I move: "That the Bill be now read a Second Time."
As Minister for Social Protection, I am acutely aware of the needs of the people who depend on social welfare and the harsh economic circumstances many individuals and families face. The Department of Social Protection currently accounts for approximately 40% of all current Government expenditure. This means that €4 in every €10 that the Government spends is spent on social protection.
The Government will spend €20.5 billion on social welfare this year. The adjustment in social protection spending this year will be limited to €475 million, or just over 2% of the Department's spend. Next year we have to save a further €540 million. Balancing the needs of those dependent on social welfare against the money available is extremely difficult but I assure the House that the Government is doing its utmost to protect the most vulnerable in society.
Just 70 years ago Europe and Britain were at war. Despite that it was possible for progressive leaders to think ahead and lay the foundations for a better society. In 1942 William Beveridge, an English man, set out a programme to eliminate the five giant evils - squalor, ignorance, want, idleness and disease - through the establishment of the welfare state. It remains today one of the greatest legacies of social democracy.
The twin evils that have to be tackled today if we are to create sustainable economic recovery are unemployment and debt. We all see every day the distress, dashed hopes and hardship they cause. That is why we are dealing with unsustainable mortgage debt though legal reforms and a new advisory service that will strengthen the hand of householders in dealing with the banks. However, there is no economic recovery without jobs.
The Social Welfare Bill will give legislative effect to certain social welfare measures announced in the Budget Statement of December 2011, which are due to come into effect this year, as well as a number of general or miscellaneous amendments to the social welfare code. I am also introducing a number of amendments to occupational pension provision in this Bill.
Despite improvements made to the one-parent family payment over the years and significant spending on supports to lone parents, a large proportion of lone parents and their children still experience poverty and experience much higher at-risk-of-poverty and consistent poverty rates than other working age adults.
In general, the best route out of poverty is through employment. We recognise that work, especially full-time work, may not be an option for parents of very young children. However, we believe that supporting parents in participating in the labour market once their children have reached an appropriate age will improve their own economic situations and their social well-being, as well as that of their families.
Changes in the one-parent family payment were introduced in 2010 to make payment until the youngest child reached the age of 14. This Bill contains further changes so that for new recipients, from May 2012, one-parent family payment will be made until the youngest child reaches the age of 12, the age of ten from January 2013, and the age of seven from 2014. For existing recipients there will be a tapered phasing-out period to enable them to access education and training and to prepare parents for their return to the labour market.
Many of those who have been concerned about the measures regarding the one-parent family payment being introduced in this Bill have said that seven is too young and obviously they are concerned about leaving a child alone without adequate child care. They have said it is too young for a parent to make the first steps back to the workplace and too young for the same parent to return to education or training. I entirely agree that seven is too young for anyone to seriously contemplate any of these things without there being a system of safe, affordable and accessible child care in place, similar to what is found in the Scandinavian countries to whose systems of social protection we aspire. That is why I am undertaking tonight that I will only proceed with the measures to reduce the upper age limit to seven years in the event that I get a credible and bankable commitment on the delivery of such a system of child care by the time of this year's budget. If this is not forthcoming, the measure will not proceed. I will engage with my colleagues, the Minister for Children and Youth Affairs and the Minister for Education and Skills, to establish a co-ordinated, cross-departmental approach to ensure the required level of services are in place to support lone parents as their youngest child reaches the relevant age thresholds.
I am also conscious that all parents have a responsibility to provide maintenance to their dependent spouses and children. I recognise that many lone parents want to work and to obtain valuable work experience. Therefore, I will shortly bring proposals to Cabinet to open up JobBridge, the national internship scheme, to lone parents because so many of them have expressed an interest to me in the opportunities available through the scheme.
I am introducing a number of amendments to the occupational pension provision in this Bill. These amendments provide a requirement for defined benefits pension schemes to hold a risk reserve in addition to the funding standard requirements set out in the Pensions Act.
The sustainability of pensions into the longer term is a critical issue and the OECD is currently looking at the direction of all pensions policy. The purpose of these amendments is to underpin further the legislative provision applying to defined benefits schemes generally and which to help provide a secure pension for the members of the defined benefits scheme into the future and ensure the sustainability of defined benefits pensions. Defined benefit pension schemes are a very important element of pension provision in Ireland. Following the downturn in the financial markets, the funding standard was suspended in late 2008 to allow the trustees of pension schemes assess the impact of historically high volatility in the financial markets and the significant losses experienced. The amendments I am introducing facilitate the re-introduction of the funding standard.
The proposal in this Bill to introduce a risk reserve will provide a buffer to assist schemes absorb financial shocks in the future and in this regard will enhance the protection of the pension entitlements of scheme members against future volatility in the markets. It is recognised that many defined benefit pension schemes are in deficit and will need time to recover their funding position. It is therefore intended to introduce the risk reserve requirement over an extended time period. The funding standard will be introduced initially and, from 1 January 2016, pension schemes will be required to hold a risk reserve. Schemes will, however, be given up to 11 years from the re-introduction of the funding standard to satisfy the risk reserve requirement.
It is estimated the risk reserve will increase the liabilities of a defined benefit scheme but this will depend on the investment profile of each scheme. Changes to the funding standard guidelines will give credit to schemes that reduce their equity risk and will assist schemes to satisfy their funding requirements. Scheme trustees have options in this regard. Legislation has been introduced to provide for sovereign annuities. The Pensions Board published guidelines to assist potential providers with the development of sovereign annuity products. As part of this initiative, the NTMA will issue, subject to market yields, sovereign bonds of a long duration that will allow pension schemes to better match their assets to their liabilities. In addition, the Pensions Board is giving consideration to the provision of an enforceable employer guarantee to meet the risk reserve requirements.
I will be tabling a number of amendments to the Bill on Committee Stage on voluntary contributions for changes in the rules governing access to the facility to pay voluntary PRSI contributions and for transitional arrangements for the gradual reduction in the age limit of the youngest child for the payment of one parent family benefit. On mortgage interest supplement, I will put in place restrictions on the payment of the supplement to provide that it will not be payable for a person in the first 12 months of the mortgage arrears resolution process as set out in the code of conduct on mortgage arrears applying to mortgage lenders. The intention is that the financial institution would provide at least 12 months forbearance to borrowers in respect of their mortgage obligations and only after this 12 month period would mortgage interest supplement be available.
For data exchange there will be an amendment of section 265(1) on sharing information for student grant purposes to include reference to the Student Support Act 2011. There will also be provision to ensure that PRSI continues to be payable on income relieved under the special assignee relief programme scheme for income tax purposes and provision to provide clarity on share-based remuneration arrangements on which employer PRSI is not chargeable. There will also be changes in the financing arrangements for the social insurance fund arising from Government accounting requirements.
Provision will also be made to extend the household budgeting facility to include additional energy providers that are regulated by the energy regulator and to extend the list of specified bodies to include housing bodies that stand approved of by the Minister for the Environment, Community and Local Government to facilitate rent deductions under the HHB scheme for customers of these housing associations.
Under this legislation, it will be a requirement that tenants, who have signed up to the household budget service to have their local authorities differential rent deducted, cannot withdraw from that arrangement without the permission of the local authority.
I am changing the basis of calculating entitlement to jobseeker's benefit from a six-day week to a five-day week.
Welfare fraud is a serious crime and the Department of Social Protection is doing everything it can to crack down on people who abuse the system. It is a small number of people but any amount lost to fraud is significant. When high risk areas are identified targeted control measures are put in place to reduce the risk of fraud and abuse of the system. The Department has begun the phased introduction of the public services card with key security features, including a photograph and signature, which will be used to authenticate the identity of individuals. One of the advantages of the public services card is that it will help to reduce fraud and error which result from the incorrect identification of claimants. Under the existing legislative provisions there is no mandatory requirement for a person to allow for his or her photograph and signature to be captured and reproduced in electronic format for purposes of a PPSN allocation, public services card and claims for social welfare benefits. I will be proposing a change to provide for the introduction of a new condition for any new claim for social welfare payment that the claimant must satisfy the Department as to his or her identity including allowing for electronic capture of photograph and signature.
I am also strengthening the powers of social welfare inspectors to make inquiries in various circumstances at ports and airports and I am strengthening the powers of social welfare inspectors to make inquiries with landlords in connection with rent supplement claims.
There are also changes to the revaluation of scheme benefits under the Pensions Act changes to the issue of guidance and further clarifications to section 50 of the Pension Act on the timeframe required to satisfy pension scheme funding requirements. The proposal to provide a mechanism that requires a pension scheme to wind-up in certain limited circumstances will be brought forward in the next Social Welfare Bill.
On amendments to section 250A of the principal Act to provide that information which an authorised officer receives from a financial institution shall be provided to a social welfare investigator for the purpose of an investigation, I have been advised by Office of the Attorney General that this provision is not necessary and is therefore not included in this Bill.
I will outline the main provisions of the Bill. Section 1 provides for the Short Title, collective citations, construction and any necessary commencements and section 2 provides for definitions used throughout this Part of the Bill.
Section 3 provides for an increase in the minimum number of paid PRSI contributions required to be eligible to become a voluntary contributor from 260 to 520.
Sections 4 and 5 make a number of amendments to the one-parent family payment to introduce restrictions on entitlement for families where the youngest child reaches seven years. The age limit of the youngest child is gradually being reduced from age 14 in 2011, to age 12 in 2012, to age 10 in 2013 and to age seven in 2014.
Section 6 amends and extends the list of bodies that are specified in the Social Welfare Consolidation Act 2005 as being authorised to use the personal public service number for the purposes of carrying out transactions with members of the public, for sharing personal data and information amongst themselves for the purposes of carrying out relevant transactions, and for exchanging data. The Office of the Pensions Ombudsman is now included and VECs are now specified the purposes of sections 262 to 270 of the Act; they are currently specified for the purposes of section 266 only.
Section 7 provides for an extension to the list of payments that have been excluded from the disqualification of concurrent payment where a person is also on a community employment, CE, scheme. It is now extended to include all weekly and monthly supplements payable under the supplementary welfare allowance scheme, that is, if people on community employment can qualify for mortgage interest supplement and the diet supplement, they can receive them.
Part 3 and sections 8 to 26 provide for amendments to the Pensions Act 1990. Sections 8 and 9 provide for the definition of Principal Act for the purposes of Part 3 and for the definition of common terms used in this Act. Section 10 amends section 7A of the Act to provide that any guidance issued by the Pensions Board or any other person specified by regulation under this Act cannot be changed without the prior consent of the Minister. Section 11 amends section 34 to clarify that the Pensions Board can issue guidance in relation to the calculation of the transfer value of pension rights.
Sections 12 to 24 deal with the introduction of risk reserves into the funding standard for the regulation of defined benefit pension schemes. The proposed amendment to the funding standard will require defined benefit pension schemes to hold an additional funding reserve in addition to the level of funding required at present. This amendment will parallel the existing structure and requirements to satisfy the funding standard. In addition to the actuarial funding certificate submitted at present, the trustees of a pension scheme will now be required to submit an actuarial funding reserve certificate and if either certificate indicates that the scheme does not satisfy the funding requirement, the scheme must, except in certain circumstances, submit a funding proposal to the Pensions Board to restore funding by the next certificate date. Section 12inserts definitions for the purpose of this Part IV of the Act.
Section 13 amends section 41 of the Act to disapply the risk reserve requirement to regulatory own funds schemes as those reserve requirements are dealt with in Part IVB of the Act. Section 14 amends section 42 of the Act to require relevant schemes to submit an actuarial funding reserve certificate to indicate whether the scheme satisfies the risk reserve requirement. Section 15 amends section 43 of the Act to specify the date on which the assets and liabilities of the scheme for the purpose of preparing an actuarial funding reserve certificate are assessed and the time frame for submission of the actuarial funding reserve certificate to the Pensions Board.
Section 16 amends section 44 of the Act to set the level of reserve required to be maintained by relevant schemes. The risk reserve will reflect the level of risk undertaken in a scheme's investment strategy. It will be the aggregate of two amounts. The first is 15% of the amount of the funding standard liabilities less the value of EU bonds and cash and any other prescribed assets held. The other is the amount by which the funding standard liabilities would increase on the effective date of the certificate if there was a 0.5% fall in interest rates. As the Minister for Social Protection, I will have the power to prescribe a higher or lower percentage. Section 17 amends section 45 to change the reference from section 44 to section 44(1). This is consequential to the insertion of section 44(2) by section 16.
Section 18 amends section 46 of the Act to specify the matters to which an actuary must have regard when completing an actuarial funding reserve certificate, just as the actuary is already required to do when completing an actuarial funding certificate under that section. Section 19 amends section 47 of the Act to ensure that there is no doubt as to the power of the Minister to prescribe different requirements for different calculations for the purposes of Part IV of the Act. Section 20 amends section 48 to clarify the scheme liabilities which must be discharged before any resources can be returned to an employer on the wind-up of a scheme and to clarify the benefits to which the purchase of an annuity can apply.
Section 21 extends section 49 of the Act to require the trustees of a defined benefit pension scheme to submit an actuarial funding reserve certificate in addition to the submission of an actuarial funding certificate. If either certificate indicates that the scheme does not satisfy the funding requirements, the scheme must, except in certain circumstances, submit a funding proposal to the Pensions Board to restore funding by the next funding certificate date. Section 21 of the Bill amends section 49 of the Pensions Act to provide the Pensions Board with discretion to extend this period in circumstances which will be set out in statutory guidance and approved by the Minister for Social Protection.
Section 22 strengthens the provision in section 50 of the Pensions Act where the trustees of a defined benefit scheme fail to comply with the funding standard. Trustees will now be required to report to the Pensions Board within a prescribed timeframe on the measures taken to restructure scheme benefits on foot of a notice issued by the Pensions Board under section 50 of the Pensions Act. A new subsection (4) is being inserted in section 50 of the Act to empower the Minister for Social Protection to prescribe the guidance issued by the Pensions Board, setting out the form and detailed requirements of an application by scheme trustees to reduce scheme benefits.
Section 23 extends section 51A of the Act to include the completion of funding standard reserve certificates in the responsibilities of actuaries in relation to pension schemes. Section 24 amends section 53E of the Act by deleting the definition of "funding standard liabilities" which is being inserted in section 40 of the Act by section 27. Section 25 amends section 55 of the Act to require the trustees of a pension scheme to include a statement in the annual report indicating whether the scheme satisfies the funding standard reserve requirements. If it does not, it must notify the Pensions Board within a time limit which may be prescribed by me. Section 26 amends section 59G of the Act to require the consent of the trustees to an application of early retirement under the rules of the scheme where the actuary is not satisfied that the scheme satisfies the funding standard reserve requirements.
This Government continues to invest heavily in social protection for its citizens in spite of the economic recession. This reflects the importance attached to supporting the most vulnerable groups in society and to reducing poverty. This must, however, be balanced against the budgetary demands. I commend the Bill to the House and I look forward to an informed debate and to hearing Members' views on the measures in the Bill.