Pension Equality and Fairness: Motion [Private Members]

I call Deputy John Brady who has 20 minutes.

I move:

That Dáil Eireann:

notes that changes made to the State Pension in recent years have impacted disproportionately on women and have forced retired workers onto jobseeker’s payments;calls on the Government to ensure that pension equality for women will be front and centre in the development of a road map for a sustainable Social Insurance Fund and associated pension reform;urges the Government to restore the pension rates and bands to their pre-September 2012 position and to reduce the contributions requirement for State Pension eligibility from 520 to 260 contributions; and

further calls on the Government to reinstate the State Pension (Transition) so that workers can once again have the option of retiring when they reach 65 years of age with the support of a pension.

I am sharing the time. I will take ten minutes and Deputy Denise Mitchell is taking five. I am not sure who else is speaking.

I will speak on the motion too.

This motion on pensions is fundamentally about two things: fairness and equality. It is about fairness for those who are obliged to retire at 65 years of age when accessing the State pension and equality for all women when they retire. This motion is about correcting the mistakes made by Fine Gael and the Labour Party in the pension reforms made in 2012. Those reforms were made without any long-term thinking or forward planning and with no adequate processes put in place alongside those reforms. This motion is about rectifying the injustices that were imposed on women by the marriage bar, which was not abolished in this State until 1973. The marriage bar was an appalling injustice that impacted on an estimated 47,000 women and which has yet to be addressed. The 2012 pension reforms were rammed through the Oireachtas and they were wrong. Sinn Féin opposed them then and we oppose them now. In tabling this motion, we have engaged with a number of organisations on it, including Age Action Ireland, the National Women’s Council of Ireland and the Irish Congress of Trade Unions.

This week more than 5,000 men and women of 65 years of age will receive their weekly jobseeker's payment of €188. In many cases, these are men and women who worked for 40 years or more and contributed to their pension, but who cannot now access it. These are people who were obliged by contract to retire at 65 years of age and who are left with a jobseeker's payment as their only option for income. No 65 year old in this State should be forced to sign on for a jobseeker's payment due to the failure of Fine Gael and the Labour Party to plan effectively when increasing the State pension age to 66 years and abolishing the State transitional pension. Where else in the world would one see a system where on retirement people are pushed into taking a jobseeker's payment for one year before accessing the State pension?

I have lost count of the number of people who have told me the same story: they retire, as they are obliged to, at 65 years of age, apply for the State pension and are told they simply cannot have it. The option for them is to apply for a jobseeker's payment and they are quietly told to take the money and not to worry about seeking work. It is an absolute farce and a joke. The situation is one of many examples of reform being pushed through these Houses without any planning or care for the consequences. The increase in the State pension age came about with no political debate, public consultation or cost-benefit analysis of the measure. This motion is about fairness for those who have no choice but to retire at 65 years of age and who are being deprived of a pension that they have earned and paid into.

A few weeks ago, a lady contacted my office. Her husband had worked all his life, until he was forced to retire at 65 years of age. He had no option but to sign on for a jobseeker's payment. He had never looked for anything from the State and had always managed to support himself and his family through his work. On his retirement, this couple decided to travel to Australia to see their children and grandchildren, but they were told that his payment would be revoked if they left the country for longer than two weeks. This man died shortly after his retirement but his wife saw fit to contact me to inform me of the distress caused to her husband by the situation. This man retired after a lifetime of work and paying diligently into his pension pot, but he simply could not access it.

This issue has been raised by the Irish Congress of Trade Unions time and again, yet its calls on the Government and the Department of Social Protection have been ignored. Age Action Ireland has been to the fore on the issue and I commend it for supporting this motion. It knows the hardship that these measures have had on our older citizens and its input into the motion has been invaluable. Surprisingly, Fianna Fáil's Deputies, who have been vocal on the issue, are noticeably absent for this important motion. There is only one member of Government here and no member of the Labour Party is present. Nevertheless, I can see no reason for any Deputy to come into this Chamber tomorrow to vote against the motion and against fairness for those retiring at 65 years of age. I know that this issue has been brought to the attention of all Deputies by constituents throughout the State. These same people will wait to see if their Deputies believe that they should be entitled to a State pension on retirement at 65 years of age.

We know that women have been directly impacted by changes made to the calculation of contributions and the band rates imposed by Fine Gael and the Labour Party in 2012. These reforms have condemned thousands of women to poverty in their retirement years. Ann said, "I am totally disgusted with the system which does not entitle me to a full contributory pension after a lifetime of fully contributing to Irish society." Peggy said, "I and other women like me are facing a very uncertain and impoverished future." Mary said, “I was affected by the marriage bar; we are the forgotten women." These are the thoughts of just three of the thousands of women receiving less than the full State pension. For women, the pension system is utterly unjust. Women who take time to care for someone or to raise children are discriminated against. The impact of the imposition of the marriage bar, which was imposed on women, still lingers as it has lessened their pension entitlements. This was not the fault of those women, yet they are the very ones having to pay for it to this very day.

A person with a yearly average of 29 contributions who qualified for the State pension before September 2012 gets a pension of €228.70.

However, a person with the same yearly average number of contributions who qualified after September 2012 receives a pension of just €198.60, which amounts to a cut of €30 per week.

The National Women's Council of Ireland has highlighted the gender pension gap and, as part of its breakthrough manifesto before the most recent general election, called for this gap to be closed. It was supported in its call by many before the general election, but it is not supported to such a great extent now that the opportunity to act has presented itself. I thank the National Women's Council of Ireland for supporting the motion.

Fianna Fáil and Fine Gael have talked the talk on pensions for years, but the time for talking, Green Papers, White Papers, studies and reports on pensions is over. Action is required; we need to tackle pension inequalities now. The simple choice facing all Deputies in the Chamber is one of fairness and equality. Fine Gael and Fianna Fáil, in particular, must ask themselves two very simple questions about the motion. First, is it fair that those who are obliged to retire at 65 years are forced onto jobseeker's payments? Second, are women entitled to an equal pension?

If the Government - Fine Gael and Fianna Fáil - is not willing to support the motion, I call on it to postpone increasing pension age to 67 years in 2021 and 68 years in 2028. Ireland is moving much faster and further than any other European Union country in increasing pension age without having adequate plans in place. Pension age should not be extended to 68 years unless it is done as part of an EU-wide initiative. I ask the Department to seriously rethink the additional increases.

The motion provides an opportunity for Deputies to do something to help those who have highlighted the issue of pensions in their constituency offices. I am sure the same people, with thousands of women, will follow this debate and tomorrow's vote with interest. I urge all Deputies to support the motion as a first step in tackling the various inconsistencies in the pension system. The motion is about achieving fairness and equality for everyone in retirement.

Sinn Féin has introduced the motion because of the Government's failure to act on a gross and blatant pension inequality which will affect a growing number of people every year. Appallingly, those most affected are predominately women.

When changes to pension bands and rates were introduced in 2012, studies were conducted of their effects. The worst aspect is that it was known at the time that they would primarily affect women. Despite this, the changes were pushed through. It is horrifying that, as a result of the way averaging works, women who left the workforce to care for children or elderly relatives are being cynically penalised on retirement by the Government.

The homemaker's scheme only extends to years spent as a homemaker after 1994. This means, for example, that thousands of women affected by the marriage bar are excluded under the scheme. We must remember that they were forced from the workplace. The scheme leaves an entire generation of women to suffer the current cuts. This generation took care of their children in the 1970s and 1980s. On finally reaching retirement, they are being told by the State that their generation deserves a lower standard of living because of the pension changes introduced in 2012 which remain in place under the Government.

What we have now are shocking cuts of up to €1,400 in pensioners' payments at a time of cost of living increases caused by rising fuel and insurance costs. What does the €5 increase in the pension introduced in the recent budget achieve for the people concerned? It is a pitiful, cold comfort. Instead of the flat rate, across the board rise introduced in the budget, the Government could have addressed the specific gross inequalities in the pension system. The motion seeks to have these inequalities addressed. If, as may be argued, the logic for not doing so is that it would have an impact on the Social Insurance Fund, why have women been predominantly selected to suffer from these ruthless cuts?

Some people will have their payments cut by €30 per week. Generally, women remain at a disadvantage when they reach the age of retirement. Many women are in part-time or lower paid employment and generally less likely to earn as much as men, with only 16% of women receiving a full State contributory pension according to the National Women’s Council of Ireland.

Despite Government commitments to close the gender gap, it has widened. The European Institute for Gender Equality found a 37% gender gap in pensions in Ireland. It is disgraceful that action has not been taken to address this issue and the Government has not undertaken real pension reform. While the words spoken by Deputies in the House may well be forgotten over time, the action we take and the ways in which we improve people's lives will not be forgotten.

Age Action Ireland and the National Women’s Council of Ireland have urged Deputies to support the motion which asks us to recognise a generation of mainly women whom we all represent. The Minister must reverse an inequality that will continue to grow, provide an equal pension for women and state clearly to the generation in question that they will no longer be penalised. He must bring this generation of women in from the cold. He will be remembered by those who are suffering and those who will suffer in the future if he fails to act now.

In the short time available to me I will focus on one particular aspect of the motion tabled by my colleagues, Deputies John Brady and Denise Mitchell, namely, the call on the Government to reinstate the State transition pension in order that workers can once again have the option of retiring, with the support of a pension, when they reach 65 years of age. I have been contacted by people who are being forced to retire at the age of 65 years. I am not embarrassed to say some of them were my classmates in school, as the clock ticks towards this major milestone in our lives. I emphasise, however, that I was one of the youngest in my class. Those whom I have met are in good health and enjoy their work. People who have financial obligations and mortgages to pay simply cannot afford to be unemployed with no pension entitlement. This is wholly unfair. It is wrong that Irish law currently permits employers to impose mandatory retirement ages in their employees' contracts, in effect, facilitating ageism and creating a set of second class employment rights for older workers. This should not be allowed to happen.

An argument used to support the current legal provision is that if people retire at an earlier age, there will be more youth employment. Such statements have been dismissed time and again and I reject them. A 2014 report from the IZA World of Labor research institute found the following:

There is no trade-off in the employment of young and old workers: Higher employment for older workers coincides with higher employment for younger workers ... Reducing the employment of older persons does not provide more job opportunities for younger persons.

From a financial perspective, it is not in the country's interests to allow employers to impose this mandatory retirement age. A worker forced into retirement at the age of 65 years is entitled to jobseeker’s benefit of €188 at the maximum rate until he or she turns 66 years.

Financially, it makes sense for an older worker to continue to contribute to the Exchequer rather than receiving payments from it. The abolition of mandatory retirement should be a priority and I call on all Deputies to support the motion.

More than anything else, this is about fairness for people who have worked all their lives and are required to retire on reaching 65 years of age. Most of us here are former members of local authorities and we are all aware that local authority members are required to go on jobseeker's benefit for a year before they get their pension. As stated earlier, when the pension age is extended further the crisis will widen further. Women, in particular, are vulnerable to this situation. As stated by my colleagues, many women who worked for most of their lives and took a few years out from working to care for an elderly parent or their children now find themselves in the precarious position of their being entitled to only a very small pension or no pension. These issues need to be dealt with properly.

In an article in last Tuesday's The Guardian, the famous physicist, Stephen Hawking, dealt with the issue of globalisation and automation of production, the Internet and the many new ways of producing wealth. It also dealt with how that wealth is moving into the hands of fewer people and how this is impacting on the masses in terms of the opportunities available to them to make a living throughout their lives and, in particular, to get a pension at the end of their working lives. These are serious issues that we need to deal with not only in Ireland but across Europe and the world. The issue of pensions comes to the fore in all this because now, when people reach the end of their working lives, they find that they are unable to live their lives in the manner to which they had become accustomed in the previous 40 or 50 years.

While this motion deals specifically with people who on reaching pension age are not entitled to a pension for another year and yet they are not permitted to work, the wider issue of pensions and what is going to happen in this area is a crisis with which we as a society need to deal with haste.

I move amendment No. 1:

To delete all words after “Dáil Éireann” and substitute the following:

“notes that:

— there are many different types of pension; the State Pension (Non-Contributory)which is means-tested and funded from general taxation, the State Pension (Contributory) which is not means-tested and is funded from social insurance, public service pensions, defined benefit and defined contribution pensions which are private trusts set up by employers and private pension arrangements like personal retirement savings accounts; the challenges and issues relating to each of these is different;

— over the past decade successive Governments have increased the basic weekly rate of the State Pension on a cumulative basis, well ahead of inflation;

— a welcome increase in life expectancy brings with it increased pension costs; without raising the State Pension age, pensions will become unaffordable and unsustainable in the future and it will not be possible to maintain their value;

— the changes to rates, bands and minimum contributions introduced for State Pensions(Contributory)were designed to help ensure that the Social Insurance Fund went back into surplus and remains so;

— State Pensions (Contributory) are paid out of the Social Insurance Fund, not general taxation and any increase in the cost of the contributory pensions would have to be paid for by those paying Pay Related Social Insurance (PRSI) contributions - employees and their employers;

— the rate of consistent poverty amongst those over 65 is 2.1 per cent compared to 8 percent for the general population; for neither men nor women over 65 is the rate of consistent poverty over 2.5 per cent; and

— there is no compulsory retirement age in Ireland but individual employment contracts, including many of those employed by the State, may contain a retirement age; more flexible working and pension options need to be developed to give people greater choice, for example such as if they wish to remain in their current employment beyond 65; and

agrees that:

— pensions are a particularly complex area and any change to the rules is likely to result in both winners and losers and have an impact in terms of cost on the exchequer and/or the Social Insurance Fund;

— the impact of any reforms on women and men and other groups need to be carefully considered and analysed before making them; and

— as a result an analysis of the impact of various possible changes will be given to the Oireachtas Joint Committee on Social Protection for its consideration in early 2017.”

I welcome the opportunity of this debate on State pension policy. I think we will have to have many more debates on this issue. Discussions on pensions can often be very confusing. This is because there are many different types of pension, including the State pension (non-contributory) which is means-tested and funded from general taxation; the State pension (contributory) which is not means-tested and is funded from social insurance; public service pensions; defined benefit and defined contribution pensions, which are private trusts set up by employers, and private pension arrangements like Personal Retirement Savings Accounts, PRSAs. The challenges and issues relating to each of these arrangements are different and different solutions will be needed in different cases. The contributions I have just heard in many cases demonstrate how confusing and complex these issues can be. For example, the marriage ban was never the law in Ireland. It has never been illegal for married women to work. The marriage ban was a contractual obligation that applied mainly, although not exclusively, to public servants. Public servants recruited prior to 1995 paid and still pay a lower PRSI rate of 0.9% and so they are not entitled to the State pension anyway. They are not entitled to it whether they are men, women or whether married or not. That is the work that works. Sinn Féin is clearly confusing the State pension with the State contributory pension in that regard. The motion as drafted does not comprehend most of those cases.

Another Deputy spoke about low pay. A weekly contribution is worth the same regardless of how much is paid. In other words, whether a person earns €1,000 per week and pays 4% PRSI, which amounts to €40 per week in PRSI, or €200 per week and pays 4% PRSI, which is only €8 per week, that counts as one contribution. The contribution of a person on low pay paying €8 per week is ranked equal to the contribution of a person on high pay earning €1,000 per week and paying €40 PRSI, so Sinn Féin's understanding in terms of how things work is wrong. The motion appears to refer to changes that were made in 2012 and 2014. These reforms were the restructuring of the rate bands under the State pension contributory and the abolition of the State pension transition which standardised the State pension age at 66. The motion does not mention the positive changes in the State pensions over recent years. It does not mention the increases in the rates of the State pensions this year and last year or the restoration of the Christmas bonus. It does not mention the large increases in spending on these pensions from €3.8 billion in 2005 to €6.9 billion in 2015. It does not mention the huge increase in pensioner numbers from 409,000 persons in 2005 to 577,000 at the end of 2015 and the projected further increases in the years ahead. This, of course, gives rise to a major challenge to future sustainability and affordability, which, again, Sinn Féin does not appear to acknowledge in its motion.

The Sinn Féin proposal to make changes to the State pension would cost €150 million next year and would, therefore, be a significant charge on the Social Insurance Fund and the Exchequer. The cost would rise in 2018 and every year thereafter yet Sinn Féin has put forward no proposals in its motion to fund any of its plans. Over the past five years, the Government has worked hard to bring the Social Insurance Fund from deficit to surplus. This year, for the first time since 2008, the fund will have a surplus. We have also reduced the Exchequer deficit considerably and intend to balance the books by 2018. Prudent management of the public finances will allow us to continue to be able to pay the State pension and to make modest increases in the years ahead. Running the Social Insurance Fund in surplus allows us the headroom we need to accommodate rising life expectancy and a spike in unemployment should there be another downturn. We all know the awful consequences that can arise for current and future pensioners when pension funds are not adequately and sustainably funded. By proposing to spend another €150 million per annum on pensions without a funding proposal to match it, Sinn Féin is advocating an approach that will undermine the affordability and sustainability of pensions in the medium term. This is reckless and irresponsible and it is bad for current pensioners and particularly bad for future workers and pensioners.

The fundamental objective of any competent pension policy is to ensure that pensions remain affordable, sustainable and retain their purchasing power or value into the future. For this reason, I have proposed a counter-motion which outlines the challenges and the achievements in this area over the last few years and indicates the general approach the Government will take into the future. The challenges we face are well known. A welcome increase in life expectancy brings with it increased pension costs. Without raising the State pension age, pensions will become unaffordable and unsustainable in the future and it will not be possible to maintain their value. We will all lose out in that scenario. The reality is that current workers aged 34 will be pensioners by 2050, and if we expect them to contribute to the pension system, we must be able to promise them that by the time they retire, they will be entitled to a pension which is at least as good as the one they currently fund for today’s pensioners.

The changes to rates, bands and minimum contributions introduced for the State contributory pensions were designed to help ensure that the Social Insurance Fund was returned surplus, as it has done this year, and remains so. The current Government, and previous ones, have sought to combine increases in the rate of the pension with reforms that make the system sustainable into the longer term. This motion proposes that we ignore that reality and undo the important first steps we have taken to deal with this huge demographic challenge. It is my view that where barriers exist to longer working, the Government, employers and workers can work together to remove these barriers while maintaining the safety nets available to people of working age. We are not alone in having to face these challenges. Every country in the developed world faces similar issues and the general approach adopted by nearly every country is to increase pension age in line with life expectancy and to attach greater conditionality in that regard. Between 2008 and 2013, 12 of the remaining 27 EU countries increased the pension age for men and 16 increased it for women. While these pension ages were largely lower than ours during that period, by the end of this decade, many countries will have a higher pension age than Ireland.

In the 1970s, the State pension age was 70 and people rarely lived beyond their mid-70s. Today, the State pension age is 66 and, thankfully, people regularly live into their 80s and 90s. One does not to be an actuary or a mathematician to understand the funding and affordability issues that arise as a consequence. There has been significant restructuring of the pensions systems in other countries. For example, the UK - this also applies in Northern Ireland - recently merged the basic and second State pension into a unified new State pension. This new pension has a rate of £155.65 for people with 35 contribution years, which is less than €185 per week, with the rate being reduced for people with fewer contributions.

We pay the full pension to people who in many cases have made contributions for only ten years. As the Deputies will be aware, the current rate of the State pension here is more than a quarter higher than the figure I have given, even before the forthcoming increases. I believe that we can take some comfort in the fact that, despite the financial crisis, we still manage to pay a State pension that is significantly higher than in many larger economies in Europe. The result of our policies is that those over 65 have a consistent poverty rate of just 2.1% compared to 8% for the general population. For neither men nor women over 65 is the rate of consistent poverty over 2.5%.

In the future, there will be a number of challenges. Clearly, if we are to maximise the benefits of longer life, we need to ensure people who can work longer are facilitated in doing so. There is no compulsory retirement age in Ireland but individual employment contracts, including many of those used by public employers, contain a retirement age. More flexible working and pension options should be developed to give people greater choice - for example, if they wish to remain in their current employment beyond 65. If public policy is to encourage workplace reform that facilitates working beyond traditional retirement ages, then it is appropriate and necessary that the State, as the largest employer in the country, should be seen to take a lead with its own employees.

In my role as Minister for Social Protection, I have received many representations, from public servants in particular, expressing frustration that they are being compelled by the State to retire from their current jobs at 65 or younger, regardless of the fact that they feel they have a lot more to give and would have a strong preference for remaining in the workplace. I am aware of several cases where crucial personnel working in the health sector retired sooner than they wanted to and subsequently could not be replaced. I have raised this matter with the Minister for Public Expenditure and Reform, and I believe that there can be a change in this area, which, in turn, will provide leadership to the broader economy. I know the Minister of State, Deputy Helen McEntee, who will speak later, is of the same opinion.

The contributory pension is just one element of a State pension system that produces similar outcomes for women and men despite very significant differences in income and contributions during working age, but I do acknowledge that there are anomalies and aspects that are unfair. My officials are working on proposals to replace the current averaging system with a total contributions approach, which will provide a fairer basis for calculation of contributory pensions in addition to removing anomalies. There is no pot of money for this change and, as with any such reform, there may be losers as well as winners if the reforms have to be cost neutral. Crucial to the design of the final scheme will be credits for periods spent caring. The position of women, but also some men, is central in this.

Debate adjourned.