I am aware of the intention to develop a new five-year pension reform plan, as flagged by the Minister of State's Cabinet colleague, the Minister for Employment Affairs and Social Protection, Deputy Regina Doherty. Her Department is considering an auto-enrolment pension system. That will be given due consideration in these Houses, particularly by the Joint Oireachtas Committee on Employment Affairs and Social Protection. My concern is, in the context of proposals to develop a new five-year pension reform plan and to consider an auto-enrolment system, that the long promised 2020 reform of the contributory pension system to ensure a total contributions approach which takes caring into consideration may not happen.
If we are considering one new pension system I want to know the following. Will the long promised new pension system and reform in terms of total contributions take place? We have always been told it would address the anomalies experienced by women in terms of the inequities in how total contributions are calculated, the averaging system and some of the inequities generated by the 2012 changes. The Government has adopted the approach of we will wait and see but address it by 2020.
We are discussing the Finance Bill but there is a new supplementary pension system on the horizon. Will the State allocate resources to address the existing inequalities and inequities? The solution is not simply a matter of moving around the social protection budget. This is a concern for the State and, indeed, DPER as the Department responsible for equality and gender proofing the budgetary system and budgets. There is a cross-cutting equality and gender issue in respect of the State's contributory pension system and the inequality experienced predominantly by women in that system. The solution is not simply a matter for the Department of social protection. It is a matter for the Cabinet and specifically for the Minister for Public Expenditure and Reform as his Department takes a lead in equality and gender proofing.
I am aware of the long-term plans but I believe the current situation will damage the take up of the scheme. Senators have talked about public sentiment and public confidence in pensions, encouraging people to save for a pension and not wanting to discourage people from doing so. People are greatly discouraged when they see that the current injustice in the pension system is not considered important enough to be addressed. The Minister for Employment Affairs and Social Protection, Deputy Doherty, will be bringing proposals from 2012. I wish to simply point out that this is not a battle for her alone to face and that the financial resources required to address the anomalies may need to come from the Exchequer rather than the social protection budget.
In terms of the other issues that have been addressed, I agree that the blunt tool at play is the way tax relief for private pensions is calculated. As the Minister has outlined, it is a blunt tool in terms of how we calculate gross pay. I agree with her that it is a blunt tool. It also does not allow us to ensure we achieve our pension objectives.
To answer Senator McDowell, I encourage everybody to get a pension despite the very poor returns provided by pension companies. I believe that a standard rate of 30%, a figure that has been proposed for a long time, would encourage many people to get a pension who are currently only offered 20% tax relief. The difference between a 20% and 30% tax relief is enough to persuade people to commence a private pension. I believe it would be enough to encourage a people to divert some of their resources from their day-to-day finances to a pension that provides for their future. I suggest that we could examine the matter if we had this report. I believe there would be a greater uptake of private pensions if there was a 30% tax relief. I do not believe that many people will automatically decide to leave their private pension systems because their tax relief has been reduced from 40% down to 30%. I query the question of the rate acting as an incentive or a disincentive.
The Minister of State has made it clear that he cannot accept the recommendation. However, we need to shine a light on the pension issue. We need to ask whether the current measures serve the goals set out in the programme for Government, which we want to fulfil. The current tool is inappropriate, inequitable and needs to be examined. We have heard different proposals from across the House and I accept that the proposal that I put forward today may not be perfect. I ask that we shine a light on pensions and examine it more robustly.
Senator Kieran O'Donnell raised the issue of contributions and specifically referred to gaps in contributions where people have spent eight years, for example, out of the workforce. The Taoiseach was the Minister for Social Protection this time last year. He was kind enough to accept my proposal that would make it easier to make voluntary contributions and extended the period in which voluntary contributions could be made.
I may discuss the issue further with the Minister of State. This change was brought in by means of ministerial order in January of this year following the debates in the Seanad this time last year. I applaud and note the then Minister's decision to take on that issue and adjust our social welfare voluntary contribution policy as a result.