Equality and Fairness of State Pension: (Resumed) Discussion

The committee is now sitting in public session in its capacity as the Joint Sub-committee on Petitions. This petition is entitled equality and fairness regarding the raising of the State pension age to 66 and beyond. The petitioner was Mr. Henry Gaynor and it is petition No. 33 of 2013. Mr. Fergus Whelan, industrial officer in the Irish Congress of Trade Unions, is with us today. We are very grateful to him for assisting us in our deliberations. I remind everyone to be careful with mobile telephones. This is a live session being viewed by members of the public and I wish those tuning in well.

Before commencing, I must inform Mr. Whelan that by virtue of section 17(2)(l) of the Defamation Act 2009, he is protected by absolute privilege in respect of the evidence he gives to this committee. If he is directed by the committee to cease giving evidence in relation to a particular matter and he continues to so do, he is entitled thereafter only to a qualified privilege in respect of his evidence. He is directed that only evidence connected with the subject matter of these proceedings is to be given and he is asked to respect the parliamentary practice to the effect that, where possible, he should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

We look forward to listening to Mr. Whelan's presentation and we will have questions and answers after it.

Mr. Fergus Whelan

I thank the Chairman. I gave the committee a brief paper in advance, to which I will speak. I will begin with the executive summary. Citizens are being deprived of a significant benefit they earned and paid for. This measure is not designed to help older workers to stay in employment. Employers and unions were given no opportunity to consider the complex labour market issues involved. In terms of the raising of the pension age - it is not the retirement age but the pension age because they are two different things - we are going further and faster than any other country in Europe. We will have the highest pension age in Europe at the end of this relatively short process.

There has been no public debate on this matter. No one has explained to the public why we must have the highest public pension age in the EU. This measure makes nonsense of the advice the Pensions Board gave for years about the importance of long-term planning for one's retirement. This measure flies in the face of the principles of pension reform. The troika did not impose this measure. It was contrived by politicians and public officials who will continue to enjoy good pensions from age 65 and earlier. We are a long time into this process and we have no faith that the cosseted pension elite who contrived this matter have any intention of mitigating the injustice they have caused.

I thank the committee for the invitation to speak to it. We were told that this hasty arbitrary diktat was agreed with the troika. There was no political debate, no public consultation and no cost-benefit analysis of the measure. No consideration was given to the significant labour market issues involved nor was thought given to issues of fair play, equity or minimising hardship on those worst affected. Social policy issues, labour market issues, industrial relations issues, pension policy issues, planning issues and social insurance issues are involved.

Nobody should be fooled by the notion that this has anything to do with austerity. Long before austerity, spurious demographic arguments were being used by the Department of Social Protection and, hopefully to its now shame, the Society of Actuaries in Ireland to tell us that 50 years from now, there would be so many pensioners and so few people at work that we had to do something drastic about PRSI pension entitlements. They even on occasions dressed these assumptions up as inescapable facts. There are no inescapable facts about 50 years from now. Making assumptions about population growth five years ahead is a very good idea if one wants to plan for a school building programme. In terms of pension policy, doing demographic projections 50 years ahead is complete nonsense.

In the run up to 2014, workers were given no advance notice when depending on their age, they stood to lose €12,000, €24,000 or €36,000 per year. The newspapers hardly covered it and the Department of Social Protection did not write to these people to tell them that although they had been paying PRSI for the past 40 years and were expecting a pension at 65, they would not get it. Between themselves and their employers, the people affected by it paid almost 15% of their salary since the PRSI system was invented to pay for this benefit so this is not a handout. No politician or civil servant looked into their heart and said it would be nice to give these workers a pension. This is something these workers paid for and nobody had the right to confiscate these payments because it is confiscation of money earned and paid for by workers paying PRSI. These workers are now victims of decision makers who are not affected at all. The people who happily made this decision will suffer no ill effects as a result of it.

Apologists for this measure suggest that as people are living longer, they should work longer. ICTU holds that people should be free to work longer if they wish but they should not be obliged to do so in order to avoid poverty. No provision has been made to facilitate workers remaining in employment after age 65. When the lower grades in Government Departments, who are on the higher levels of PRSI, reach the age of 65, they are out the door, regardless of whether they have any pension entitlement or not. The Government can hardly expect the private sector employers to keep their people on if it is not prepared to keep its own employees on in this situation. On a number of occasions, we asked the Department of Social Protection what it proposed to do with its lower grade staff on the higher rate of PRSI when they hit 65 if they had no pension entitlements. Even when it was put in writing, that answer was not forthcoming. The reason it was not forthcoming was because it knew exactly what it was going to do. It was going to push them out the door, which is exactly what it did. This has nothing to do with keeping people in the workforce for longer.

Employers and unions were given no opportunity to consider the other complex labour market issues involved. IBEC was concerned about whether the lack of clarity concerning the legality or otherwise of an affiliate sacking workers at age 65 would lead to litigation. We were concerned that if a person with 40 years service was going out the gate with no pension, he or she might picket it. In a way, I am sorry some of them did not do this. It might have brought the matter to a head but as a trade union official whose job it is to fix industrial disputes, I can say it would be a very difficult dispute to fix because this person has been pushed out the door and he or she has nothing to lose by keeping the picket going for the rest of their life.

Other labour market issues that were ignored were the effects on the morale and productivity of workers either being retained in or forced out of employment against their will. This is a big issue for both us and employers. Even if one lets somebody who has been planning to go at 65 stay on to avoid poverty, there are implications for productivity. There are also implications for productivity and morale among other people who are being held back from promotion because people who were expected to leave at a particular age are being kept on. If the Government had decided that people were not getting a pension at 65 but their employers had to keep them on, the troika would have regarded it as a labour market rigidity. I use the term "if" because nobody involved in making this decision with whom I spoke had any intention of doing anything to protect a worker who was being driven out of employment with no pension entitlement.

Another issue that is very dear to my heart, probably because of where my working life began, is the fact that it is all very well for to ask somebody working in this building or organisation, in the various organisations associated with it or in education to work to 68. Where is the justice in asking a scaffolder to work to 68 if one could find an employer who would be irresponsible enough to let a 68 year old man climb a scaffold on a January or December morning? There was no discussion of this matter. If arrangements are made to keep people on - not that anybody has done this - is there a knock-on effect down the line in terms of youth unemployment and positions not being available for younger people coming into the labour market?

Pension reform and pension planning are long-term issues. When we go to negotiate a pension scheme, we engage actuaries and the workers pay them big money to find out how much they have to put away and for how long if they want a certain pension. This must be done over a 40-year period, which is the proper way to plan a pension. To come along 35 years into that and say, "By the way, some of the figures are wrong because we changed the rules. You've paid for three years PRSI pension but we have decided you're not getting it," makes a nonsense of pension planning.

The current Administration is saying that it wants to move towards a mandatory pension scheme or a pension scheme that involves everybody. This decision has done a lot of damage to that prospect. People have been paying PRSI for years and now they see it confiscated. What worker will agree to pay into a pension for their entire career if some Administration in the future can just say, "We didn't really mean it. We wanted you to pay for it but we never had any intention of giving it to you." Huge damage has been done to confidence in pensions as a result not just of this measure, but of others we will not go into. Perhaps we will come back another day and talk about them. To put it simply, if somebody was told five years ago that he or she was going into an occupational pension scheme, they would nearly have celebrated. If it was said to a young worker today, he or she would nearly cry because very few people have any faith that they will get what they are paying for. This decision has been a big contributor to that.

I will not read out the rest of my paper.

In the paper I drew up last year I refer to a person aged 59 years but I will correct that to 60 years of age. A private sector worker who is 60 years of age this year will not get their pension until he or she is 67 years of age. I know this because I am that person. I started to work at 16 years of age in a construction site and I have worked ever since. I will not get a penny out of my PRSI pension until I am 51 years in the workforce. That is assuming my employer allows me to stay on after 64 years of age, which is the age at which I finish work. That is a big assumption. The people who made this decision can get very generous pensions. Most of the people involved have very generous pensions at 60 years of age and never paid the rates of PRSI that I paid.

In my entire life as a trade union official I have tried to avoid the public sector-private sector divide, and that is still very important to me, but it is very hard when well-pensioned elites can make decisions at the flick of a pen which deny people who are much poorer than they an entitlement without a by your leave.

I thank Mr. Whelan. I call Deputy Aengus Ó Snodaigh.

Go raibh maith agat. I hope I do not repeat the questions I asked previously when the witness appeared before one of the committees - I think it was the Joint Committee on Education and Social Protection. This issue comes before us because somebody has appealed to us, as a petitions committee, that the public service and public policy is doing them a disservice. That is the reason the petition is before us and the reason Mr. Whelan was invited to appear before the committee.

I have wholehearted sympathy for the position the witness and the petitioner have taken. I agree in particular with the point he made around the lack of debate and the lack of foresight for those who are affected in any way. Normally if an entitlement is to be taken away there is negotiation or compensation. In this case neither has happened. What is even worse is that this was one of the Bills that was guillotined where we never reached the debate which had been scheduled so that we could tease out all the implications of a move such as this. Has any analysis been carried out around the number of jobs that will be affected? There is a whole range of contracts, including Mr. Whelan's own case, where it is hoped employers will extend the contract or else one will be retired. One is not pensioned any more because the pension age is 65, 66 or 67 as the case may be and one will be put on the dole, the jobseeker's allowance. If all those people have to extend their contracts that means there are many young people whose job opportunities have been delayed to them by one, two or three years. Has a job of work been done to see what will be the effect on the jobs market?

The other question is around alternatives. I agree with Mr. Whelan's scepticism around the actuarial approach being given to this pension timebomb as it is presented. Have any alternatives been offered, for example, to look again at the PRSI contributions, the reinstatement of the National Pensions Reserve Fund or such like to ensure that the Social Insurance Fund is adequate to address what is a perceived shortfall? That is not correctly linked to the petitioner. The petitioner basically said that it is unfair to lose an entitlement which they were led to believe their PRSI contribution was going to bring them at retirement age.

Mr. Fergus Whelan

When a person reaches the age of 65 and has no pension and their employer asks him to leave the premises, the correct word for that is dismissal. What happens when a person reaches the age of 65 is that he or she has to go out the door. Retirement is a nice thing, it sounds as if one is going to get a watch and pension. The correct word is dismissal. No analysis was carried out on the effects on the job market. When IBEC and ourselves were in with the Department of Social Protection we were asking the same questions but we did not agree on everything; basically, we were asking for clarity as to whether people would have to stay on. The attitude of the officials at that stage was that it was being implemented, if people want to stay on they can take their legal cases and see how they get on. This was done on the basis that we will just do it and let the fall-out be what it is. No analysis was done of the likely effect and we still do not know the likely effect.

In fairness, it is very hard to get a handle on what is being done. For instance, one of the aspects is that one is entitled to unemployment benefit for nine months, but is that the case? It is if one has not been unemployed in the recent years but quite a number of people when planning for retirement would have taken their redundancy package and signed on for unemployment and so on and would have been depending on it but not everybody gets it. Something bizarre has happened in respect of unemployment benefit and while I welcome some of the change, it is not a long-term but a short-term fix. As I understand it, a person who is entitled to unemployment benefit will not just get it for the nine months but will be given it for 12 months. That is certainly better than nothing and helps in a little way but it does not help for the second and third year. To some extent, the effect of that was to prevent a bigger backlash against this in the short term. The alternative is that if the pension age has to go up, by all means let it go up but let it go up for everybody and much more slowly than the present rate and let it go up to 68 when it has gone up to 68 for everybody else. Why should Irish workers be the only workers in Europe who do not get their pension until they are 68 years of age? By all means push it out but an injustice has been which can be mitigated if it is pushed out a little and only to 67 years of age.

I call Deputy McEntee.

I thank Mr. Whelan for appearing before the committee and for his presentation. He has touched on an issue I want to know about. In respect of the rest of Europe, the witness said that Ireland is moving at a faster pace and that we are jumping ahead of ourselves. Does he have any figures or timeframe as to how Europe is moving and how we compare?

Mr. Fergus Whelan

Spain, the UK, Germany and Denmark will be moving to a pension age of 67. The UK is moving to 65 starting at 2020; by 2021 we will already be at 67. We are moving faster and we are certainly going further.

I call Senator Ó Clochartaigh.

I thank Mr. Whelan for his presentation which echoes much of what was in the original petition which, I imagine, he got sight of from Mr. Henry Gaynor. One of the points raised by Mr. Gaynor towards the end of his presentation which was interesting - I wonder if ICTU has done an analysis of this - was that the net cost-benefit to the Exchequer is actually very small.

He suggested that the numbers of people who actually end up retiring at 65 years is rather small, because some finish work early and others do not stay in work for health or other reasons until they are 65 years of age. I do not have the figure to hand, but it was a rather small figure. Has ICTU done a cost-benefit analysis on the matter? Let us compare that with the net cost to the State. There would be a loss of tax revenue because those people would not be working and we would be paying them unemployment benefit for that period. On the face of it, only a saving of €500,000 annually to the State is at issue in respect of introducing something that has major implications. Has ICTU had a chance to examine the net cost and the implications?

Another point mentioned by Mr. Gaynor is the ring-fencing principle in industrial relations. We have seen it with newly qualified teachers and nurses. People who were already in the system were ring-fenced and any changes brought in to working conditions were only for new entrants to the system. Mr. Gaynor has suggested that if something like this were to be introduced, then it is only right and proper from an industrial relations perspective that we should only introduce it for people who start to pay PRSI from when the agreement is made, and anyone who is already in the system should be ring-fenced. Mr. Whelan is an industrial relations negotiator. This seems to be a generally accepted principle across unions and employers. Does this fly in the face of that?

Mr. Fergus Whelan

I will answer the second question first. It is even bigger than that. The industrial relations aspect comes from a far more fundamental thing in law, that is, legitimate expectation. There is a thinking in law whereby if an employee pays for something on the basis that he has been told this is what he will get, then he has a legitimate expectation. This proposition tears up legitimate expectation in a most unfair way. If anyone had the wherewithal to bring a Supreme Court challenge or a challenge to the institutions in Europe, I believe this could not but fly in the face of legitimate expectation.

The other question was whether we had done a cost-benefit analysis. We have not. I believe that initially only a rather small number of people would be affected by it. However, the fewer the number of people affected by this, the greater the injustice. If I and five others are the only people to have lost €24,000 as a result, it is a greater injustice than if 50,000 people were affected. In other words, it is worse if a small number of people have been targeted. It would have the effect that a small number of people have lost out but no one else would lose out. That is a graver injustice and a bigger inequity.

Mr. Whelan has reminded me of something with his reference to legitimate expectation. Some years ago the case was made that we should cut the pensions of judges. However, the argument of legitimate expectation was used in that scenario.

Mr. Fergus Whelan

That is correct, and they were perfectly right. One may not have sympathy for them, but they were right.

Are we suggesting that the petitioner has highlighted the issue again and that there could be legal grounds on the basis of legitimate expectation?

Mr. Fergus Whelan

I think the petitioner is 100% right in that argument.

I thank Mr. Whelan for his presentation. As matter of interest, does Mr. Whelan have the Greek retirement age in the analysis?

Mr. Fergus Whelan

I am afraid not. I can tell the committee what it is in Australia.

One issue Mr. Gaynor was particularly focused on was the idea that a person may leave work at 65 years but does not get the State pension until 66 years, and that there may be a year when the person has the option of claiming jobseeker's benefit. Does ICTU have an opinion on this? To claim jobseeker's benefit, a person must be seeking work. A person does not qualify for jobseeker's benefit or allowance if he is not seeking work.

Mr. Fergus Whelan

No. He does if he has paid his PRSI contributions and so on. In the normal course of events, when a worker finishes his active working life, he is entitled to jobseeker's benefit. Now, it could be the case that a social welfare inspector could call him in and ask for proof that he has been actively seeking work, but they do not do that. It has always been the way.

The point I am making is that, technically, a person signs for jobseeker's benefit or allowance on the basis that he is actively seeking work. This is the anomaly I am trying to point out. Let us suppose a person has left work or has had to leave work and does not have a State pension. The only option open to him for an income is jobseeker's benefit. However, technically speaking, to claim jobseeker's benefit a person must be actively seeking work.

Mr. Fergus Whelan

That is not the way it works in practice, but I take Deputy Harrington's point.

Obviously, that issue is part of the discussion.

Mr. Fergus Whelan

There is nothing transparent about what is going on here, but I gather the current practice is that if anyone retired last year and had no pension entitlement, they would get the jobseeker's allowance and the provision requiring them to be seeking work has not been applied. Although it is rather difficult to pin down, I also understand that they get it for 12 months rather than the nine months to which they are entitled.

I am trying to focus on the anomaly that it is ludicrous to have someone leave work and go on a scheme which, ordinarily, or in the normal run of the mill, a person is not eligible for unless he is seeking work.

Mr. Fergus Whelan

I will set out the way the worker would see it. Most workers who leave work at 65 years have been paying vast sums of PRSI, insurance against periods of unemployment. It would appear to a worker in that situation that the entitlement for nine months is only right, particularly if he has worked for 40 years and had never claimed unemployment benefit in all that time. It would be a bit much for someone to pay for 40 years and never get any benefit from those payments.

I wish to make one point before I let in Deputy Kirk. It is clear that what Mr. Whelan wants is for the pension of €230 to be available at the age 65 years, and, therefore, that the people concerned would not have to avail of the jobseeker's benefit. Does he think the arrangement as it stands devalues the jobseeker's system? I declare an interest. Many years ago I worked for the Irish National Organisation of the Unemployed. It was clear that unemployment benefits were a payment of social solidarity for people while they were seeking work. Does Mr. Whelan have a difficulty with the fact that the Department has found this solution to the conundrum that has been created?

Mr. Fergus Whelan

We are where we are. I believe this is a terrible injustice, but some of it has been done already and I cannot see any circumstances where the Department is going to bring back the pension age to 65 years. However, I believe that if there is going to be any mitigation of the injustice, then the second raise in the pension age should be pushed out to something along the lines of what is in the rest of Europe and that we should not go to 68 years.

By the way, I think Mr. Gaynor made a very articulate point in respect of people like himself and his colleagues who have worked all their lives in gainful employment and have never been unemployed. If I understood him correctly, he took the view that putting him on jobseeker's allowance was somewhat belittling for someone who had never been unemployed. I do not see it that way. I see it as someone getting an entitlement that he has paid for.

The conundrum is there.

It is simply an observation but there is a cohort of people who have not been mentioned here. The poor old chucks out there who are self-employed rarely come in for mention. It is something that we should examine further down the line when it comes to pension reform. The self-employed really have no safety net whatsoever.

I want to touch on one thing. The Deputies who were elected in 2011, me included, face the vista of 68 years as well. I am keen to have that on the record. That change has taken place and it is only fair to mention it.

I thank Mr. Whelan for coming in. Some questions have come to mind as the debate has unfolded. Has ICTU had any meetings or discussions or undertaken any analysis with the Department of Social Protection about the proposed changes?

Mr. Fergus Whelan

We had several.

What was the position? Is it that it has taken a decision?

Mr. Fergus Whelan

The Department explained its decision. We told it about the knock-on problems. We asked it at one stage to postpone it. It was coming up to 2014 and this was moving quickly. We asked it to push it back to give us some time to set up a forum where we could examine the labour market issues. The Department said it would set up a forum but did not do so. As the clock was ticking, the Department brought in ICTU, IBEC, the Employment Law Association of Ireland and the old-age pensioner organisations into a room in Croke Park, listened to everything we had to say and that ticked the box that it had consulted with us. However, we never managed to influence the Department in any way. These are probably very good negotiators and it was hard to believe that any arguments about justice, equity or fair play made the slightest impression on it The message was that this was happening and if there were labour law issues it was nothing to do with the Department.

Has there been survey work done on the risk of injury? This refers to older construction employees on building sites.

Mr. Fergus Whelan

It is a little dated because it is five years old but we did a lot of work on patterns of ill-health among building workers. Very few active building workers are still employed at 65 years. Generally, people get out of the game as they go into middle age but some do not. For the small number who do not find another way of making a living, they expect to get the pension they paid for at 65 years of age. Any scaffolder of my age will not get the pension until he is 67 years, which is a gross injustice.

ICTU examined the changes and modifications to pension schemes in other EU jurisdictions. Did other states contemplate a compensatory mechanism for the changes and the impact it would have on social insurance contributions for individuals directly affected?

Mr. Fergus Whelan

The short answer is that I do not know but it is difficult to compare pension entitlements across Europe. When I was in the room while Mr. Henry Gaynor was here, I could see huge confusion among committee members about the difference between public and private pensions, which part is the PRSI pension and which part is the occupational pensions. The pension models around Europe differ so greatly that European comparisons are not of much value, with the exception of the UK.

The state pension as the comparator across the EU does not apply everywhere.

Mr. Fergus Whelan

No. Every pension jurisdiction in Europe is different. In some cases, the entire pension is an occupational pension. Our system is a mixture of first pillar and second pillar pensions but, in the time available to me, I will not be able to explain it. We can be certain that a 60-year-old scaffolder in Berlin has better pension prospects than a 60-year-old scaffolder in Dublin.

The practice is that someone in receipt of jobseeker's benefit is not hassled to get work but the criteria and the rules are specifically that the person is capable of work and is available and genuinely seeking work. In the current climate, that is ridiculous. It is also an insult to the people who have that kind of service record. The State transition pension also disappeared. It was to allow people to retire at 65 and be paid a State allowance for the period until they qualify for the pension but is now gone. This is also related to the compensation the State gives in exchange from PRSI and jobseeker's benefit, which is set at €188. The contributory pension is €236 so there is a substantial weekly loss to the person of €48. That is substantial in the current climate, especially since people make provision on the basis of retiring and think they will be okay for the first year or second year. Most of the people who were severely worried are those with contracts that will end at the age of 65. That is their employment contract and unless the State starts to negotiate on their behalf that the contract will be extended - the State has not given any indication that it will ensure the contracts are extended to 66, 67 or 68 years - people who are forced to avail of jobseeker's benefit will incur substantial loss. Has that been calculated on the basis of the figures I am coming up with?

Mr. Fergus Whelan

I have not made the calculations. The Government has driven people with no pension entitlement out of employment at age 65. If the Government has done it, what does it expect private sector employers to do? The Government is leading by example and telling private sector employers that it is grand to sack people at 65 years.

Is it Mr. Whelan's view that the objective was to abolish the transition pension? Is the next step to remove it entirely?

Mr. Fergus Whelan

If that was the only objective, it would not be too bad. It is an objective that has been achieved. For a long time, every time there was a new report by the Pensions Board or anywhere in the public service, demographic material was included suggesting we were living way beyond our means and that we must tackle the public pension provision. The troika came as a godsend to these people because they were immediately able to raise the pension age without any public debate, go further than anywhere else and not engage in discussion about what they were saving.

My question is a follow-up to what Deputy Aengus Ó Snodaigh referred to, where someone is forced into unemployment but would prefer to stay in employment. From the point of view of industrial relations, is there a case of unfair dismissal that can be taken to the Employment Equality Tribunal? If so, what are the chances of winning?

Mr. Fergus Whelan

IBEC was certainly worried about that. The person might win. Mr. Gaynor handled this well when he was talking about the European court system. All these things are decided on the merits of the individual case. One person might win and another person might lose.

I am an old type industrial relations practitioner. If my employer were to decide to throw me out of employment - I have no pension entitlement - I would prefer to engage in an industrial dispute. I think I would have a better chance of winning than taking a case for unfair dismissal to the Employment Appeals Tribunal.

It might be quicker.

Is Deputy Mulherin offering?

I think Mr. Whelan. We value his contribution to our deliberations, which are ongoing. At some stage we will make recommendations on this petition.

The joint committee adjourned at 5.05 p.m. until 4 p.m. on Wednesday, 18 February 2015.