The next item is a discussion on the national pensions framework with the Minister.
National Pensions Framework: Discussion with Minister for Social and Family Affairs
The national pensions framework is the Government's plan for future pension reform encompassing all aspects of pensions, from social welfare to private occupational pensions and public sector pension reform. It aims to deliver security, equity, choice and clarity for the individual, the employer and the State. It also aims to increase pension coverage, particularly among low to middle income groups and to ensure that State support for pensions is equitable and sustainable.
During the consultation process, which followed publication of the Green Paper on Pensions, it was clear that there was a raft of pension issues which people wanted addressed but no consensus emerged. We consider this framework to present the best, overall solution for the future. Achieving a balanced solution across all of these issues means that one must consider the framework as a whole and not in a piecemeal fashion.
The context in which the framework is set is important. People are living longer and the cost of financing pensions is falling to a diminishing share of our population. Average life expectancy is 76 for men and 81 for women. It is expected to increase by eight years over the longer term. Recent forecasts suggest that in future we could spend almost one third of our lives in retirement, one third in employment and one third in childhood, education or between jobs. This, together with a declining workforce and an ageing population, indicates the challenge facing us all.
The framework includes a number of changes to the State pension to make it more transparent, simple and equitable. I stress that the State pension will continue to be the fundamental basis for the pension system. The Government will endeavour to maintain its value at 35% of average earnings. Since 2005, the Government has increased the value of the State pension by 30% in real terms. This is a major achievement and we are committed to working to ensure that this solid foundation is retained. However, it is not sustainable to continue with a pension system based on the current model, which allows people to spend almost as long in retirement as they do in the workforce and, therefore, we have decided to increase State pension age as follows: in 2014, the State pension transition will be abolished and this will increase the State pension age by one year to 66; in 2021, the State pension age will be set at 67; and, in 2028, it will be set at 68. This will facilitate those who want to work longer and also help us to sustain the pension system for future generations.
From 2020, the way in which eligibility for State pension is calculated will be simplified. There will be a switch from the current averaging system, which particularly disadvantaged women who took time out for caring. Under the new system, the pension paid will be based on the total number of social insurance contributions made by a person over his or her working life. A person will need 30 years' contributions to qualify for a maximum pension and ten years' contributions to qualify for a minimum 30% pension. A State pension is a very valuable asset and we must ensure that those who benefit from it have made a sustained and adequate contribution over the course of their working life. In addition, we are introducing social insurance credits for people who take time out of the workforce for caring duties. This will replace the current homemakers' disregard and will assist people, particularly women, to qualify for a contributory pension or a higher level of payment.
In the context of private pensions, the introduction of a new auto-enrolment system is a major advancement in the Irish pension system. Increasing pension coverage for workers, and those on low to middle incomes, in particular, has been one of our key objectives for many years. Many employers already provide for their employees and some 850,000 people are already enrolled in an occupational pension. We have also had success with the increasing growth of PRSAs, with approximately 170,000 contracts worth some €2 billion in assets now in place. However, approximately 50% of workers still do not participate in an occupational pension scheme. Inertia and procrastination are among the main reasons people cite for not taking out a pension. The auto-enrolment system provides a way of overcoming these problems. People can opt out if they wish, but they will automatically be enrolled every two years.
In addition to the employee contribution, the scheme will include a State contribution equal to 33% tax relief and a mandatory employer contribution set at the same level. Therefore, all three share responsibility for future pension provision. Contributions will only apply to those who earn over a certain minimum amount and a maximum threshold will also apply. This means that there will be no additional burden placed on those on the lowest incomes. For this group, the State pension will provide a sufficient replacement income. Employers will continue to benefit from tax and PRSI relief on contributions, so it should not be too onerous a requirement for them. The level of the thresholds will be decided closer to the implementation date. However, they will focus on low and middle income earners, who are the group most at risk of having no occupational pension. While the Government cannot provide investment guarantees, there will be a range of funds available, including a low risk default option. It is intended that the scheme will be implemented in 2014, but this will depend on the prevailing economic conditions.
A range of other changes in the framework deal with the standardisation of tax relief, access to approved retirement funds for members of all defined contribution scheme types, enhanced regulation and reforms to public service pensions. The framework will be implemented over a number of years and take cognisance of the prevailing economic conditions. An implementation group is being established to develop the legislative, regulatory and administrative infrastructure required to implement the various elements of the framework. In line with the Government decision, the group will be chaired by my Department. The Departments of the Taoiseach and Finance, the Office of the Revenue Commissioners and the Pensions Board will also be represented. The first meeting is planned for early May. The group will develop a communications strategy and will consult stakeholders on the detailed implementation arrangements.
The national pensions framework provides a clear statement on future reforms to State pensions, occupational and personal pensions, public sector pensions and the impact of demographic change. It provides certainty for pension savers, pension schemes, employers and the industry on how pensions will be regulated and managed in the years ahead.
I welcome the published framework, but it was a long time coming. The Minister stated that the framework will be implemented over several years and the day before it was announced, the Taoiseach said it would take effect over a long period. Is there any indication of how many years it will take to implement?
I disagree that it provides certainty for savers. That is not part of it. I appreciate we cannot provide 100% certainty, because the pensions industry is a volatile one. However, this issue is a significant concern. The Minister said earlier that inertia and procrastination were the key reasons people cite for not taking out pensions. The third key reason is fear. I spoke about this in the Dáil about two years ago, before we found ourselves in the financial situation we are in now. I said then that I thought people were afraid to take out pensions because they did not know what they would get. That fear has increased because people have seen how the stock markets and pensions have collapsed and have seen what has happened in companies like Waterford Crystal and SR Technics. They wonder now why they should bother putting money into a pension scheme and whether they would be better off squirrelling the money away. That is their perception, although they will not be better off if they do that.
There are flaws in our current system. It is ineffective. Of the 30 OECD countries, we are the third highest in terms of old age poverty rates. This is a shameful record for a country that had the money we had in circulation over the past decade, although we could possibly understand how it could be the case over the past two years. Defined benefits schemes are closing and we will see inadequacy of pension provision for ordinary private sector workers, which will be a challenge we must face. These people will either have no pension or they will be part of a scheme that does not provide them with an adequate income in retirement. We must consider how to fill the gap. We discussed this issue with reference to Waterford Crystal in the Dáil yesterday, but I do not know if the Minister can offer a solution for people who find themselves in that position. They paid into something, and that is what is so annoying for them. It is not as if they just sat back expecting something. The money was taken from their salaries regularly, but suddenly they find themselves with only from 26% to 36% of what they expected to get in retirement. I welcome the fact there will be a tightening up of defined benefit occupational schemes, but they will remain unsafe. Workers will have even more concerns with regard to defined contribution schemes, because they know what they are putting in, but have no idea what they will get out.
A concern I have with regard to the framework is that it does not deal with the costs for people. A huge proportion of what people put away for their pensions goes to run an industry. Massive amounts of money are spent on the army of the pensions industry. While there may be tighter regulation, this is a significant problem for people and they question it. While there has been standardisation of the relief for individuals, I do not see any signal of a change in the employer contributions. While there is a cap for the individual, the employer can still make significant contributions — up to €4 million — on behalf of people. We have seen an example of a significant pension contribution being made in the past week. People find it hard to live with such decisions. Will the Minister clarify this situation? There is a cap of €150,000, but as far as I am aware, a company can still build a fund up to approximately €4 million. I question the fairness and equity of that because the majority of employees in a business will not get a pension fund of that level built up for them. It is only specific people who are already well paid who will have that advantage.
There is an issue of equity between the public and private sector. The public sector now pays a significant pension levy. We might not like to see a reduction in public sector pensions, but we would like to see the private sector have the security of a safety net at the same level. Does the Minister feel these provisions will achieve that? The situation is difficult for people like the Waterford Crystal workers. I do not want to keep harping back to them, but their situation is probably the best example of the worst case scenario. People in semi-State bodies, like Bord na Móna and the ESB, who have been paying into a pension fund all their lives also face uncertainty because of the current standing of those schemes. Even before the collapse we have seen over the past two years, those two semi-State pension funds were in massive debt. When these people look at the pensions people like us get, they find it hard to accept their own position. I would like to see equity in the system in that regard. Will the Minister address how the proposals will deal with this issue? Will he also indicate whether there is any opportunity to lessen the investment risk or to cut the cost of pension provision?
I welcome the Minister's presentation on the national pensions framework. A total of 50% of our population do not have any private pension provision. This is testament to the fact that the pensions policy pursued in recent years has been a complete failure, in spite of the Government spending €3 billion per year on tax relief. A pensions system that relies so heavily on tax relief has resulted in a situation where the top 20% of earners get 80% of the benefit of that relief. It is completely indefensible from a social, moral or economic point of view. Of those 50% of the population with private pension provision, many people have seen their pensions go down the tubes because the pensions system has been reliant on the stock markets. It is not before time we had a new framework for pensions. Having waited two years for the follow-up framework after the production of the Green Paper, it is quite disappointing to see the proposals from Government. I have a number of specific concerns about those proposals and I will put some questions to the Minister.
I attended a seminar on pensions yesterday and I can tell the Minister there is a great deal of concern about what the Government proposes. There is concern in the pensions industry but also in trade union groups, organisations such as TASK and the pensions unit in Trinity College. They are very concerned to ensure equity and fairness and security in any future pension policy. There are so many questions outstanding about this framework that people do not have any confidence that this will deliver what is required.
The framework estimates that pensions will cost 15.5% of GDP by 2050. Many people would dispute this figure. No research has been cited in the framework as a basis for that figure. Where did this figure of 15.5% come from? Many people would claim it significantly overstates the projected cost.
The framework proposes a 33% tax relief for everybody. Where does this figure come from? The programme for Government contained an across-the-board 30% rate of relief. Nobody can understand where the 33% comes from and I ask the Minister to explain. On that point, will the Minister clarify if, in the case of people paying tax at the standard rate of 20%, he proposes to give them tax relief of 33%? Does this entail a refundable tax credit of 13%? It is important we are given clarification.
The second tier proposal assumes a 7% rate of return on investment. I have no idea where the Minister got that figure. A 7% rate of return would only be possible with very high risk investment. The Minister uses this figure as an average rate of return. What is the basis for this figure? Even taking the top of the range, it is difficult to see how this return of 7% could be achieved.
The Minister refers to a total contribution rate for the second tier of 8%; 3% from the employee, 3% from the employer — a split between the three contributors. What pension replacement rate would the Minister expect to achieve from this? There is a sense that these figures have been plucked from the air. There is general agreement that we should aim towards a 50% replacement rate up to a limit but the 8% is unlikely to give a 50% replacement rate. What are the figures to support this?
It is proposed that the employer contribution rate would be 2% for the second tier. There are many situations where the employer is making a 5% or higher contribution to an employee pension fund. Will the situation arise where 2% will be seen as the standard? How does the Minister intend to move from the current position to the future position where 2% is being paid? Will this not result in many employers reducing their contribution on behalf of their employees?
I refer to the very controversial proposal to increase the retirement age to 68 years within a very short period. Allowing four years for people to prepare for retirement at an age that is a year earlier than they expect, seems to be entirely unreasonable. Other jurisdictions propose a minimum of a ten year lead-in to a new higher retirement age. Four years is completely unreasonable. It is a lead-in of 17 years in the United Kingdom and most people would say it should be at least ten years. What are the expected savings to the Exchequer in increasing the retirement age? This would seem to be the primary factor in driving this unreasonable change. What will happen to people whose jobs will finish when they reach 65, for instance, in five years time? Many people retire before they reach 65 years. What will happen to those people in terms of their entitlement between the age at which they retire and the new retirement age, because in five years time, that new retirement age will be 66 years? Will people be faced with the situation where there will one or two or more years at the beginning of their retirement when they will not get the State pension? How does the Minister propose to deal with this issue?
Why is it the case that the new pensions framework does not attempt to tackle the problem of the abuse of tax relief? The issue has already been raised by Deputy Enright. This is in the case where there are limits on employee contributions to pension funds but no limits whatsoever on employer contributions. I refer to the case of the Bank of Ireland which seems to be an example of this and where there is abuse regarding contributions. Why does the Minister not propose to restrict this practice? In the current climate, it is very hard to defend allowing a major loophole like that to continue. Equally, why is it that the Minister does not propose to reduce the entire pension pot limit, whereby people who can afford it, can build up pension pots of €5.4 million? They can take 25% of that sum, tax free. One could argue there was never justification for this but in the current climate, how can the Minister possibly defend a situation where people are still allowed accumulate that size of pension pot on a tax-free basis? A person can take €1.4 million absolutely tax free. There can be no defence of this. Why is the Minister not tackling this in the pensions framework?
Current and future pensioners should have a much earlier call on assets in a situation where a company becomes insolvent. This has been identified by the Pensions Ombudsman. The pension fund should be given a higher ranking than shareholders in a situation of insolvency. Is the Minister prepared to give any consideration to this point? It is disappointing it has not been addressed in the framework. Does the Minister intend to address this in the future? Has the Minister decided on the make-up of the promised implementation group? Will he provide us with details on that?
It is important for us to have this debate. As colleagues have said it is an issue about which people are concerned and are beginning to engage. We have all gone through our lives wondering about pensions. I suppose in the good times people were always concerned about their pension rights and entitlements. Now when things are a bit more challenging it is something on which people want to hear answers. The so-called Bank of Ireland issue is certainly being talked about on the streets. At a time when people are worried about their future entitlements in retirement and the ability of the State to continue to deal with those entitlement rights, it is the kind of issue that registers with people.
The remit of the Department is very wide and in the past four weeks has developed even further. My sense is that this issue is as important as any other issue we have discussed. At the same time people might believe it is not as immediate as some other issues. Will the Minister guarantee that it is something he is considering particularly in the light of the concerns being expressed by many groups? This is a nettle that clearly needs to be grasped. I wish the Minister well.
I have learned a few things today. People will need to wait longer if they have an opportunity to retire from work. For many people that retirement has already started. They are out of work now. Many will not go back for a long time. If they ever go back to work they will face a longer stay before being entitled to their pension. Deputy Enright already mentioned the issue of private pensions. People are very fearful of continuing to pay into those pension funds because they believe there will be a shortfall at the end of the day. That has already happened to many people. People who paid into private pensions in the hope of building up something for when they retire now find themselves without jobs. Many of them are stuck in limbo now. Some of them have quite a bit of money in these pensions and are being told they cannot touch it until they are 66. For some people that could be in 20 years. That is a real issue for many people.
I raise a personal issue. My husband who is 57 lost his job last year. He was told last week that he is not entitled to any money anymore — he is means tested on my income. I can understand that; I do not deny that I have a good income. He will not reach 66 for another nine years and he is very concerned about what he will live on. It is only that I am a good wife, look after him well and provide for his needs. Many other people might not have that. Fortunately we do. At the end of the day we are means testing somebody who has worked for 40 years, paid his contributions and worked to support his family. He has no entitlements. If he was a prisoner in Mountjoy today he would be entitled to €2.35 to buy his newspaper. He is not even entitled to that after working for 40 years. There is a moral issue there for us all. People work and contribute to the country in many ways. When the time comes and they lose their job as unfortunately thousands have, they are left on the scrap heap. This morning we spoke about self-esteem and everything else. There are thousands of people in the same position wondering how they will survive given that they might not receive a pension for another nine or ten years. I would like to hear the Minister's views on that.
Owing to time constraints I ask Deputy Joe Carey to be brief.
The first question that should be asked regarding pensions is "Are you retired?" A person should not get a pension without being retired. We need to lead from the front. In the Houses of the Oireachtas there are Deputies, Senators and Ministers drawing pensions without being retired. Any reform of pensions should entail looking at ourselves first. As the new Minister in this area, the Minister, Deputy Ó Cuív should show leadership on that question.
Before calling the Minister, I want to point out that many detailed questions were asked. I suggest that the Minister should forward to the committee responses in writing to any questions he cannot answer orally now, especially given the time constraints we have today.
Nobody expects the Minister, who is only in his post for a few weeks, to be on top of everything at this stage. We would welcome senior officials contributing to the debate. There are many technical questions and there is not a difficulty in that regard.
The Minister is here in public today and that cannot happen. I apologise to the Deputy.
I will answer any questions that I can. For the technical questions the members can either get written replies or invite the officials in to give the replies. They have indicated they are willing to come back.
Deputy Enright asked how long it would take. The schedule is clearly laid out. The increase in the State pension age to 68 will happen in 2028.
I mean the whole policy and not just the retirement age.
On the issue of implementation and getting the detail, I understand nominations have been sought from the different Departments. The assistant secretary here with me will chair the group and the first meeting will take place on 7 May. We want to move forward to get to the detail of many of the issues that were raised here.
The issue of paying into pension funds and the uncertainty of getting a return has become widely discussed in recent times. When there were very high nominal returns and people were investing in equities that were rising in value very quickly, people were very pleased with the pension performance and probably criticised the more conservative pension investors that were not yielding the return in the good times. The probability with any risk investment, particularly for investors who want a high return, is that the higher the potential return, the greater is the risk that it all goes against the investor. In regulating this industry, it is important that people should be aware of the risk. We often hear advertisements that stress that the value of an investment may go up or down. However, it seems that many people never heard that and thought that shares could only go up.
There will be a default scheme based on government bonds, which is the lowest-risk investment. The idea of government bonds being low risk is predicated on the fact that this type of money lent is always paid back and people always honour these types of bonds. Therefore there sometimes seems to be a disconnection for people who want stability for the investment. Much of the money that was invested in bonds in banks and so on came from pension funds. People who want a low risk when investing and then suggest, for example, that we should default on low-risk bonds, which would create risk for people all over the place, seems to be a contradiction in terms about which I would be concerned. To turn low-risk investments into high-risk ones would inadvertently hit many people who do not realise where their money is gone. One of the problems with bonds is that people are paying into their pension funds and it goes through a number of steps, and they might not be aware where their money ends up. However, they would be very aware of it if ever there was a default.
There was the famous story of the race between the tortoise and the hare, and the tortoise won. In other words, one should take the low rate, or the certain rate. It is always prudent for people to take the lower risk in the longer term. There is a provision that as one gets older — when one is 50 or 55 — one's money is transferred into areas of less risk. That ensures it does not have a high value at 60 and suddenly a very low value at 66.
I was asked why top earners get the most benefit. We are trying to move away from that. Quite rightly, there are now significant limits on the amount of tax relief in respect of a pension fund. One can put in what one wants. We are moving away from the previous arrangement, whereby a person who was not paying any income tax would get no relief on moneys put into his or her pension fund, a person on low tax would get 20% relief and a person on high tax would get 41% relief. Under the new system, the relief will be 33% across the board. I was asked why it will not be 30%. It was decided to change it to 33% so there will be an even split between the employer, the State and the employee. It seems an even way to do it. I do not think there is any magic formula, although common sense dictates that is a fairly equitable way of doing the job. I was asked whether those who pay less than 30% tax will get some type of rebate. We will have to work out how mechanically that will be given to such people. One will either get a refund in respect of tax relief, or it will be calculated and then taken off one's wages.
Does the Department of Finance agree with that?
Absolutely. The Deputy will be glad to hear it has all been agreed.
That is a first.
I was also asked about the 15% GDP figure. I believe that was given by the Department of Finance. As I have said, the details of the repayment will have to be worked out mechanically.
What is the information that was given by the Department of Finance?
The Deputy asked about the 15.5% of GDP.
That is what is in my note.
What is that based on?
I do not know.
There will be no further questions, only answers from the Minister.
It is based on the Department of Finance's figures.
What are those figures based on?
They are based on the Department's costings and assumptions.
Fine.
All of these things are subject to the vagaries of the human condition. We can labour like scholars over all sorts of figures into the future, but who would have said three weeks ago that we would not have any aircraft over Europe throughout past week just because of a volcano? One thing we have found out in recent times is that life is highly unpredictable.
I was also asked about the figure of 7% over 40 years. Apparently they were getting much higher returns, for example of 12%. That is considered an industry norm. As we are talking about compound interest, the money makes money. As one gets interest in the early years, that, in turn, makes interest again and again because it is compound interest.
The pension replacement rate is set out on page 32 of the document. I was asked about the increase of one year in the retirement age in four years' time. Apparently, 25% of people are paid between the ages of 65 and 66. It will make no difference to 75% of people. There will be a challenge for the other 25%. It will not be a problem for most people. Those who retire at 65 will be entitled to unemployment benefit if they are not working. The normal change for most people will be to retire at 66 rather than 65. That is what will happen to most people.
What are the expected savings from that? Are the savings driving it?
I accept that savings are driving it. If we do not adjust the age upwards, these costs will grow rapidly as long as people continue to live longer and longer. It seems that over the past 20 years, longevity has increased by approximately ten years. If one accepts that average longevity is between 71 and 88 years, one can use the age of 78 for these purposes. If the average age of death went from 68 to 78, that means we have moved from paying the contributory State pension for two years to paying it for 13 years. It is a six time multiplier. We are not talking about ten years out of 78 years, but about ten years from retirement age. That is what makes all——
The problem is the short lead-in time. Is the Minister prepared to review that? It seems unfair that it will be just four years.
Deputy Joe Carey made an interesting point that is close to my heart. To make such a change would have a dramatic effect across the system. He spoke about the idea that one should not get a pension until one is no longer working. I listened carefully to what he said. I think it has some validity. All sorts of people, including gardaí, teachers and civil servants, take early retirement and then get jobs in other areas. They would feel aggrieved if such a measure were to be introduced. Many people receive pensions long before they reach the age of 66. They would feel very aggrieved if they did not receive their pensions until they reached that age. It is an interesting concept.
Is the Minister prepared to review the lead-in time of four years, which seems very unreasonable?
It has been decided that it will be increased from 65 to 66.
No other country is doing that. The UK is giving 17 years' notice.
All points should be made through the Chair.
Income supports are available from the State for those who have no income or are not working. If this change only affects a person for a year, the person will get these supports for a year. If a person is forced to retire at 65 but the pension does not kick in until he or she is 66, he or she will be covered by unemployment benefit for that period.
That will not be the case if one's partner is working, as this will be means tested.
If one has been in employment, one will have a benefit entitlement for a year.
Can I ask Deputy Shortall to allow the Minister to continue?
Deputy Shortall is asking what will happen, as a result of the increase in the pension age to 66 to people who are forced out of their jobs at 65. By definition, if one had a job one will be entitled to unemployment benefit or jobseeker's benefit for a year. This payment is not means tested because it is made on the basis of contributions. One would be covered by a State payment for that year.
It would be for just one year.
I am changing it by just one year in the short term. The Deputy was arguing that four years was too short a lead-in time, but I suggest that is not what is causing the big problem. Somebody who was forced to retire at 65 will, by definition, be covered under jobseeker's benefit until the age of 66. It is when one moves up to 67 or 68 that a problem potentially arises. That is why we have a long lead-in time for such people.
I just want to make the point that the lead-in time to 68 is not that long, relative to what other countries are doing. Perhaps the Minister will consider the kind of timescales that are being considered elsewhere.
When examining all of this, one of the issues is the burden one places on the working population. In attempting to support the pensioners, one cannot place an unsustainable burden on the working population. It is a challenge. That is why I was so interested in Deputy Carey's comments about people who retire and are paid a pension immediately. I keep coming back to that because one could ask why a 68 year old person with a very good job should get a State pension. That raises the question of whether the current transition rules should apply to an older age group. I know it is not part of pensions policy. I hear what the Deputy is saying and I will reflect on it.
I was also asked about the issue of the employer contribution. I remind members that employers get tax relief on corporation tax. I will note this very valid issue and bring it to the attention of my colleagues. I have made my views known on what we have seen in the past week. I will not say any more. People know my views.
It should not be an optional thing for people. The Minister should not have to appeal to people to hand something back. They should not be allowed to act in such a manner in the first place.
If it is part of somebody's contract——
Surely the legislation on the employer contribution could be changed, just as it was changed in relation to a person's own contribution.
I hear what the Deputy is saying on that issue.
The Minister had to approve the new contract for the individual concerned.
As the Deputy is aware, there was a great deal of debate on that issue. The salaries were capped. A much wider debate on this issue is warranted.
It is.
Absolutely. The person to whom I would always listen on the subject of how salaries grew during the past ten or 15 years, and for whom I have deep respect, is Mr. Frank Prendergast. He spoke on percentage rises long before most other people, and I concur strongly with his views on the issue. As Deputy Shortall might remember, he was a TD in her party.
I understand there is some legal advice against giving priority to current and future pensioners.
The issue of what?
The issue of giving priority to pension payments in a liquidation situation. I understand there is legal advice that does not favour that.
I request a note on that at some stage.
We will try to get that to the member. I gave the committee the date of the implementation group——
Who is on the group?
I listed the Departments that are on it. I do not think all the nominations have been made. The first meeting is on 7 May. I have no doubt we can get the names, and ensure that the committee gets them all, once all the nominations have been received.
I take it there will be outside members such as people from the industry and people with other interests.
No, it is an implementation group at this stage. The industry has been well consulted. This is a State implementation group, and it will involve the Departments I have listed and the Revenue Commissioners discussing the pensions pot.
Will all due respect, the Departments do not have a monopoly on wisdom on the issue.
They can consult if they need to. I do not agree with the Deputy on the cur chuige here. The situation is right. If we included private industry in the group, we would be told we were being influenced by private vested interests, so "Marbh ag tae agus marbh gan é".
It is a specialist area.
We can get any expertise we want.
I hope there is provision for that in the implementation group.
As we are meeting in a different committee room today, I have just been informed that we must vacate the room by 1.35 p.m. at the latest. I ask the Minister to try to complete his response as soon as possible.
Deputy Catherine Byrne raised an issue that was not to do with pensions as such. It concerned the huge challenge — which I mentioned earlier — faced when a person loses his or her job and finds that he or she is not entitled to any social assistance because of their spouse's income, even though that income may be quite modest.
The person who is out of a job should continue to sign for credit, as that is relevant to their state pension. It is important that they continue to get the credit so they maintain their entitlement.
The second issue that warrants a debate is a problem that occurs particularly in low-income households, where only one partner is working but the whole life of the household is predicated on two incomes. There is a challenge there. I am giving that issue some thought, but I have to deal with it on a cost neutral basis.
: The Minister did not deal with the point about the army of people in the pensions industry, and the proportion of what people pay into their pensions that goes towards keeping that army marching. It is a huge proportion of what people spend on their pensions.
The Minister said the industry was not involved in the group, so perhaps the group can have a good discussion about it. That issue must be examined. I appreciate that pensions is a complex area, and that it is necessary to have actuaries and advice, but I am concerned that it seems to be growing and growing.
I heard the tail end of an interview on "Morning Ireland" this morning in the car. The issue of the money in the finance industry and the profits it makes was raised. That is probably a legitimate question, although I suppose those who depend on the international financial services centre for employment would say that it is important.
The group will discuss whether the order of enrolment should be a competitive process. That should drive down costs, and the group will examine that issue in relation to administration and so on. That is a legitimate question with which the implementation group should concern itself, and we must keep our eye on it.
I thank the Minister for his comprehensive replies. I want to ask about two outstanding issues. I asked the Minister about them before, but he has perhaps overlooked them.
My first question is on the implications of the new arrangements for existing schemes in which both the employer and the employee are paying into a defined benefits scheme. The employer might currently be paying 5% or more. Will 2% be the new benchmark?
The second question is on the €5.4 million limit on pension pots. Does the Minister intend to reduce that in line with other countries?
On the second point, I hear what the member says and I am aware that is an issue. However, the Government will decide that matter; I do not have a decision on that.
Does the Minister intend to take up the issue?
Yes, I do, but I will not give any decision here on the hoof. On the member's first point, I understand that the experience in Britain has been that employers have not reduced their contributions. I will ask the implementation group to note the member's concerns and consider how that issue can be dealt with.
I thank the Minister and his officials for coming to the meeting today and for engaging in such comprehensive discussion on issues of fundamental national importance.
I say a special word of thanks to the Minister. The seat held by the Minister is hot, but he assisted us when we made a massive decision with regard to the work done by farmers' wives. Not only I am massively grateful to him, but the people have spoken loudly and clearly and have praised him for doing that work for us in a special way when he had only been in his seat for a short length of time.
As Deputy O'Connor said, the Minister has a tough assignment in the days ahead. There is no better man in the world to meet that commitment. I know that with his powerful drive and the way that he continues to work, he will meet that challenge head-on without any trouble. On behalf of the committee, I wish him the best of good luck and thank him for coming before the committee.
The joint committee went into private session at 1.28 p.m and adjourned at 1.35 p.m. until 11 a.m. on Wednesday, 28 April 2010.