid. These contributions maintain pension coverage at the level equivalent to that for which the person was last compulsorily insured.

Additional information not given on the floor of the House.

The amount to be paid as a voluntary contribution is a percentage of annual income. For those who were previously self-employed, the voluntary contribution is paid at a fixed amount of €253 per annum.

The requirement to have 260 paid contributions to gain access to the voluntary contribution scheme ensures that the requisite number of paid contributions is in place to establish a contributory pension entitlement. While some spouses may not be able to accrue the paid contributions through farming, large numbers are now engaged in off-farm employment which enables them to accumulate the requisite number of paid contributions.

Under the existing social welfare provisions, where formal employment or partnership relationships are intended between spouses or assisting relatives, the legislation provides the scope necessary to allow parties to enter into arrangements that will enable them to gain access to social insurance coverage. On the voluntary contributions scheme, the requirement to have 260 paid contributions to gain access to the scheme is appropriate. I am always willing to consider possible improvements.

I thank the Minister for his reply. Let me articulate and propound the case of the cohort including farmers' and shopkeepers' spouses. They are declining categories of people across rural Ireland and in urban areas who are effectively forgotten or invisible in the social welfare code. They spend many hours at the shoulders of their spouses, trying to retain and build up businesses. They work extremely hard from early morning to late at night. They do not have the formal arrangements or contractual arrangements to which the Minister referred. They could in the case of legally incorporated businesses or partnerships, but that is the State effectively imposing a view on them. Why does this have to be done? Does the Minister agree that a significant anomaly exists within the social welfare code for farmers' and shopowners' spouses as well as other self-employed categories? Women are being classified as relative to the system and prevented from paying PRSI in their own right. As a result, they cannot qualify for contributory pensions in their own right.

Does he agree that the problem has been compounded since the introduction of a means test for the qualified dependant? Is it not the position that they are wiped out all together? They work extremely hard, rear families and give a service to many people across the country, whether on the farm, huckster or corner shop. Is this not effectively another form of discrimination?

The answer is to remit such people in these situations. I accept such an initiative would have to be subject to examination, restriction and regulation. However, they should be allowed to pay the PRSI contribution on a voluntary basis, as was done with the carers, provided they work a certain number of hours in the shop or on the farm. Let us say it would cost up to €500 per annum and they would need ten years' contributions to qualify. It would not be open season and would be subject to regulation. We all know that one cannot undermine the concept of the PRSI system, and we would not want to do so. However, we should recognise people who are making a major contribution but who are wiped out of the system and in statistical terms turn up with zero in this regard.

I appeal to the Minister as part of the multifaceted reviews going on in his Department to examine this situation. I am sure the farmers' bodies and self-employed associations will make robust submissions to the Minister in the context of recognising people's contributions, ensuring the independence of women and removing them from a sense of dependency which was introduced in the 1920s and 1930s and which should be eliminated.

This issue has been the subject of many reviews over the years. More recently, it was discussed under the partnership talks. The distilled wisdom of all the parties involved, at review level among employers, employees and, in so far as I can ascertain, farmers, is that while the system is not perfect and leaves people out of the loop, there is a solution by way of making formal arrangements so that the spouse becomes a business partner.

I will listen carefully to the farmer bodies in particular if they have another approach to the problem. However, all the reviews and the partnership talks have fallen back on the solution that is available, namely, formal relationships between partners as one might expect in any business. That would allow them into the contribution net.

I commented earlier on the availability of voluntary contributions. Access to that scheme required a minimum number of 260 paid contributions and I can foresee some difficulty in that area for these people. I understand the issue and I am sympathetic. It has been reviewed many times. Nobody in the Department has produced an easy solution to the problem. However, there is an answer for anyone who is doing this work, namely, to enter a type of formal business relationship. I am not sure that it has to be an extensive high-powered business relationship. A partnership of some type might meet the requirements. Nonetheless, I will take account of what the Deputy said.

I thank the Minister.

Question No. 105 cannot be taken because Deputy Healy is not present.

I recall that rule from my days as Chief Whip. I probably brought it in.

Question No. 105 lapsed.

Family Support Services.

David Stanton

Question:

106 Mr. Stanton asked the Minister for Social and Family Affairs if his Department has concluded consultations on the proposed new parental allowance as outlined in the Government discussion paper, Proposals for Supporting Lone Parents; if he has received the final National Economic and Social Council report on its research into a proposed second tier payment; the plans he has to introduce both these new payments for low income families; the proposed timescale for same; and if he will make a statement on the matter. [32084/06]

The Government discussion paper, Proposals for Supporting Lone Parents, put forward proposals for the expanded availability and range of education and training opportunities for lone parents; the extension of the national employment action plan to focus on lone parents; focused provision of child care; improved information services; and the introduction of a new social assistance payment for low income families with young children.

The new social assistance payment being developed by officials in the Department will have the long-term aim of assisting people to achieve financial independence through supporting them to enter employment, which offers the best route out of poverty. Although the formal consultation process on the Government discussion paper has concluded, my officials continue to be in contact with lone parents' representative groups, whose views continue to feed in to the development of the proposals.

I fully realise that the proposed new payment cannot be introduced without co-ordinated supports and services being put in place by other Departments and agencies. This is why the Government has instructed the senior officials group on social inclusion to draw up an implementation plan to progress the non-income recommendations in tandem with the development of the legislation required in my Department to introduce the new payment scheme. Once the implementation plan has been successfully drafted, it is my intention to bring proposals for legislation to the Dáil.

As regards the National Economic and Social Council report, the council was asked to examine the feasibility of merging the family income supplement and child dependant allowance into a second tier child income support. Such a payment would be aimed specifically at targeting child poverty by channelling resources to low-income families without creating significant disincentives to employment.

While waiting for the structure for the new second tier support to be finalised, a range of other reforms, increased welfare supports and expanded child-centred services are all combining to make significant progress in tackling child poverty. The most recent figures show that at least 100,000 children have been lifted out of deprivation and hardship inside the last decade as a result of targeted measures and supports.

These include substantial increases in each budget in child benefit rates which directly benefit over one million children; increases of from €21 to €282 a week for families on family income supplement, which is being claimed by almost 19,000 families; some 80,000 families are benefiting from the €40 per child increase in the back to school clothing and footwear allowance; over 350,000 children have qualified for the €1,000 a year early child care supplement, a third of whom are the children of lone parents; and 41,000 child care places have been created under the €500 million equal opportunities child care programme.

What is the Government's target for child poverty levels by 2007 and what will it achieve by then? Perhaps the Minister might confirm whether it was 2%, but it is now way beyond that figure. There are two payments to be considered here, the parental allowance and the second tier payment. Again, the Minister might recall that in his 2005 budget speech, made almost two years ago in December 2004, he spoke about the targeted second tier payment. Will he tell the House when he plans to introduce it or bring forward solid proposals in this regard? That is a fairly straightforward question. We have been talking about this for two years. When will we see action, or at least concrete proposals before the House, on the second tier payment?

The same question arises regarding the parental allowance. When will concrete proposals regarding this new allowance be brought before the House? It is like the pensions issue — there is a lot of talk, reports, discussions, reviews and bodies, but we do not see any action.

There has been action. There have been increases in child benefit. Family income supplement has been dramatically changed and improved——

I am not talking about those.

——back to school allowances, early child care supplements and equal opportunity child care programmes, etc, have been put in place. Last year, those improvements stood at well over €1 billion. Much is happening in tackling child poverty and poverty generally. The facts and figures I have make clear that it is having a major impact.

To return to the Deputy's question, I do not have a specific percentage in mind regarding a target for reducing child poverty outside the general poverty target. The general poverty targets depend on whether one uses the approaches for measuring relative poverty used by the CSO or Europe, or the more sensible approach of measuring consistent poverty. It ranges from 5% to 20% depending on the figures with which one deals. The figures available to me indicate that approximately 240,000 people have escaped from the poverty trap in the past decade or so. The percentage of those in poverty is reducing steadily.

As regards the NESC report, while I am committed to the second tier payment, it is not the only tool against child poverty. It was trumped somewhat by the child care payment of €1,000 to children under six. This skewed the pitch a little in regard to payments directly to support children. The NESC tells me that it is a complicated issue and it is continuing its work. I have told it to continue its work, and I will move quickly on its proposals. I have been tackling poverty, including child poverty, through increasing family income supplements, child benefits, clothing allowances and early child care supplements. We are not waiting for that single tool. While it will be a valuable tool, it is not the only one.

I hope the lone parent family legislation will be brought before the House in the coming months. While consultations with the various groups have been completed, it is not yet drafted. We promised to put an implementation plan together to deal with the non-income element of the reforms, such as access to education, training and child care. As well as my other proposed reforms, the groups feel strongly that those three elements must be organised. We will try to progress them together.

Given that so much money is involved, will the lone parent allowance legislation have to be brought forward as part of a budgetary process? Does the Minister agree that this new child care payment was designed to cover child care costs and not child poverty per se? Will the Minister supply us with the figures for child poverty levels, his targets, and the current status?

My target is to ensure there is no child poverty in this country at this stage of our development. That is what we are working towards.

It was supposed to be achieved by 2007.

It is my intention that the legislation will be separate. There may be financial aspects of it that will have to be dealt with in a budget, but the legislation would have to be separate because it is a new scheme and there are considerable legislative reforms involved.

Social Welfare Benefits.

Emmet Stagg

Question:

107 Mr. Stagg asked the Minister for Social and Family Affairs if his attention has been drawn to the reply given to a parliamentary question in the European Parliament tabled to the European Commission by Proinsias De Rossa MEP; if his further attention has been drawn to the fact that the Commission rejected his proposal to extend the free travel scheme to those with Irish pensions and living abroad on the basis that it discriminated against Irish persons of pension age who did not have Irish pensions; his views on expanding the scheme to all Irish nationals of pensionable age living abroad, regardless of whether they have Irish pensions; and if he will make a statement on the matter. [31954/06]

The free travel scheme is available to all people living in the State aged 66 years or over. All carers in receipt of carer's allowance and carers of people in receipt of constant attendance or prescribed relative's allowance, regardless of their age, receive a free travel pass. It is also available to people under age 66 who are in receipt of certain disability type welfare payments, such as disability allowance, invalidity pension and blind person's pension. People resident in the State who are in receipt of a social security invalidity or disability payment from a country covered by EU regulations, or from a country with which Ireland has a bilateral social security agreement, and who have been in receipt of this payment for at least 12 months, are also eligible for free travel.

The scheme provides free travel on the main public and private transport services for those eligible under the scheme. These include road, rail and ferry services provided by companies such as Bus Átha Cliath, Bus Éireann and Iarnród Éireann, as well as Luas and services provided by more than 80 private transport operators. The free travel scheme applies to travel within the State and point to point cross-Border journeys between here and Northern Ireland. In line with the Government objective to put in place an all-Ireland free travel scheme for pensioners resident in all parts of this island, I am committed to significantly improving the North-South element of the current arrangements.

There have been a number of requests and enquiries regarding the extension of entitlement to free travel in Ireland to Irish-born people living outside Ireland, or to those in receipt of pensions from my Department, particularly in Britain, when they return to Ireland for a visit. I have examined the reply given by the European Commission to a parliamentary question from Proinsias De Rossa MEP in the European Parliament. The reply indicates that to extend the free travel scheme to people in receipt of an Irish pension and living abroad could be discriminatory under EU law. I have also been advised that it would not be possible to extend entitlement to free travel simply to Irish-born people living abroad as to do so would also be contrary to European legislation, which prohibits discrimination on the grounds of nationality.

However, I am determined to explore all options and I have raised the issue in meetings with the Commissioner for Employment and Social Affairs. Officials from my Department have met with European Commission officials on two occasions in an effort to clarify the legal issues involved. I am keeping this issue under close review and contacts with the European Commission are ongoing.

I thank the Minister for his reply and for his history lesson on free travel. I do not know why Ministers do not exclude that part of their answers. Obviously, members of the Opposition know just as much about free travel as the Department's officials. I do not know why it has to be read into the record every time.

I am asking the Minister to take his courage in his hands. Instead of running to Europe seeking a licence every time he wants to do something, he should do it and let Europe respond if it sees fit. If the Minister had done this in the first place, we would already have the free travel scheme for the Irish abroad.

In the response to Proinsias De Rossa, the Court of Justice's ruling effectively said that Irish nationals cannot be discriminated against on the basis that because someone does not have an Irish pension, one cannot get free travel when they come home to Ireland, whereas the Minister argues that he will only grant free travel to those with a pension. I do not know why the Minister interprets it differently, but the European Commission said that were the Government to introduce free travel for all Irish citizens of a certain age living abroad, that would be in order. The Court of Justice ruling quoted in the reply to Proinsias De Rossa fortified that argument.

Rather than going over and back to the EU and leaving files piled high without any decision or effective action being taken, the Minister should now introduce a free travel scheme for all Irish citizens whether they live in Ireland or elsewhere. I do not think he will have any difficulty from the Commission for doing so.

That is what I want to do.

Then the Minister should do it.

However, I do not have the luxury of ignoring what the Attorney General or the Commission say. I must take account of what both institutions say. As the Deputy is aware, I removed the peak time restrictions recently and in the coming period it will be possible to give full details on the expansion of the North-South travel. We will then have sorted those two problems.

I am as committed as the Deputy to trying to make progress on this issue. I have had a number of meetings with Commissioners. My officials have met their opposite numbers on many occasions. There has been much protracted and heavy discussion about it and it keeps coming up. I have a letter here from the Commission setting out the issue in black and white, including the European Court of Justice case. It states that any action I take that is based on nationality alone will be challenged. Free travel could be extended therefore to everybody in the European Union over the age of 66. That is something I was not planning to contemplate given the huge numbers involved. One answer to this question would have been for the European Community to proceed with its free travel pass many years ago. That would have been a good solution but various countries pulled that apart and it did not get anywhere, which is a pity.

I will continue to press every possible angle to ensure that our citizens in the United Kingdom are dealt with, not just those in receipt of pensions, although that would be a start. I specifically put that proposal regarding those in receipt of pensions. At one time I offered to change the legislation to make it a condition of an Irish pension that one would get free travel. I even pointed out that it would be discriminatory for me not to give free travel to someone in receipt of an Irish pension in the UK, but that proposal was not accepted. I then went back to the basics but if I put some measure in place for Irish citizens only, it will have no chance of standing the test of time so there is no point in going down that road.

I will continue to search for every possible angle to address this issue. I will take careful note of what the Deputy says to me today and promise him that within a couple of hours I will have it assessed by whatever legal brains are available.

I am afraid the Minister might be just playing with the issue rather than dealing with it. He tells us every time that he is pressing the buttons but there is nothing he can do about it. That, however, is no good to us. What we need is action from the Minister on this issue. He said he will raise another hare with the Commission and let the Commission chase it around for another six months before it comes to ground. That is no use to the people about whom we are talking.

It is important that the House realises the sort of people about whom we are talking. We are talking about Irish people who went abroad, worked extremely hard and sent back a great deal of money to the rest of us who were at home. They and their organisations believe there is a necessity for some recognition of that. It is not about monetary value because there is very little monetary value involved, and I believe the Minister appreciates that. It is a matter of recognising them and giving them somewhat of a salute for what they did for us.

I ask the Minister to stop running to the Commission every time he wants to do something. He should take a leaf out of the book of the French Government and Administration and do it. He can then talk to the Commission. I strongly suggest he should do that. He should not run to the Attorney General either because he will give the Minister the most careful possible answer. He should just do it and deal with the Commission subsequently. It will be ten years before it catches up with any one pensioner.

I will give the Deputy's suggestion some thought.

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