Public Service Superannuation (Miscellaneous Provisions) Bill 2004: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

My colleague, the Minister for Finance, introduced this Bill to safeguard the long-term budgetary sustainability of public service pensions, while at the same time ensuring that future public service pensioners obtain fair and reasonable occupational pensions. In furtherance of these objectives, the Bill introduces two key changes, which will affect most new entrants to the public service from 1 April 2004. First, it raises the standard minimum pension age in the public service from 60 to 65 years, and second, it abolishes maximum retirement ages in most areas of the public service.

These changes will affect new entrants to the Civil Service, local government, teaching, the health sector, non-commercial State bodies, the Dáil and Seanad, and ministerial office. The special nature of the duties of members of the Defence Forces, gardaí, prison officers and fire fighters means that maximum retirement ages will continue to apply in these areas. However, the Bill raises minimum pension ages for new entrants to the Garda Síochána and the Prison Service, as well as providing for new pension arrangements to be put in place for new entrants to the Defence Forces. I emphasise that the measures in the Bill apply to new entrants only; neither serving staff nor existing pensioners are affected in any way.

The changes set out in the Bill have been decided by Government following consideration of the report of the Commission on Public Service Pensions. On foot of that report, there was full dialogue between the Government on the one hand and trade unions and staff representative organisations in the public service on the other. As I will explain later, full agreement was not reached in the course of that dialogue. While the changes proposed in the Bill are urgently needed, they spring from a background of lengthy consideration and extensive consultation.

The Minister considers the Bill constitutes a vital reform initiative in light of developing demographic trends. Demographic change, and in particular the trend toward greater longevity, is central to the need for reform of our public service pension arrangements. Since the foundation of the State, life expectancy has risen sharply. In the case of men, it has increased by about 15 years and in the case of women, it has increased by more than 20 years. While future life expectancy forecasts are open to debate, it is generally agreed there will be continued improvement in the years ahead. On that basis it is reasonable to conclude that future new recruits to the public service can expect, on average, to live beyond the age of 85. Most public servants currently have the option to retire on pension at the age of 60. If this option remained in place for new entrants, taxpayers would be faced with the prospect of financing pensions for many future public servants for periods of more than 25 years.

The rise in life expectancy, combined with a declining birth rate, will produce a pronounced ageing trend in the general population over the next 25 years. A recent study published by the Department of Social and Family Affairs projected that the number of people of pension age in Ireland will rise from 430,000 at present to 673,000 in 2021, and then to 1.2 million in 2056. This means that our current ratio of five people of working age to every pensioner can be expected to fall sharply to a ratio of less than 2:1 by 2056. This prospective decline in the support ratio further underlines the necessity for action now to forestall excessive impositions on the Exchequer in the future.

Public service and social welfare pensions now cost the Exchequer approximately 5% of gross national product. Maintaining the current level of provision is expected to cost approximately 12.5% of gross national product in 2056. Over the same period the public service pension component of this spending is set to rise from 1.4% to 2.5% of gross national product. The challenge posed by such stark projections has already led to a pro-active response by this Government through actions such as the establishment of the national pensions reserve fund. At the same time, the broader goal of fostering responsible pension planning by individuals in the workforce generally has been tackled in recent years by taxation adjustments and the introduction of PRSAs.

With costs over the medium to longer term clearly posing a major challenge, the Bill is directed at reducing the Exchequer burden in years to come through implementation of moderate and well-researched changes, which in the long run are estimated to achieve annual savings of some €300 million for taxpayers. This is set out in the explanatory memorandum accompanying the Bill.

The need for reform of public service pensions has long been acknowledged and was clearly recognised by the Commission on Public Service Pensions, which was set up by Government in 1996 and which issued its report in 2001. The commission's membership included the social partners, academic experts, pensions industry professionals and departmental representatives. I believe it also included a Member of the House.

Its terms of reference included changes in the working environment, claims for improvements in existing terms, emerging costs and the operational requirements of the public service. It recommended its package of measures as representing an integrated strategy aimed at securing the long-term viability and stability of public service pensions. In this context, it cited as key aspects the growth in long-term pensions expenditures, changes in the nature of public service employment, the issue of retirement age and claims for early retirement. The Government accepted the bulk of the commission's proposals, including those on pension age.

The provisions of the Bill on increasing minimum pension age for new entrants are a direct implementation of specific commission recommendations. In endorsing such an approach, the commission took a thorough approach by examining all relevant factors, including the demands placed on the different occupational groups, and cited increased life expectancy as a key factor in its decisions. The Government agreed with the commission's conclusions.

The commission made no recommendation as such concerning maximum retirement ages, which the Bill will abolish for most new entrant public servants. In the Minister's view, this is an appropriate accompanying measure to the change in minimum retirement age for new entrants and will facilitate future public servants in terms of their capacity to make a productive contribution in the workplace at older ages. From a pensions perspective, the Minister believes that the forecast decline in the dependency or support ratio as the first half of this century unfolds makes it a particularly opportune moment to dispense with mandatory age-based retirement for most new entrant public servants. At the same time as the worker to pensioner ratio falls over the decades ahead, people will be living longer. In the context of the major impact these changes will have on the labour force, it makes sense to allow people to continue to work and contribute for so long as they are competent and willing to do so. The return to the Exchequer should be a reduction in pension costs.

In September 2001, the Government agreed the recommendations of the commission in principle and set up a working group with the public service unions to advise on the implementation of those recommendations. The group's deliberations spanned almost two years, concluding with a report to Government in October 2003. Parallel groups with similar remits were set up in respect of the Defence Forces and the Garda Síochána. The Government also had the benefit of reports from these groups in informing its decision-making.

Although the trade union and management participants on the main working group were able to make progress on several important aspects of the commission reform package, agreement was not reached on some other critical items in the package, notably the raising of minimum pension age for new entrants. Every opportunity was given to arrive at an agreement in the course of these talks, but unfortunately this did not prove possible.

Against this overall background, the Minister considered that action was urgently required following a prolonged phase of study and consultation. In his view, to delay further created the risk of missing the opportunity for reform created by the commission's work. The Government agreed that real change had become a pressing priority and as a result the Minister was able to announce in his budget statement last December that the Government had decided to implement the bulk of the recommendations of the commission. Specifically, he announced his intention to introduce legislation, now embodied in this Bill, to increase minimum pension age and remove compulsory age-based retirement for most new entrants to the public service.

In line with the Government's concern about securing a balanced reform package, the Minister also announced in his budget statement that the Government would not be proceeding with the commission's recommendations for the introduction of an additional 1% pension contribution by all public servants or the use of a new index for determining public service pension increases. In addition, the Minister announced his intention to draw up a further set of pension changes arising from the commission's recommendations in respect of existing public servants. These changes, which are not part of this Bill, may include amendment of the formula used for integrating public service and social welfare pensions to make better provision for current and future staff on lower pay levels, along with a new single additional voluntary contribution-type scheme for the public service, as well as the possibility of optional early retirement on the basis of actuarially reduced benefits. These further changes are the subject of ongoing discussion with the public service unions.

I hope this outline of its historical context has impressed on Members that this Bill has its roots in a lengthy and thorough deliberative process. Its provisions are in no way precipitate or improvised, but have been crafted in the context of expert independent analysis and appropriate consultation.

I now turn to the structure of the Bill. The first two sections deal with definitions, including the definition of new entrant. These are followed by sections which remove or raise compulsory retirement ages for new entrants to the public service. The Bill then deals with the design of new superannuation arrangements that will be introduced in the Defence Forces, after which the concluding sections are essentially technical in nature, covering matters such as removal of doubts and collective citation.

The Bill contains two Schedules. The first is a list of State bodies, mainly commercial, which do not come within the definition of a public service body in this Bill but whose employees in certain circumstances will not be deemed new entrants on assuming posts in the public service. The Second Schedule lists those areas of primary legislation which the Bill is intended to amend.

Members will note that the Bill's provisions on minimum pension age extend to new Members of the Oireachtas and office holders including Ministers and Ministers of State. This is in line with the Budget Statement for 2004, in which the Minister said that the minimum pension age for these groups would be increased to 65. Although the pension commission's remit did not include new Members of the Oireachtas and office holders, meaning the commission did not make any recommendations regarding their pension terms, the Government considered that they should be encompassed by the current changes.

The reason for including Oireachtas Members, Ministers and other office holders within the scope of this change in minimum pension age is that we are public servants. We serve the public in a fundamental way. However, unlike most public servants we do not have security of tenure. That is the nature of the job. We are subject to the will of the electorate from time to time, so there can be a considerable change in Oireachtas membership from one Dáil or Seanad to the next. It goes without saying that in many cases these changes are involuntary, but this does not change the basic position that we are public servants. The requirement to be re-elected from time to time means that Oireachtas Members are different from the general body of public servants.

The Minister considers it appropriate that this special factor should be taken into account in the Bill for serving or former Oireachtas Members and Ministers. Accordingly, the definition of "new entrant" in the case of Members of the Oireachtas and office holders does not include any Member of the Oireachtas or office holder who was first elected or appointed before 1 April 2004. This is an exception, but it is reasonable on the basis that even the most effective Deputy, Senator or Minister may not be re-elected and does not have the same security of tenure as other public servants. As I have said, this is not a voluntary matter. Accordingly, having once been elected or appointed as an office holder before 1 April 2004 should be sufficient to take a person out of the new entrant category when he or she is elected or appointed an office holder in the future. Persons elected for the first time after 1 April 2004 will be subject to the new entrant age limits. The Minister considers this reasonable as individuals going forward for Dáil or Seanad election for the first time will be aware of the new age limits and will be in a position to take this on board to fit their own circumstances.

Members may also notice that taoisigh who are first elected to the Oireachtas after 1 April 2004 will be exempt from new entrant status. This exemption applies only to the pension in respect of holding the office of Taoiseach; it will not extend to the person's entitlement under the Oireachtas Members' pension scheme. Perhaps this is an invitation for Senator Bannon's party to elect yet another new leader, who is not a serving Member of the Oireachtas. The existing provisions for office holder pensions recognise the status of the post of Taoiseach as leader of the Government. The Minister considers it appropriate that the respect accorded to the post and to former holders of the post should be preserved. However, this provision for new entrants has no implications for the pension entitlements of current or former taoisigh.

In the commission's view, the operational requirements of the Garda Síochána, prison officers, military personnel and firefighters continued to warrant special treatment in terms of minimum pension age and retirement age provision for these groups. Notwithstanding this, the commission did recommend certain changes for these groups and these changes are being proposed for implementation by the Minister in this Bill.

In the case of gardaí and prison officers, the Bill sets a minimum pension age of 55 for new entrants and a maximum retirement age of 60. For gardaí, service between the ages of 55 and 60 will require that members meet certain health, fitness and competence criteria. For new entrants to the Defence Forces, the commission recommends that payment of pension be dependent on age and service rather than service alone and that the earliest age at which a pension should be paid is 50 years. The Bill will implement this recommendation on minimum pension age as well as providing for the making of an appropriate pension scheme on this basis for new entrants to the Defence Forces.

The commission considered that firefighters should continue to have a minimum pension age of 55 and also a maximum retirement age of 55. The Bill proposes no change in this regard. However, the commission recommended that new entrant officers in the fire service should have standard public service terms. Accordingly, the Bill provides for them to have a minimum pension age of 65. The Bill also abolishes maximum retirement ages for new entrant officers in the fire service.

I now turn to the definition of a new entrant. The guiding principle adopted in the Bill is that a new entrant is a person appointed as a public servant, as defined in the Bill, on or after 1 April 2004. However, this does not include staff on leave or on secondment from public service bodies on 31 March 2004 or staff who are serving in the public sector on that date and who subsequently move within the public sector. Provision has also been made in the definition that any current public servant who leaves employment but returns within a period of 26 weeks to a public service job will not be regarded as a new entrant. The stipulated period of 26 weeks reflects similar provisions in employment law generally. The definition also takes account of seasonal and temporary workers. The definition of a new entrant also excludes a person who has received a written offer of employment prior to 1 April 2004 and persons training in the Garda College who were admitted to training prior to 1 April 2004.

The Minister, through Government officials' contacts with the unions, has been as sensitive as possible to concerns about the definition of a new entrant. He is confident that the definition contained in this Bill is fair, sensible and workable. A balanced approach is adopted, allowing a reasonable interim period within the overall context of a clear and practical definition. The removal of compulsory retirement ages will heighten the necessity for strong management and performance control in the public service. Guidelines are already in preparation for the civil service in the broader context of public service reform. In overall terms, this Bill is modernising, fair and balanced in its approach. It will shield the Exchequer from unsustainable future liabilities while ensuring the State can continue to provide reasonable levels of occupational pension income to its retired workers. Viewed in this light, I hope Senators will conclude that the case for change is incontrovertible and that this Bill is the right means of delivering that change. I commend the Bill to the House.

I welcome the Minister to the House. As stated, the purpose of this Bill is to remove the compulsory retirement age for certain categories of those who enter the public service on or after 1 April 2004, to increase the pensionable age for certain categories of new entrants into the public service, including Members of either House of the Oireachtas and certain office holders, and to make consequential provisions to provide for certain other categories of new entrants. The Bill indicates that the Government has decided to implement the bulk of the recommendations of the report of the Commission on Public Service Pensions. The recommendations have in turn been the subject of a report by a joint management-union working group, set up to advise on the implementation of the commission's recommendations, as well as having been considered by parallel working groups established in respect of the Garda Síochána and the Defence Forces.

This Bill, if passed, will force new civil and public servants, recruited from 1 April this year at the age of 18 years, to work for 47 years before they can claim a pension. That is manifestly unfair. After 40 years of work everyone should have the automatic right to retire and claim their pension. Nurses, teachers and local government employees will be affected by the change but gardaí, soldiers, prison officers and firemen will have the right to retire at 55. New entrant civil servants will no longer be able to retire early at 60 years and must remain in employment until 65. The minimum retirement age for gardaí will increase from 50 to 55 years, with compulsory retirement age extending to 60. Deputies and Senators elected for the first time after 1 April will not get a pension until 65, while Ministers who are appointed after this time will have to wait until they are the same age, rather than claiming a pension at 55 if they had three years service at this level, as previously applied.

The Minister should, as a matter of urgency, consider the establishment of pension rights for local authority members. As general secretary of the Local Authority Members Association, I have been involved over many years in a campaign for this right. Being a councillor is a full-time position and after 40 years' service many council members have left with nothing. The Minister for the Environment, Heritage and Local Government has recognised the role of the local representatives. Full recognition of their pension rights is the next logical step.

The extension of the Garda retirement age to 60 years is a step in the right direction. There is a high retirement rate in the Garda Síochána. The increased age limit is a positive move to help reverse this trend. However, there is still no sign of the 2,000 extra gardaí promised by the Government in its pre-election whitewash exercise. Teachers have lost the provision whereby they could retire after 40 years' service on full pension or after 35 years on a reduced pension. This is a significant worsening of teachers' conditions of employment, following the imposition of full PRSI in 1995. Nurses are set to lose the right to retire at 60 or 55 if they have 35 years' service. It is neither feasible nor desirable to expect most nurses to work until 65 years of age. The Government seems to have reneged on its agreement with the Civil and Public Service Union that new entrants would have a spread of retirement age options from 62 to 65 years.

Although the Irish population is not ageing as quickly as some of its European neighbours, Irish workers will be quick to realise that this Bill is the precursor of pension related problems for the future. As a result of medical advances, people are living longer. Increased life expectancy is a ticking time bomb for public funding. We are already being warned that we must save more or work longer to avoid dependence on a State pension which pays the equivalent of one third of average earnings. That is less generous than the pensions in most other European states.

A total of 50% of workers in the Republic have private pensions and the introduction of personal retirement savings accounts last year is aimed at increasing that figure. Most people believe that if they are in a pension scheme, their future is assured. However, the cost of annuities is rising due to increased longevity and low interest rates. People outside the safety net of defined benefit or final salary schemes must save more for their retirement than heretofore.

Furthermore, the picture emerging with the elimination of the compulsory retirement age is one of people working until they drop. Who, in the not too distant future, will be able to afford to retire at 65? What has the Government done for those whose hard work created the Celtic tiger? It has squandered the benefits which those people secured for this country and it now expects them to plough back those wasted billions into the Exchequer, by means of stealth taxes and cutbacks. What has the same Government dreamed up for them in the future? It is not a happy and secure retirement but will, instead, impose the necessity to work until our ageing workers have one foot in the grave.

In an effort to cope with future pension bills, the Minister for Finance has graciously eliminated a compulsory retirement age and, one could say, eliminated ageism in the workplace, but at what cost? How far will the parameters be extended? In 40 years from now, will the compulsory retirement age be 70 years and how far upwards can this limit be extended? How far will the caveat of "subject to suitability and health", outlined in the Bill, be extended?

The Minister acknowledges that we have a pensions problem and that we must cope with higher future pensions bills. However, what is his answer to the problem? Last year, massive strikes occurred in France and Austria in response to proposed retirement benefit cuts while similar issues are high on the political agenda in Germany, Italy and Britain. How long will it be before the same reaction is seen here?

With a median age ten years below that of Europe, the population of the Republic is not ageing as quickly as that of neighbouring states. However, our time will come and our citizens will be forced to protest as others have done before them.

While recognising that it is necessary to provide for the expected 50% increase in the number of pensioners in approximately 30 years, the first requirement is to ensure a minimum standard for all in retirement. It is patently obvious that this Bill follows a trend in Government activity. The less well off and the most vulnerable are not its concern. This Bill is finance driven and is yet another money grabbing, income slashing move by the Minister for Finance. When the budget for 2004 was announced, I referred to this Minister as one who would go down in the records as "Charlie the Slasher".

It is out of order to refer to the Minister in that way.

What about the Longford Slashers?

It is estimated in the budget that the annual savings which will arise from these pension changes will be approximately €300 million in current terms in 30 to 40 years, with some savings being realised before that. No more needs to be said. This Government's actions speak for themselves. Once again, it is turning to a sector of our society which is not deserving of or capable of handling the burden that is being put on it to ease the problems of the Government.

The Bill is a double edged sword for older people in the workforce. Older people should have the choice of whether to retire. Age is not a good indicator of how capable or otherwise a person is. In this respect, the Bill offers the older worker the chance to remain in the workforce, despite age. This extension of the working years is desirable when voluntary but my concern with the Bill is that the Minister is paving the way for compulsory extension.

By the time many people achieve a half decent pension, they may no longer be able to enjoy it. The biggest question thrown up by this Bill concerns the private sector. Will the Bill have a knock-on effect or will the private sector lag behind, for better or worse, in the implementation of the proposals?

The Minister referred to the exclusion of Taoisigh. Will he elaborate further on that? I do not see why we should go backwards. The general opinion on the issue is that we are developing a monarchy type situation. The Queen's pension or salary is not questioned in Britain and it looks as if we are heading in the same direction. Perhaps the Minister can explain that.

I welcome this Bill. I welcome the Minister of State and his officials to the House. The precise purpose of the Bill is to avoid the sort of problems which have brought people on to the streets in France, Germany and Austria.

I am particularly proud of the pension provisions that have been made by this Government, its immediate predecessor, and the party in Government to which I belong. In the early 1980s and the late 1990s the Government gave priority to the pension issue. There was no particular priority given to pensions during the rainbow coalition period. The Government also prioritised the free schemes such as the medical card at the age of 75. We are building and improving provisions.

The Minister did not deliver on the medical cards, which is disgraceful.

As we can see from continental countries, if we do not handle this issue correctly, pensions will be a crippling overhang on the economy and the public finances. I was in Germany as a diplomat in the mid-1970s when it was already concerned about the effect pensions would have on the economy and public finances. That was at the stage of Model-Deutschland and the model German economy. Since the late 1990s pensions have had a crippling effect there.

One of the biggest achievements of our Minister for Finance is that he is tackling the problem in a number of different ways well ahead of time. He is putting 1% of GNP into the pension reserve fund. Although I know not everyone in the House agrees with that, I strongly agree with it. The Minister has also established many incentives for better private pension provision, including the PRSAs, and now he is introducing this Bill which provides for flexible retirement. Obviously it does not affect any older person and we must be clear when discussing it that it only affects those in their early 20s or younger.

I am a little surprised that the savings as a result of this measure are only estimated at €300 million annually. That seems small and I thought the effect would be more radical. The figure is not particularly significant and I find it difficult to believe.

The Senator doubts the Minister.

Another point concerns where we project the ratio of working population to dependants being 1:2. It has been clear to me from watching economic developments over the past 20 to 25 years that the real joker in the pack is migration. We can estimate births, deaths etc. but I am a little sceptical as to whether the scenario painted for 2056 will, in fact, happen.

Hear, hear.

I suspect the dependency ratio, from the point of view of the State to society, will be a lot more favourable. It would not surprise me if we had a much higher population then than we think we will have. It is always in the back of my mind that 150 or 160 years ago we had a population of 8 million. When we debate issues such as one-off housing and the beauty of barren peninsulas now, we forget they were not barren then. However, that is beside the point.

This Bill is a useful reforming measure. The precedent for this type of reform was in the mid-1990s when it was decided to extend full PRSI to public servants. Such reforms can only be introduced for new entrants, which means they take a long time to filter through and have an impact. Anything which would reduce people's current entitlements is difficult to introduce. It could be argued that the reform is a blow against ageism. It may well be the case that between now and 40 years time we will become more flexible about retirement ages, which could be good.

We should all approve retirement being on the basis of health rather than age. People should not be under pressure to retire on the basis of age although they should be entitled to retire if they want to. Equally, those who want to and who are able to work beyond the age of 65 should be able to do so. That would be better for them than doing nothing.

We will have to develop, particularly in the public service, a new kind of career pattern. It already exists in embryonic form in places such as the Department of Foreign Affairs. People there reach the peak of their career, in terms of the importance of the posts they occupy, sometime in their 50s. Their last posting is often not as onerous as previous ones. We can think of other situations where the pattern is changing. In some cases senior civil servants work on a consultancy basis and they are brought in to do specific tasks or to help with a particular negotiation. The public service will have to develop to provide for this.

The provisions of this Bill will not affect any current Oireachtas Members. Nonetheless, by a process of empathy, many Members would have mixed feelings about the situation. Given that I have been a public servant for over 25 years, I am delighted to see for the first time in legislation that Oireachtas Members are defined as public servants. This gives one a great feeling of continuity. On the other hand, as pointed out by the Minister, there is a sharp contrast in the security attaching to the career of most public servants and the lack of security applying where one cannot see from one Oireachtas to the next.

If one had an eye for satire, one could allow oneself a smile regarding the bodies to which the definition of public service bodies does not apply. If one had a sort of Evening Herald cartoon attitude to CIE, the ESB or An Post one might smile. However, I admire all the people who work in those bodies.

There is something objectionable about able-bodied parliamentarians who have moved on to better paid roles than they had in either House collecting a pension unconditionally. Equally, there are people, who through failing to get elected, are in danger of falling on hard times because they have nothing else to which they can immediately turn their hands. I am aware that a severance payment applies once Members have been here for three years. Perhaps there should be a type of safety net arrangement a little like the cnuas in the sphere of the arts to which the 150 members of Aosdána are entitled if they are not earning sufficient income from their artistic endeavours.

A pension is a better idea.

Charlie Haughey said that.

I realise I am treading on eggshells on the question of teachers. We all know teachers who are deeply upset to have to retire at 65. Equally, there are other cases where it would be of benefit both to the individuals concerned and their schools if they could call it a day at a certain point. The Minister of State referred to the possibility of optional early retirement. Teachers are well represented among the social partners and if problems arise as a result of the legislation, I have absolute faith in the ability of people like Senator O'Toole, his colleagues and successors to negotiate within the broad framework of standard retirement arrangements something that is particularly adapted to certain cases for whom the standard scheme might create difficulties. We must remember that the problems are long-term ones which do not apply to existing teachers.

We are all aware that members of the Army and Garda avail of other employment opportunities. A period of service in the Army is, generally speaking, a good qualification for many other careers. The reason for the pension in these cases is that one has to attract people to these areas in the first place. The prospect of a pension on retirement at a certain age is part of the appeal.

I offer qualified support for Senator Bannon's idea about pensions for councillors. The role of councillors has changed a good deal. I do not think it was always a full-time position, but given the pressures of modern life it is becoming full-time. In recent years Ministers have considerably improved conditions in terms of pay and allowances. I agree in principle with Senator Bannon that it is the next logical step, but that is not to say that it will be feasible for it to happen next month or even next year.

I accept that I raised my eyebrows about the exemption for future Taoisigh. Taoisigh being new entrants is a contradiction in terms. I do not know about the aptness of comparisons with civil lists.

This is important legislation in terms of social reform. It is also important in terms of underpinning our economy's confidence in its soundness for the future. People are well able to make calculations as to where the economy will stand and what liabilities it will face in ten or 20 years' time. It is wonderful that these problems are being tackled early and that we are learning from the bad experience, in some respects, of European partners who have good pension arrangements that they, unfortunately, are unable to sustain.

I welcome the Minister of State, Deputy Michael Ahern, to the House. I am sorry he was given the job of bringing in this destructive legislation. I urge that some of the issues raised here are responded to in some detail by the Department of Finance. It is important that this is done.

I begin by declaring both an interest and a disinterest. The disinterest arises from the fact that although I am a teacher and a politician, none of us already in the system will be affected in any way, as Senator Mansergh rightly pointed out. Accordingly, in a personal sense, I have a total disinterest in what I say about teachers and politicians.

I declare an interest in the sense that I am the only person in the House who was a member of the dastardly Commission on Public Service Pensions. I assure Senator Mansergh that the odds were better at the pass of Thermopylae, as I was surrounded by the enemy all day long. I failed to convince them. They did not even discuss the idea of politicians. I assure the House that from the few times they made reference to it, their distaste and contempt for politicians was only marginally worse than their contempt and distaste for teachers.

I firmly support Senator Mansergh on two points. As I said to the Minister last week, if it is only €300 million we are talking about I can offer four solutions. There is no question about it. My colleagues in the INTO made it clear when the question of the 1% was being discussed that it was partly a solution, but the Government decided not to move in that direction. The 1% of the €2 billion that is roughly teachers' salaries at present would be €20 million a year straight away and one can work that out over 40 years and invest it and so on. It is very easy to get up to those figures. Senator Mansergh put his finger on the real issue. I am glad to have one such colleague in the House, because I have been saying this for 17 years, but I have never yet seen an acceptable demographic prognosis in the House. I argued this case in 1989 with the Leader of the House when she was Minister for Education.

That is right.

I pleaded with her not to take the word of her demographers who told her what would happen in education in the following ten years. Everything I said on that is on the record and has proven to be correct. Senator Mansergh is absolutely right. The idea that in 2056 the dependency ratio will be 2:1 is absolutely inconceivable. Are we to run the country by computer? It is impossible to consider that taking place. We now have a population which is touching 4 million, approximately 3.96 million the last time official figures were altered, and it has gone up significantly since then. I think we have probably reached 4 million at this stage, the highest population for well over 150 years. It is important to remember that point.

I disagree with Senator Mansergh about pensions in Europe. I have looked closely at this issue and it is right that the exposure and liability to future pensions in certain European countries is far in excess of ours, but it tends to be far in excess for reasons other than what we discuss. In the main it is outside the public service and vocational areas and is mainly due to people in the private sector who generally have no pension cover of their own in their jobs. I do not say this in an absolutist fashion, but that is a major part of the problem in those countries.

What is wrong with the legislation is that two groups have been hit hardest by it, the professions of politics and teaching, and that is unfair. I wish to put a few points on the record that were not mentioned by the commission on pensions, the Department or the Minister either now or in the Budget Statement. Some significant changes have been adverted to in the Minister's speech which are welcome, such as the one about taoisigh. It is not that long ago since a Taoiseach retired and invested his future in a high profile manner that went up in a bottle of smoke two years later. We all remember that he had to scramble. I do not like the idea of Taoisigh having to be at the grace and favour of big industry or somebody else to give them positions as directors of boards if they do not have income of their own. The issue of their own income is what has wrecked politics in the past. We need people who can see it as a career.

In the past ten years we have looked at pensions for both teachers and politicians. The Bill refers to the Oireachtas (Allowances to Members) and Ministerial and Parliamentary Offices (Amendment) Act 1992. This Bill put in place a minimum retirement age for politicians and brought it up to 50. This happened after much discussion and consideration. No Member has mentioned this aspect. Politicians are the most disorganised group of workers and would not have the courage to take this on publicly because they are afraid of the reaction of the media. The pension age of teachers was looked at under the PCW in 1996. Meetings were held at the Department of the Taoiseach late into the night. I am sure Senator Mansergh was aware of them. Conclusions were reached at that stage about retirement at 55 when teachers could then draw down a reduced pension.

Under this Bill, having five years added to the accrual period has disadvantaged everyone. However two groups are excluded from this, namely, politicians and teachers. The earliest age at which politicians can draw their pension has been increased by 15 years, from 50 to 65, and by ten years for teachers, from 55 to 65. The ages we are building on have came from years and years of consideration and experience.

The Leader was the Minister for Education in the late 1980s. A lump sum was offered to teachers during her time as Minister and she made a case for people whom she felt needed to get out of the profession. While I disapproved of the offer that was made, she said the issue should be looked at in such a way that teachers might be able to leave the profession. We were not able to achieve it.

This Bill contains good elements. Under it, people will not have to retire at a certain age. Many healthy people want to continue working and we should support them. Under this Bill, every 64 year old teacher should be able to take a class of 35 lively four year olds in junior infants, or challenge 17 year olds in a leaving certificate class. A physical education teacher of 64 years of age would have to do all that is required at a time when most people of this age worry about prostate problems and arthritis. This will not work and is wrong for teachers.

It is also completely wrong for politicians. While I do not like naming names, I have spoken about this to the people concerned and I am sure they will not mind me saying what I am about to say. Let us consider the current Progressive Democrats leader who has given her whole life to politics. While I might disagree with her politics, this is not the issue. She is the senior Minister in the Minister of State's Department. Were she to fail to be elected in the next election, she would have no source of income for the next 12 or 13 years. Surely this could not be right. The former deputy leader of the Fine Gael Party was not re-elected in the last election. As these individuals are in this system, this measure does not affect them. However, this could happen to new entrants in similar circumstances.

I have spoken to many people from most parties and know there is no support for these measures. The public sector unions and my colleagues in the INTO have often said that the issue of pensions needs to be examined. It may be the case that we need to pay more for pensions. In the interests of equity, everyone should have had their minimum age increased by five years, and not ten years for teachers and 15 years for politicians. I am not going back to my trade union background of simply holding differentials. These ages were established for good reasons. These measures are fundamentally wrong. We will return politics to people who have incomes of their own and will not make a career of it. I appeal to the Minister of State to bring forward changes on Report Stage.

Senator Mansergh spoke about €300 million. If teachers are required to work an additional five years, I estimate the additional contribution from them would be €25 million per year. This does not take into account savings on pension. The figures have not been worked out at all.

I submitted 20 proposals to the commission on pensions. I pleaded with it and said that it was madness to have people in full-time employment until a certain day and in full-time retirement from the following day. I travelled to Boston College at my own expense and met with experts in this area. My union, the INTO, invited an expert from Boston College to speak to people here. We looked at the different approaches to pensions. It has been repeatedly proven that persuasion is the best way to deal with the pension issue. The carrot should be used rather than the stick.

A federal law has been enacted in the United States. While this has not been applied in each state, it has been applied in most of them. It provides for something that would be seen as heresy in the area of Irish pensions and to the Department of Finance. In the United States, a person can decide, in consultation with his or her employers, to work half-time after the age of 65. During the course of the year, this person will draw half a pension entitlement and half a salary entitlement. The person will continue to contribute to the pension fund from the salary entitlement. There is no reason that the law could not be changed so that this could be done here. I believe the Minister is amenable to this move.

Coming up to the last election, Members continually raised issues on the Adjournment looking for remedial or support structures for teachers. Retail distribution of the education service at primary level is almost impossible as there are schools everywhere. It is hard to give less than a full teacher type of service. However, teachers who wanted to go on partial retirement and work half-time could do it. I might as well have been talking to the wall as to those uncreative people in the pensions commission; I got no hearing on these issues.

A huge amount can be done. I assume that section 2(6)(a), which refers to people returning on the same contract, will cover those who leave service on career breaks. I also assume that someone has thought of the equality implications for people who take off for a year or two, not on a career break but for domestic or family reasons, and return in a disadvantaged position. One can certainly line up the cases on that one.

We should also consider a point made by Senator Mansergh which comes very close to what I said about adding five years to everyone's retirement age. When I started teaching, I was 19 years old. That does not happen any more, since the post-primary course is a year longer, as is the teacher education course. Nowadays, people typically begin primary teaching at between 21 and 23 years of age. If one adds 40 years to that to get the full pension, one reaches the age of 61, 62 or 63. That is the appropriate figure. The case has been made by the Government to increase the age on the basis of life expectancy and a variety of other matters. It should be no more than the five years. One should certainly increase the point at which one may take pension benefits from 55 to 60. Full retirement would be somewhere further on from there.

That is a very simple method, and I intend tabling an amendment to include teachers. As no one else will have the courage to do so, I also intend to table one for politicians. That is the fairest thing one can do and reflects reality. I will defend those amendments anywhere. No one wants a situation where teachers are forced to stay in the job beyond the point at which they are comfortably able to do it with their natural energy. We have a job to do. It is interesting that teachers always feel put down. The Senator makes a point about their representatives, but it is strange that the Bill will say that people in Garda college who wish to become guards are not considered new entrants. I will certainly table an amendment in order that those in teacher education colleges are treated the same way. There is only one field in which they can be employed when they graduate, namely, as teachers. Surely the same thing should apply there. Teachers are not popular in the Department of Finance, and such things never come easily in that kind of situation. It is unjust, unfair and iniquitous, and I believe very strongly that we should examine it.

I have gone over my time, and I have much more to say. Two professions, teaching and politics, have been unfairly hit — harder than any other group — and we should at least try to inject some fairness and balance into matters at this stage. The issue of the additional contributions must also be examined. Someone must say something about it. There are people in these Houses who say to me every year that they have reached their full pension age and wonder why they must still make contributions. When I was INTO general secretary, I heard the same. They have changed it here, but will they change it on this one? I see no sign of that. Will people continue to pay pension contributions after they have reached the end of their approval period? I ask the Department and the Minister to re-examine this and be open to the reasonable amendments which I will helpfully table on Thursday afternoon. I hope that people in parliamentary parties will at least take a strong stand on those issues to inject some kind of balance into this legislation or allow a space for that balance to be created in future.

I welcome the Minister. I will be making many of the same points raised by Senator O'Toole. Of course, I must congratulate the Government on bringing this Bill forward. It is planning for the future regarding pension reforms for the public service; one could not deny that. There can be no smirking or otherwise in that regard. However, the first of the two points we must address is raising the standard pension age to 65. The second is abolishing the compulsory retirement age. The rise in the standard pension age will cover civil and public servants, gardaí, nurses and health employees. In most cases, it is easy enough to agree with that. However, regarding politicians and teachers, I have significant reservations.

I am delighted by the welcome removal of the compulsory retirement age. We all know the reasons for that. Life expectancy has now risen sharply, as have the capabilities and performance of people at 65. Why should they not be allowed to continue if they so wish? That is certainly to be welcomed, and no one would say anything against that. However, while many of the recommendations of the commission are certainly all right in my view, the key area of retention for the teachers goes down very hard with me. Perhaps I might remove my politician's hat and put on that of a secondary and careers guidance teacher with which I lived for 30 years. I feel very strongly on this and am compelled to express my feelings.

There were special terms for teachers, including secondary teachers. Those were that they retired at 60. If necessary, they could retire at the age of 55 without losing increments. That agreement was justified, particularly when we look at society's changes regarding stresses and strains among teachers. No one should expect teachers in their 60s to try to control, let alone teach, an honours leaving certificate class in mathematics, physics or chemistry. They would be trying to control a bunch of students who do not want to learn. Considering remedial teachers, home-school links and all the societal problems, it is simply unreasonable to expect teachers to have to stay on until they reach 65 before they can benefit from a full pension. I would like the Minister to re-examine that. Those special terms laid down in the conditions of service for teachers should remain. The age of 60 should be retained as the standard retirement age, and voluntary early retirement without losing pension benefits at 55.

I appreciate that the working group sat down and talked at length. Senator O'Toole has referred to that. There were many discussions on trying to find a formula on this but, unfortunately, they were not able to reach agreement on it. However, I would like them to take note of some kind of requirement regarding teachers. Those in school management — principals who have spoken to me — all feel strongly that it would work and that some formula or mechanism should be introduced. Perhaps the Minister might add in some subsection that a special case should be made for those who have reached the age where they have peaked in their careers and are not capable of delivering a full programme. Perhaps they should have a lower level of responsibility at a certain point in their career, coming out with that retirement without losing their pension benefits. I would like the Minister to revisit that area to see it he could find some formula or mechanism for those. I might add that not many avail of it at present, but it should be there as a kind of cushioning for those who feel they could leave the profession if they wish and, if they do not wish to do so, have a lower level of responsibility and hang in there until 60. There should be some sort of formula to give them some leeway, and I ask the Minister to revisit that. I have great difficulty accepting this provision regarding Teachtaí Dála and Senators. I say that because, as we know, being a politician today is more volatile than ever. When I grew up in politics, if one became a Teachta Dála or a Senator and worked at all at one's profession, the public would vote one back in. That is no longer the case. We have all felt that we have not received our just reward when we were not successful in politics. This shows the volatility of the political profession.

I come from a political family from which another generation of politicians will come forward. It will not, however, be for some time because they will not be allowed to enter politics until they are well-established in their careers. The likelihood that young people who enter this profession at the age of 23 or 24 will be voted out by the age of 35 and will be unable to draw a pension until the age of 65 discourages young people from entering politics. This is wrong. Only the wealthy or those involved in business who can later take up where they left off will get involved in politics. For those in the professions, the prospect of leaving politics at the age of 35, having failed to develop a career, is too dangerous. I ask the Minister to revisit the section to ensure that Members leaving the Houses receive a lump sum or superannuation to allow them to start in another profession.

I also ask the Minister to revisit the Bill to allow those who currently enjoy special terms enabling them to leave their profession aged 55 years to continue to do so on a voluntary basis without losing benefits. This is extremely important to teachers because once they reach 55 years, they find it too difficult to contain a class and teach a subject at second level. Many of my former colleagues have spoken to me at length on this issue. If it is not possible to allow teachers to retire aged 55, I ask that the Minister try to devise a formula to allow them at least to complete the final few years of their careers with less responsibility. This would mean giving them some scope to opt out of responsibilities, for which management would be grateful.

I have always admired the capacity of Members, particularly those from the Fianna Fáil Party, to welcome a Bill and then spend the rest of their speech condemning everything in it, as Senator Ormonde has done for the past ten minutes. Her argument may have more effect, coming from that quarter, than it would were it to come from this side of the House.

I agree with almost everything said by those who essentially oppose the central tenets of the Bill, although I am inclined to be slightly less exercised by it. This is odd legislation which will not come into effect for 20 to 30 years. In that sense, despite the desire of the Minister to make his mark by passing it, the Bill will not affect anybody for a long time and his successors will have the option of changing it at any time. Other than provisions which specifically relate to politicians, it is not clear if the legislation is required as most of the issues could have been addressed through normal industrial relations mechanisms.

In a sense, the Minister is trying to stop the tide of social change. Important changes have taken place in recent years in terms of how people have approached their later years. From the age of 65 onwards, people now look at a range of options. As Senator O'Toole correctly pointed out, they do not necessarily work full-time until they reach 65 years and then stop work completely. Frequently people work part-time or stop working altogether from the age of 55 onwards in an effort to create choices which suit the lifestyle they have chosen. The Minister is seeking to call a halt to this by telling people they cannot have such a choice or develop such flexibility and, if they choose to do so, they must meet the costs. The Government is indicating that people must work until the age of 65 years and after that their choices are entirely their own business. This cannot be achieved through a relatively short Bill such as this one, which we will have to revisit long before its provisions come into play.

I agree with Senator O'Toole that the presumptions underpinning the Bill are based on conjecture — I will not say they are wrong. The Bill relies on two or three central presumptions, including demographics, which are not amenable to accurate calculations. While it is true that the birth rate is now lower than it was 20 or 30 years ago, it has undergone several different changes in the intervening period. In the 1970s, for example, it was among the highest in Europe. It then collapsed to become one of the lowest in Europe in the 1980s before recovering in the 1990s. While we may be able to make a reasonable guess as to what the birth rate will be in 20 years, we cannot be in any way certain about it.

Even more uncertain — Senator Mansergh correctly pointed this out — are developments in the labour force, which will be crucially important in terms of our ability to pay for pensions. In 1990, fewer than one million people were at work. This figure now stands at approximately 1.7 million, which has major implications for our capacity to pay for pensions. Given that this dramatic change took place over a period of slightly more than ten years, it is nonsense to claim it is possible to state with some certainty what the position will be in 2056.

The figures underpinning the consideration of this issue just three or four years ago by the commission, of which Senator O'Toole was a member, were from 1997 and 1998, although attempts were later made to update them. Even now, it is clear the figures used are wrong. They did not calculate, for example, that we would have net migration of some 30,000 to 35,000 in each of the intervening years and, as such, did not take into account the consequent change in the dependency ratio. We cannot state with any degree of certainty the number of likely immigrants during the next 20 or 30 years, or for that matter during the next two years.

It is remarkable that we are having this debate on a day when we must acknowledge that we cannot predict the number of people from the accession countries who may seek to come here in 15 or 18 weeks. Producing a five year old report to try to guess the dependency ration in 2056 can only be described as guess work. I was about to describe the process as informed guesswork but that would do it too much of a service.

Based on the experience of the past five to ten years, the dependency ratio is significantly better than anybody would have guessed ten years ago. It is, therefore, premature at best to introduce a measure as insignificant as this legislation to address the issue. Even if we were to accept all the figures, as the commission pointed out, the cost of public service pensions as a proportion of GNP will increase from approximately 1.6% now to approximately 2.4% in 2027, not a crippling or, to use the commission's phrase, "unaffordable" burden. One must, therefore, wonder why the Minister is taking this course of action.

It is also true that while the number of pensioners is not a matter the Government can control, it has a measure of control over the number of public service pensioners because it controls to some degree the number of public servants. I understand that the number of public service pensioners will peak in the third decade — from around 2020 onwards — because of the significant intake of public servants during the late 1970s and 1980s when we recruited a large number of additional public servants. The legacy of the Charlie Haughey years is even now——

The former Minister, Martin O'Donoghue, was actually responsible.

That is too complex for Senators on this side of the House to comprehend.

I have read again the report of the Commission on Public Service Pensions, which I read on its publication. I also recall meeting Senator O'Toole in a hotel in north Dublin about four or five years ago when we discussed it at length over a few pints. It is remarkable that the Minister has reduced to two decisions such an interesting, lengthy report containing many recommendations. He has indicated that he will make more decisions, but he has not yet done so. The only two decisions we have are that there is a presumption that one retires at 65 and that if one wishes one can continue to work for longer than that. I have no problem with the second of those, nor does anybody else. If people want to work beyond the age of 65, and there are plenty of people who do, they should be entitled to do so and should not be told there is no further use for them and they should go away.

My worst moment during the election campaign of 2002, bar the count, was when I chaired a Labour Party press conference one morning dealing with issues relating to older people. This provision was one of them.

Was Senator Ryan there?

Yes. The provision was that there would not be compulsory retirement. A particular journalist who presents a late-night radio programme leapt on this proposal and within a matter of moments had conjured up the notion of a crack troop of octogenarian gardaí——

We can guess who that was.

——who would be dedicated to dealing with drug problems in the city. I am thankful that it was dealt with in the spirit of levity intended by the journalist. In any event, it is a decent proposal. We all accept that if a person can do the job, and that is an essential proviso, he or she should be entitled to continue doing it. However, why should people be required to work until they are 65? The truth of the matter is that people will not do that. Significant numbers of people will choose to leave early and there is no doubt that the €300 million saving will come as a result of people leaving early with either no source of income or an actuarially reduced income in the intervening period. That is not a satisfactory state of affairs.

Let me refer in passing to PRSAs, which have not yet been mentioned in any detail. Most of us welcomed, at least in principle, the introduction of PRSAs a few years ago. However, the experience so far has not been encouraging. It is early days and one would not wish to make a final judgment on the issue. However, it is clear that the number of workers, particularly lower paid workers, availing of PRSAs at the moment is not at an acceptable level. It is possible that there are voluntary measures that could be taken to increase the participation rate. It might be possible to provide incentives either to workers or employers to ensure that people are made aware of the schemes and encouraged to join them. It is not my party's official policy, but it strikes me that we will soon have to consider introducing a measure of compulsion. The essential role of the State is to ensure that people have an adequate level of pension provision, but the State should also go beyond that and acknowledge that many people want more than that and provide every possible encouragement for the provision of occupational pensions. This is an issue with which the trade union movement is also grappling and we will have to consider whether there should not be some sort of compulsory private provision on top of the PRSI provision that already exists.

Hear, hear.

A not insignificant issue struck me when reading the Bill. Senator O'Toole referred to it at the end of his contribution, namely, the issue of breaks in service. It is not at all clear that Members of this or the other House who are defeated at the next election will still qualify for payment of their pensions under the existing scheme. It is fairly clear from the Bill that teachers who take a career break of three or four years, say, to look after their children will not benefit under the old system when they return but will be treated under the new scheme. This is very serious and will come into play much earlier than the basic provisions of the Bill.

There is a specific provision relating to Dáil Deputies. The Schedule where we insert an amendment into the 1990 Act seems to make clear and to conform with what the Minister said during the course of his contribution that it does not apply to those who were first elected before 2004. However, it sits uncomfortably with the other provision in the body of the Act which does not exclude civil servants. Section 2(6), to which Senator O'Toole referred, refers to public servants and does not specifically exclude Members of the Oireachtas and contains what appear to be different provisions regarding breaks in service. There is a problem for Dáil Deputies, and there is clearly a problem for virtually all other public service employment, including that of teachers, where people want to take a few years out.

I have said on a number of occasions in this House and in the other House that the public service generally will have to be a good deal more flexible in the future in terms of allowing people a few years out. Many Ministers, including this Minister, are on record on more than one occasion as saying they believe it would be a good approach to have some cross-stream mobility between the private sector and the public service whereby people who have worked for, say, ten years in the Department of Transport could work somewhere else for five years and return to the Department or to the public service generally if they so wish. The public service can only benefit from giving people an opportunity to take time out in the private sector. This measure clearly runs in the face of all that rhetoric because it constitutes a serious disincentive to anybody to do that, because if they go away without a specific agreed time for coming back, they cannot come back under the same pension arrangements. They will come back effectively as new entrants and lose out on the benefits of the old system.

Others have referred to specific provision regarding the Taoiseach. I find that rather strange. I accept what the Minister says, that Taoisigh need to be treated with a certain respect and that there is a particularity attaching to that office. However, one could make the same case for others. The same case could very obviously be made for Ministers and for Deputies. Ministers are obliged to give up participation in private industry. I am familiar with the position of legal practitioners — there is at least one in the current Cabinet — who are required to desist from any private involvement, and it is not that easy to go back to it if they cease to be a Minister. I really do not see why we take a particular view of the Taoiseach and do not take the same view of other Ministers.

The Senator has struck a chord with the Minister. We are making progress.

I will leave it at that for the moment. This is not a good Bill. I do not see the point of it. This Minister has done a number of good things and a number of others with which I would quibble on the issue of pensions. This is by no means the most important thing he has done. There will be time to revisit this and time to amend it before it becomes law. However, I do not understand why he is bothering to introduce it in the first place.

Over the coming decades most industrialised countries will face the problem of an ageing population, despite the doubts and reservations about the projections being made and the available statistics. By 2050, for example, on the basis of the information we have, the overall population in Europe will decline by more than 3% and the number of people aged 65 and over in proportion to the working population will increase from 25% to 50% over 20 years. The two big factors contributing to this are low fertility rates compared with earlier years and an increase in life expectancy. Ireland will experience similar trends, to a greater or lesser extent, although currently, as has been pointed out by previous speakers, over this decade we will be in a far more favourable position. As time goes on the trend will take on much the same pattern as the rest of Europe. Projections based on the only statistics we can rely on at this point show that by 2016 there will be about four persons of working age to support each pensioner and by the 2050s there will be only two. The ageing or greying of the population will cause serious problems for us. It presents challenges for the way this and future Governments fund public service and social welfare pensions. Decisions must be made. In 2000 about 4.7% of our GNP went to fund these pensions. By 2026 I understand that will have increased to about 8.1%, and by 2056 it will have increased to 12.4% just to maintain the existing level of pension service. If the Government decides to take no action, if it takes the view that this is conjecture, that things are changing and that it will therefore do nothing now, the likelihood is that the pension prospects of the present and future generations will be at serious risk. The Government is right to take action. I fully supported the establishment of the national pensions reserve fund which was one of the most radical moves in terms of budgetary and financial strategy. For the first time, instead of operating entirely in the system of "pay as you go", the fund introduced a new strategic long-term element into budgetary financing and planning.

This Bill is a significant extension although some speakers on the opposite side of the House have disputed its significance. The national pensions reserve fund is a partial pre-funding. The extent of the savings emanating from the implementation of the Bill's provisions has been questioned on both sides of the House. Other countries did not take action and are now faced with major problems. Due to our predominantly young population and high employment rates we are fortunate in having the time and the capacity to take action.

The recommendations of the commission established in 1996 have been referred to in detail in the House. The report was adopted in principle by Government in 2001. Following the establishment of the pensions fund, many initiatives have been introduced to build on the planning for future pensions. Budget 2004 is being given legislative effect tonight and builds on those reforms especially with regard to age-related pensions reforms.

Discussions on those recommendations have taken place between the social partners at various fora over the past number of years and some progress has been made. It is quite evident that there is no unanimity with regard to this Bill in the House.

The Minister's guiding principles in formulating this Bill are laudable in general but I have some reservations. The principle that there should be no compulsion in the pensions system and that people are allowed to retire at a particular age if they are fit and well enough and willing to work is very positive and I can foresee a big take-up on that provision. I know of people who wanted to work beyond their retirement age who wished to use their experience and expertise. Those who opted out of the workplace for parenting reasons and, having reared their families, now wish to re-enter the workforce will be anxious to avail of the benefits of that provision.

Some of the reservations have been articulated very forcefully in the House. I wish to speak about teachers from the experience of having taught in inner city Dublin in the late 1960s and throughout the 1970s. What I witnessed there gives conviction to what I say. I witnessed teachers in their 60s trying to teach in classes where, despite having tremendous records of achievement such as bringing children to scholarship level in previous years, they had come to a point where they were experiencing total burn-out and where their level of productivity was not just zilch but was very much in the negative zone and where they should not have been allowed to continue teaching. My concerns have been reinforced through the years in my political career.

The proposal is to introduce the standard retirement age of 65 years for new entrants into the public service. While there is merit in the introduction of some changes to the pension terms of new entrants, it is my view that the introduction of a single retirement age of 65 for teachers needs careful examination. To put the matter in context, the teaching profession currently has what are known as "special measures" to allow a teacher retire on pension and lump sum from age 55 onwards, having completed 35 years of service. The current proposal in the Bill would seek to abolish these special measures and replace them with a single retirement age of 65. To adopt an inflexible stand on that aspect would be wrong and I predict that it will be changed in the future. Common sense and wisdom will prevail. If the Minister does not see fit to amend this Bill to take account of those serious concerns, future Ministers will have to do so. There is no way that an inflexible element of this Bill will work for every teacher. Most teachers can and will be very anxious to work up to the age of 65 but there will be a significant minority element who will simply be inappropriate in a classroom at either primary or secondary level beyond 60 years of age. I ask the Minister to consider amending the Bill in that respect.

I do not agree with the Minister and the other Members with regard to this Bill which in my view is a disaster. The idea of removing the cap on the retirement age is good for those who wish to remain in public service but forcing people to work until they are 65 is outrageous and a completely retrograde step. This is particularly the case for the teaching profession where people will be expected to work for 44 years before they can draw a full pension. People hit the wall sooner than they should in some cases. If a teacher has had enough of teaching at age 45 or 50, that teacher will be forced to stay in a job and I do not see any benefit either for the teacher or the students and their parents.

Instead of complaining about bad teachers we should be examining ways of giving escape clauses to teachers so that they can opt out of teaching if they want to move on to something different or take a career break. I am aware that in Canada, teachers are given a year off to attend refresher courses. I believe that in the Canadian system, one tenth of a teacher's salary is withheld every year and this is repaid in the tenth year so that they can take time out to refresh themselves. A recent report recommended that people change careers every seven years. This does not mean a complete change of career but they should be given the opportunity to move sideways or upwards.

The days of teachers going into classrooms and staying at the same level for the rest of their lives is over; people expect more flexibility in their work. It is a terrible indictment of the Government that it is introducing the compulsory threshold of 65 years before people can retire. This will have a devastating effect on public services. If the Government is genuine in its desire, it could by all means remove the cap on retirement age and give people who at 65 years of age are still full of the same enthusiasm as when they were 21 the option to continue working in the public service if they wish. However, to compel a person to work until 65 years of age is the wrong step and is too sudden a jump.

Senator Bannon referred to members of local authorities. Those who work in local government should be rewarded with a pension and in particular those people who never benefited from a salary and those who sat on local authorities over the years and sacrificed much of their family and personal lives to serve the public, often with very little thanks at the polls. I ask the Minister to consider awarding pensions to those persons or to their families if the person is deceased, particularly in the case of councillors who served prior to 1999 before the current salary system was put in place.

The purpose of this Bill is baffling especially when the Government issues contradictory statements about public services. In a previous budget the Minister for Finance announced his plans to cap the numbers in the public service but there now seems to be grave confusion about the numbers. According to FÁS a different figure has been issued lately and people are not too sure——

The CSO's figures are more accurate.

This week there was great confusion among the public on this matter. I do not understand why the Government is compelling people to stay. The public service must be made attractive to people and they should be allowed to leave it if they so wish. Making someone stay in a job for 44 years is not the way to do it. Public service employees should have the option of getting out early.

There has been a dramatic exodus from nursing, making our health system dependent on Filipino nurses to make up the shortfall. I am also concerned by recent reports of a future pensions bombshell in light of the benchmarking deal. The Minister of State might refer to this in his closing remarks. Due to the new benchmarking awards and the increases in the number of public service employees, the State will face a massive pensions bill in future years. The deficit will mean that workers in years to come will have to support numerous pensioners. A recent report also stated that in Europe alone, with its ageing population, up to 70 million emigrant workers will be needed.

This Bill is a missed opportunity by the Government. By all means, abolish the maximum age for retiring but people should not be compelled to stay in the public service. I am surprised by the stance of the Leader of the House, a former teacher who has many teaching colleagues who are not impressed by this Bill. I accept that our population is ageing, people are living longer and there will be huge costs in years to come. I have raised with the Leader the need for a debate on the effects of the ageing population, as most will now die from degenerative diseases as opposed to sudden deaths, such as heart attacks.

I wish to share my time with Senator Kitt.

Is that agreed? Agreed.

I welcome the Minister of State. The report was compiled in recognition of the difficulty of the impending liability associated with public service pensions. It has been well discussed and has informed this Bill. It is important that the issue is dealt with now, well in advance of when it will impact on the economy. From discussions in the House on the economy, Members are well aware of the importance of facing up to such a situation now. This is notwithstanding the fact that some concerns have been raised by different interest groups. This issue is on the agenda and it is important that it is addressed now rather than in a fire brigade action at a later stage.

Up to 280,000 people work in the public sector. I support Senator Fitzgerald's comments on the gross expenditure on public service pensions. Based on actuarial figures, the pensions bill is due to double between 1997 and 2012 and then quadruple between 2012 and 2027. Senator O'Toole has echoed the concerns of the unions on this issue and also that the Bill does not deal with the issue of early retirement. Notwithstanding that, a prudent approach must be taken to the financial management of the economy, which was not done in the past. The year 1987 is seen as a watershed in terms of how the economy was addressed and how certain measures were put in place to ensure the same problem never re-occurred. I would, therefore, be more concerned if the Government's effort was to retrospectively address this issue.

This Bill is for new entrants to the public sector. It will be like any contract available to a new employee. They will see from the start what they are getting into and they can make their own decision as to whether they choose the public service or their chances are better in the private sector. I admit that the safety mechanism for those in the public sector is much better than for those who chose to work in the private sector.

In establishing 65 years as a minimum retirement age, it recognises that we must address our changing demographics. The future is considered with good financial planning in mind and such issues will not be dealt with out of context at a later stage. The most important element of the Bill and the report is the capacity to address ageism. Ageism is one of the most outrageous perceptions evolving in this country. The manner in which we treat politics helps to inform the entire debate on ageism in our society. One only has to look around Europe and the US to see political figures such as Mr. Jacques Chirac who is 69 years of age and Mr. Berlusconi who is aged 67 years. Mr. George Bush senior was aged 64 years when he was first elected. However, there is a perception in Ireland that after 50 years of age, one is over the hill and any chances of high office are diminished. This perception informs all other elements in society. If this can be focused on, which this Bill does, there will be a much more mature approach to the concept of people's active involvement in life after 65 years of age.

I thank Senator Dooley for sharing his time with me. I welcome the Minister of State.

All Members will agree that the reforms allowing public servants the option to remain at work after 65 years of age are welcome. This is reflected in the teaching profession where many retired teachers continue on as substitute teachers. It also highlights the lack of qualified teachers, but that is for another debate.

There was a diplomatic sentence in the Minister of State's speech on time being given to new Oireachtas Members to become aware of the new age limits and where they are "in a position to take this on board to fit their own circumstances". Senator Ormonde said this may make it difficult for young people to become involved in politics. At an election convention in Ballinasloe, I noted a 21 year old candidate was selected to contest the town council elections. If a person of that age contested a Dáil election, given the changes we have had, it would be difficult for them to start at such a young age. I hope this issue will be examined again.

There is concern about new teachers entering the profession now. The anticipated changes to employment, announced by the Minister for Finance in the budget, will increase the difficulties for them. I must declare an interest as a member of the INTO. I support the INTO in seeking modest changes to allow for the right to retire on full pension and with a lump sum after 40 years service. While many professions may wish to work up until 65 years and beyond, there has been an approach in the teaching profession to maintain the option of taking retirement due to burn-out and other such matters. I hope the Minister for Finance will look at those proposals, as well as defending the pension age and the retention of the dedicated early retirement scheme for all public servants. Of course that is welcome but there is another proposal on the care of the elderly and, for example, the 1% levy for the nursing home subvention which we should also consider. The Minister of State has been good about not borrowing and says we will not pay a 1% levy for pensions but the nursing home subvention remains. The Departments of Health and Children and of Social and Family Affairs have issued a joint paper outlining ways to provide for long-term care, whether in nursing homes, communities or health board hospitals. That links with the issue of people living longer and needing care which I hope will also be addressed.

I thank the Senators for their contributions to this debate. I do not have to declare an interest in this because the Bill does not affect current Members of the Oireachtas or office holders but will affect those who intend to participate in public life in the future. It is understandable that Senators on all sides have a view on the impact the Bill might have on citizens' participation in the institutions of State and in the public institutions of State. The teaching profession has also shown a great interest in this Bill. There was a very public division of opinion between the commission report and the stated position of the teaching profession whose concern stems from anxiety about sustaining the traditional high standard of our teaching profession. It does not affect the current generation of teachers but will affect those who enter the profession from next year.

Various ideological pejoratives are attached to the Minister for Finance, Deputy McCreevy, in public debate. In the context of this legislation however, he is a very far-seeing Minister and his concerns do not relate to this generation or the epoch that will culminate at the next general election.

Is it finishing?

He envisages in this legislation a measure that will come into operation when many of us, as a matter of actuarial probability, have passed away. In discussing this Bill we must consider that it is providing in legislation for a framework that will begin to impact in 2044. That gives a somewhat arid speculative tone to this debate but I understand the concerns expressed by those in public life and the teaching profession about the possible implications of this measure.

Senator Bannon inquired why the Taoiseach was excluded from the definition of a new entrant. He appeared to be concerned that some material benefit accrued to ex-taoisigh in this provision when in fact it will do no more than maintain their existing positions, as is true for the rest of us. There will be no distinction in the future between the Taoiseach and other Members as far as his or her Member's pension is concerned. A Taoiseach elected after the next election will be in the same position as the other new entrants but, uniquely, this legislation will not affect the Taoiseach's position in so far as the pension stems from the office. That marks the importance of the office. Senator Bannon and others raised the question of the introduction of pensions for local authority council members. Since May 2000 severance payments of up to three times the annual representation payments are payable to council members depending on the period of service, hence salary is payable from the forthcoming local elections. I will draw the Minister's attention to the Senators' concerns in that regard.

Senators Mansergh and McDowell suggested that our dependency could be more favourable than that which I outlined in my introductory speech on Second Stage. That is possible and I hope it is the case but we cannot be certain of that, and as some Senators commented, developments in other European states have moved in the opposite direction. Senator Browne referred to the ageing and greying of Europe and in some countries the dependency ratios are approaching crisis levels. The political response to this in Germany, France and Scandinavia has disimproved the terms of existing pensions in those countries. That is why I suggested at the outset that the Minister is very far-seeing in this area, not alone in this legislation and in acting on the recommendations of the Pensions Board but also in the establishment of the pensions reserve fund. It is clear that many of these countries left it too late to introduce the necessary measures. We have time to plan and I can assure Senator McDowell that the figures will be updated. Even if the dependency ratio is better than the projected rate we will have a major problem in the future. The Minister is anxious to ensure that only new entrants will be affected, if they continue to enjoy very good pensions by private sector standards.

While I understand Senator Browne's concerns, we live in a time of great demographic change. The average life span has lengthened and we must legislate to take account of that. We cannot ignore it. The attitude of a person entering a job today is fundamentally different from that of a person entering a job several decades ago. The modest increase in the actual retirement age for most public servants is between 60 and 65. Many stay until they reach 65 and there will be no saving in respect of such persons.

Senator Mansergh thinks the envisaged saving of €300 million seems rather low but that is calculated in current price terms. Public service pensions cost approximately €1,500 million, so €300 million, or 20% of that figure in current terms, is a substantial sum especially when this item of public expenditure is a recurrent annual item in the budget. The €1,500 million outlay on public service pensions makes it a saving of approximately 20% which is significant. Senator Bannon referred to "bad faith" on the official side in not proposing a retirement band between the ages of 62 and 67 which the working group discussed with the union and the staff. That option was discussed in the context of efforts to reach an agreed package but the Minister found it impossible to reach agreement and indicated in his 2004 budget speech that he is willing to make various improvements in pension terms, such as for those on a low income, and he has dropped the 1% contribution recommendation.

Senators O'Toole, Bannon, Ormonde, Fitzgerald and Kitt referred to teachers and politicians. The recommendations on teachers stem from the commission's recommendations and will arise only 30 or 40 years hence. Senator O'Toole suggested that every teacher must continue to the age of 65. This does not take account of a package of flexibilities which the commission recommended, such as actuarially determined early retirement, or neutral early retirement combined with the purchase of additional pensionable service. There is also the option of moving to less demanding work as a person approaches retirement.

Can the Minister of State explain what moving to less demanding work means?

Within the management of any particular operation——

Let us make it easy, how will it work in a two-teacher school?

We are planning for a future four decades hence and it may well be possible in the context of the revolution in the delivery of educational services in those decades to identify such positions and locate them through discussions between staff and the officials. I appreciate the Senator's concern but we must look at the pension report in which he participated and which makes it clear we are facing very stark demographic facts for which we must plan and adjust. We must revise our work practices accordingly. Several Senators raised the issue of the difficulty of dealing with work challenges as teachers age. The pension commission received and considered a wide range of submissions from groups seeking early retirement terms given the stress employees in the relevant areas experience. This applied to numerous areas in the public service. Stress is recognised as a factor in modern working and needs to be addressed. However, the Commission on Public Service Pensions was looking at pension provision and considered the most appropriate response was to introduce a range of additional flexibilities in the public service that would enable public sector employees to plan to retire earlier if they wished, for example through a combination of purchasing additional pension and actuarially reduced early retirements or by reverting to a lower level in the years before retirement without suffering a pensions penalty.

On a point of order, the Minister is giving incorrect information. The SPEARS will come into effect. We still cannot draw the pension until the age of 65. SPEARS was an add-on.

The Senator should allow the Minister of State to reply.

While I know the Minister is not doing so deliberately, what he said is misleading.

There is the option of purchasing into a full pension in advance of 65.

What does it mean for someone wanting to retire at 60?

We cannot have questions and answers at this stage.

While I know it is not done deliberately, it is misleading.

This debate is supposed to conclude at 8 o'clock.

The proposal applies to teachers recruited from April 2005 and the issues the Senator has raised will not arise in general for another 35 to 40 years. The Minister for Education and Science will have ample opportunity to address the operational difficulties involved in that time span.

Senator O'Toole asked about career breaks. A person on a career break with a right to return will not come within the scope of the Bill. Such people will not be new entrants and this is quite clear. I am advised of this and I am happy to put it on the record of the House. Only new entrants are affected by this measure.

The Senator also spoke of the burn-out of teachers. A limited pilot scheme of early retirement for teachers was agreed as part of the PCW restructuring agreement between the Department and the teachers' unions early in 1997. The scheme provided for early retirements for teachers experiencing different kinds of professional difficulty as well as teachers whose posts became surplus to requirements. Under the agreement the pilot scheme was to be reviewed in the light of the pensions commission report. The commission recommended continuation of the scheme for a further five years after which it should be subject to another review.

The Minister has not departed from the commission's recommendations. He envisages that the pilot scheme will be reviewed in a couple of years' time. Accordingly, he has not addressed this issue in the Bill. No decision has been reached on this matter. There are numerous issues and it is a matter for operational decision between the Minister for Education and Science and the relevant staff interests in future years. I appreciate the often passionate concern expressed by Senator O'Toole and others about the future of the profession, just as many Senators have expressed concern at our own future in public life and whether the implications for pensions will have an effect on those who chose to participate in public life.

The Commission on Public Service Pensions made recommendations. I confess to being somewhat surprised at them. The Minister decided to add to them. I believe he has decided in principle that accepting the pension report is important for safeguarding the economy into the future. The Government has decided that the new arrangements should apply to us and we should provide respectable ballast to the proposal.

I thank Senators for their contributions to the debate and I look forward to addressing the detailed issues on Committee Stage.

Question put and declared carried.

When is it proposed to take Committee Stage?

Next Thursday.

Committee Stage ordered for Thursday, 26 February 2004.

When is it proposed to sit again?

Tomorrow at 10.30 a.m.