: There are two aspects to the written submission which I have circulated to members. First, there is the general question of modified social insurance and the role it plays in regard to social welfare pensions. The second issue relates to the insurability of the RTE workers in question and how their social insurance status was established. I propose to deal with the general question first before discussing the specific issue of the insurability of RTE workers.
The unified system of social insurance was introduced in 1953 and eligibility to contribute was based on income. In 1953 the income limit was the equivalent of €761 per annum and this was increased during the years until the limit was finally abolished in 1974. Some categories such as the self-employed and part-time workers were excluded from social insurance.
Not everyone was insured at full rates with some, mostly public sector workers, contributing at modified rates. The rationale underlying the notion of modified social insurance was that the pension and sick pay arrangements available to those workers were such that they did not require such cover under the social welfare system. The workers in question included civil servants, gardaí, Army officers, teachers, higher education staff, local authority and health board officers and staff of certain semi-State bodies, including the ESB, RTE, An Post and Telecom Éireann.
The detail of the modified rates of social insurance is contained in regulations which provide that where employment is under a public authority, the person is employed in a permanent and pensionable capacity and the terms and conditions of his or her employment provide for payments during illness on a basis considered adequate by the Minister, the rate of social insurance can be modified. While there is no legal definition of a public authority, decisions are based on legal precedent.
At the end of 2003 there were approximately 133,000 persons insured at modified rates, including almost 99,000 paying class D contributions. While public sector employees recruited after 1995 are now subject to full class A insurance, modified insurance rates are still an important part of the social insurance system. The pension entitlements of those recruited after 1995 are integrated with the social welfare pension, a common practice in most defined benefit pension schemes in both the public and private sectors. This means the occupational pension and the social welfare pension are combined to give, for example, a civil servant with 40 years' service a total pension of 50% of salary plus a lump sum.
In order to qualify for a standard contributory pension, a person must satisfy a number of basic qualifying conditions. He or she must enter insurance ten years before reaching pension age; pay a minimum of 260 contributions, which figure will be increased to 520 in 2012; and achieve a yearly average of at least ten contributions, paid or credited, from the first time they enter insurance until they reach pension age. An average of 48 contributions are required for a full pension.
We also have what are known as pro rata pensions which are designed to cater for those with a mixture of social insurance contributions made at different rates or from other countries. Generally, the standard contribution conditions must be satisfied but the pension payable is related to the proportion of full-rate contributions contained in the overall record. There is a minimum level of full-rate insurance contributions which must have been paid. At least 260 full-rate contributions must have been paid or credited since 1953, or at least 208 full-rate contributions must have been paid since that year. In addition, we operate the pre-1953 pension and the special pension for the self-employed, both of which are based on the payment of 260 contributions. In regard to the former, the contribution condition can be satisfied by a combination of pre and post-1953 contributions. The range of pensions available is sufficient to cater for most eventualities having regard to the need to uphold the contributory principle which underpins entitlement.
The RTE Pensioners' Association has suggested we should amend the qualifying conditions for pensions to take account of modified insurance contributions. It has asked that for every four modified contributions a person makes, he or she should be credited with one full-rate contribution. In approximate terms, this would qualify a person with 40 years service at modified rates of social insurance for a 50% pension which, after budget 2006, is €96.50 per week. I understand there are some 680 RTE pensioners. Assuming they all qualified for the pension and making allowances for qualified adult payments, the estimated cost could be approximately €4.2 million per annum.
As I mentioned, the RTE pensioners are part of a much wider group comprising those who were and still are insured at modified rates. At the end of 2003 there were approximately 133,000 insured at such rates. I understand from the Department of Finance that in 2005 there were some 88,000 pensioners receiving payments from public service pension schemes covering civil servants, local authority staff, the education sector and so on. The majority of this group are likely to be in the insurance category under review.
In the absence of more detail on existing public service pensioners and a profile of existing modified contributors, it would be difficult to cost a pension with any degree of certainty. However, assuming that two thirds of existing public service pensioners qualified for the scheme suggested by the RTE Pensioners' Association, the cost could be of the order of €360 million per annum, not including pensioners in the commercial State sector. These are approximate estimates but they give a good indication of the impact the suggestion might have and the numbers involved. Given the level of modified insurance within the PRSI system, unlike the pre-1953 pension such a scheme would represent a significant ongoing overhead on a pensions system that is already facing large increases in costs in the years ahead as a result of demographic changes.
The suggestion in the RTE Pensioners' Association's submission that class D insurance should be abolished needs to be considered in the overall context of the insurability of existing employees in the public sector generally. Any such decision would be a matter for the Minister for Finance as well as the Minister for Social and Family Affairs and, as I stated earlier, such a move would raise significant industrial relations issues. Furthermore, it would not be possible to allow employees to opt in or out of class A from class D or other insurance classes, as was also suggested, because that would be contrary to the contributory and solidarity principles that underpin the social insurance system. If, for the sake of argument, extending class A to existing public servants were to be considered, consideration would also need to be given both to whether the existing pension entitlement would be "co-ordinated" and to the impact that higher rates of PRSI payments would have. In summary, we believe that the proposal has been debated thoroughly in previous years and would have huge consequences.
I will now deal with the issue of the insurability of the former RTE workers from the 1960s who made a submission to the committee some while ago — they also had a meeting with me and my colleagues in the Department — and who have been represented by the RTE Pensioners' Association. The issues raised about what happened in this area in the 1960s have been used by the association to support the case for changes to the qualifying conditions for contributory pensions. Having examined in detail the Department's files for that period on foot of the issues raised, we can say the following is the position in so far as we can establish it from our files.
RTE was established in 1960 under the Broadcasting Act 1960 to operate the national sound broadcasting service and to set up and operate a national television service. From an examination of the Department's files, we understand that the staff of RTE at the time comprised civil servants formerly employed by the Department of Posts and Telegraphs. Some of these staff were established staff who were permanent and pensionable and some were unestablished. The established staff cadre was composed of general civil service grades and Department of Posts and Telegraph grades including engineers, technicians and doorkeepers. The unestablished staff comprised the general body of programme staff, actors, musicians, journalists, producers and so on.
Shortly after the setting up of the new authority in 1960, a staff superannuation scheme was brought into operation. At the time the new authority, Raidio Éireann, wrote to the scope section of the Department of Social Welfare — the scope section is the name of the section that deals with insurability issues — seeking clarification as to the insurability of its staff. The staff were divided into three categories. The first category comprised existing established staff who were transferred. They were required to join Raidio Éireann's new superannuation scheme and, in effect, they became permanent and pensionable. Their sick pay conditions remained the same as those obtaining in the Civil Service. The second category comprised unestablished staff who were offered the same sick pay conditions as those obtaining in the Civil Service. They were eligible to become members of the staff superannuation scheme. In its letter to the Department, the authority stated that it believed most of those unestablished staff would join the scheme. The third category comprised new recruits, who were required to serve a short qualifying period not exceeding 12 months, after which they would be required to enter the superannuation scheme. Such recruits would then graduate to full Civil Service sick pay conditions after three years service.
On receipt of the request for clarification of the insurance classification of these three groups, the Department's scope section first sought legal advice as to whether Raidio Éireann, as set up under the Broadcasting Act 1960, was a public authority for the purposes of the modification legislation and regulations in place at the time. The legal adviser confirmed that RTE was a public authority for social welfare purposes and, based on the legal advice received, scope section advised Raidio Éireann that, subject to the remuneration limit in place at the time for non-manual workers, the following was the position. First, contributions at the special rates — now class D — were payable in respect of established civil servants who relinquished their Civil Service status and took up employment with Raidio Éireann in a permanent and pensionable capacity and who were entitled to the prescribed sick pay conditions. Second, special rate contributions would also be payable in respect of unestablished employees who opted to become members of the staff superannuation scheme from the date on which they acquired permanent and pensionable status and became entitled to the prescribed sick pay conditions. The third group, which comprised unestablished staff members transferred to the authority when it was established who opted not to join the superannuation scheme, were insurable at the ordinary contribution rate, which we now know as class A. Finally, the ordinary rate also applied to new entrants from their date of entry up to the end of their third year of service, whereafter the special rate of contributions applied, subject to the usual conditions that such staff must be permanent and pensionable and have adequate sick pay conditions in the event of absence through illness.
From the files available to the Department, it appears there was no other contact between the scope section and Raidio Éireann or Raidio Telefís Éireann until 1970, when an inspection by the Department's investigation branch discovered that the authority had made changes to the superannuation scheme for its staff. The RTE document outlined that one of the new superannuation conditions was as follows: "The employee must join the Superannuation Scheme and pay contributions as from the first day of service". This change abolished the lead-in time for full membership of the superannuation scheme and made it effective from the first day of service. The chief inspector of the Department submitted this new situation to scope section to establish what effect it had on the insurability of new entrants. Scope section ruled that the special rate of contribution was payable in respect of each permanent and pensionable employee on the first day of service, again subject to the usual sick pay and remuneration conditions. This change came into effect on 5 January 1970.
In effect the change was not particularly significant, in that new entrants paid the ordinary rate of contribution for the first three years of their employment between 1961 and 1969 and the special rate thereafter. From 1970 onwards, new entrants paid the special rate from the first day of their employment. The pre-1970 new entrants had a maximum of only three years on the ordinary rate before they were transferred automatically to the special rate.
On the basis of the files examined, the Department is of the view that the insurability of RTE employees throughout the 1960s and 1970s was in accordance with the legislation of the time and was decided on in consultation with the then Department of Social Welfare. Apart from the decision in 1970 to admit new staff to the superannuation scheme from the day they started employment, no changes took place that affected the social insurance status of RTE staff at that time. As I said, the effect of the change was to delay entry to modified insurance for three years.
Clearly, the proposal that four modified insurance contributions should count as one full-rate contribution towards entitlement to contributory pensions could have widespread and costly implications. Modified insurance has played an important role in social insurance and it will continue to do so for the next 30 or more years. Therefore, the proposal cannot be equated with measures such as the pre-1953 pension which, although costly, has a limited application in both coverage and time.
On the general issue of insurability, I can assure committee members that it is open to any worker from RTE or elsewhere to write to the Department's scope section at any time to seek a determination of his or her historic or present insurability records. If people feel that they have been insured at the wrong rate, they can always write to us for a determination of their case. In my meeting that I mentioned earlier with the two representatives of the pensioner group, without going into individual details we went through the records to check that people were receiving their entitlements. It would appear that our records tie in with the historical files. If members think we are missing something, we are quite happy to take another look at it.
