I welcome the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, and his officials.
Public Service Pensions (Single Scheme) and Remuneration Bill 2011: Committee Stage (Resumed)
We concluded the last meeting with a vote on the list of allowances. Was that amendment to this section?
No. Amendment No. 38 was to section 11.
It was defeated and that was the end of the matter. Are we still on section 11?
No. That section was also disposed of; the question on it was put after the division on the amendment.
I intend to table a Report Stage amendment on the general issue we discussed previously, if it is feasible to do so.
Amendment No. 39 has been ruled out of order because it involves a potential charge on the Exchequer.
Amendment No. 40 was discussed with amendment No. 29.
I move amendment No. 41:
In page 19, subsection (3), lines 36 and 37, to delete all words from and including "to" in line 36 down to and including "retire" in line 37 and substitute the following:
"to provide for either or both an age and a maximum service limit (however expressed) at which any class or classes of public servants could or is required to retire or be retired or discharged".
I move amendment No. 42:
In page 20, subsection (2)(b), lines 23 to 25, to delete all words from and including “in” in line 23 down to and including “be,” in line 25 and substitute the following:
"in accordance with section 1(1)(a) of the Superannuation (Prison Officers) Act 1919 (inserted by section 5 of the Public Service Superannuation (Miscellaneous Provisions) Act 2004) or section 10 of the Public Service Superannuation (Miscellaneous Provisions) Act 2004, as the case may be,”.
Are we not covering Deputy Stephen Donnelly's amendment?
There is no amendment.
Section 13 was being opposed.
No one indicated that when I put the question on section 13.
Why was the amendment not called?
Opposition to the section had been signalled, but there was no amendment.
This is a technical amendment to correct a legislative cross-reference in the Bill, as published. The Bill referred to irrelevant sections of the 2004 Act and did not reference the 1990 Act. We have been advised by the Parliamentary Counsel that this should be corrected.
The United Left Alliance is opposing this section primarily because it refers to section 25. There is a technical amendment consistent with our opposition to that section which deals with the extra contributions required from fire fighters, prison officers, members of the Garda and persons in similar categories who must retire earlier because of the nature of their job. They are being required to make extra pension contributions under section 25. This section refers to the same issue and on that basis we oppose it.
That has nothing to do with the section. We will deal with the relevant section when we get to it. Section 14 refers to normal pension age. Certain workers in the public service have fast accrual pensions. They include fire fighters, members of the Garda, Army personnel and Members of the Oireachtas. Proportionately, fast accrual is reflected in the increased contribution required from those to whom it applies. By comparison with the private sector, it is still a good deal.
We will deal with the matter when we come to section 25.
Amendments Nos. 43 and 49 are related and will be discussed together.
I move amendment No. 43:
In page 21, subsection (2), lines 5 to 7, to delete all words from and including "Other" in line 5 down to and including "members" in line 7 and substitute the following:
"In respect of Scheme members to whom section 19 relates, the rate of contribution”.
These amendments make minor changes to harmonise the text with the inclusion of the line in the table of contribution rates for ordinary non-fast accrual.
Single scheme members who are dealt with in section 19. Amendment No. 49 simply lists the accrual rates for ordinary single scheme members - the people who do not have fast accrual - primarily for completeness and information purposes. Amendment No. 43 is an independent consequential amendment on this inclusion.
Amendments Nos. 44, 47, 86 and 87 are related and may be discussed together by agreement.
I move amendment No. 44:
In page 21, subsection (2)(b), lines 13 and 14, to delete “as adjusted when not
working on a full-time basis" and substitute "as adjusted".
These amendments are for technical for drafting purposes. The phrase, "when not working on a full-time basis" is proposed for removal to avoid repetition within the clause and changes that harmonise the wording in other sections so there is no meaningful change, simply a textual change.
Amendments Nos. 45 and 48 are cognate and may be discussed together by agreement.
I move amendment No. 45:
In page 21, subsection (2)(b), line 15, before “hours worked” to insert
This is a technical drafting amendment to bring about consistency of expressions with other sections of the Bill. The purpose of the changes is to write better English.
I move amendment No. 46:
In page 21, subsection (3), line 19, to delete "which".
This is a minor drafting change in page 21, to delete the word, "which".
I move amendment No. 47:
In page 21, subsection (3)(b), lines 29 and 30, to delete “as adjusted when not
working on a full-time basis" and substitute "as adjusted".
I move amendment No. 48:
In page 21, subsection (3)(b), line 31, before “hours worked” to insert “number of”.
I move amendment No. 49:
In page 21, between lines 41 and 42, to insert the following:
Persons to whom section 19 refers
I move amendment No. 50:
In page 21, between lines 44 and 45, to insert the following:
Persons to whom section 23 refers who hold office on a basis which is fully insured for social welfare purposes
Persons to whom section 23 refers who hold office on a basis which is not fully insured for social welfare purposes
Amendment No. 51 in the name of Deputy Donnelly has been ruled out of order as a potential charge on the Exchequer.
I ask the Chairman to explain that ruling.
The consequence of taking this amendment would be a potential charge on the Exchequer because it seeks to remove the provision whereby public servants who are entitled to retire earlier have to make higher contributions, thereby preserving the same level of eligibility with lower contributions. It would lead to a higher cost which would be a charge on the Exchequer and only a Minister can make a proposal to amend legislation or to introduce legislation that constitutes a charge on the Exchequer. That is a constitutional provision which none of us has any means of changing, at least, not here anyway. I rule the amendment out of order for those reasons.
I move amendment No. 52:
In page 22, subsection (4)(a), line 11, to delete “member’s contribution” and substitute “member’s contributions”.
This is a drafting amendment.
Amendments No. 53 is consequential on amendment No. 54 and they may be discussed together by agreement.
I move amendment No. 53:
In page 22, subsection (5), line 14, to delete "All contributions" and substitute "Subject to subsection (9), all contributions”.
These amendments are connected. The Central Bank is part of the euro system and is an independent body under the Treaty on the Functioning of the European Union which states in Article 130 that national central banks must not be interfered with by national governments. In particular, the Central Bank's guaranteed independence means that it must pay its staff itself. I have had discussions with the European Central Bank on this matter but in order to give comfort to the European Central Bank, who issued an opinion on this legislation which we sought, the amendments make clear that the Government will not, for example, use Central Bank pension contributions for other financial purposes. This amendment, therefore, serves to uphold the independence of the Central Bank of Ireland. It ensures in particular that the Central Bank cannot be liable for financial pension contributions for single pension members other than those in respect of its own staff.
The definition of the Central Bank and its scope has changed over the years. Speaking from recollection, we have dealt with legislation governing the Central Bank and the Financial Regulator in the past. They were separate bodies but they are now under the remit of the Central Bank. In addition to the Central Bank staff, are the staff of the Financial Regulator, Matthew Elderfield's section, included in this provision? The Central Bank is in the process of taking over consumer protection in financial matters which were formerly dealt with as consumer protection by a different Department. Some of these matters will now be dealt with by Mr. Elderfield. Will this legislation allow staff who are employed in the consumer protection agency and who now be working on consumer rights in financial services be absorbed? What is the definition of which staff are included now and in the future? The remit of the Central Bank can change over the period and this legislation will not have any financial impact until almost 40 years hence when new recruits are retiring in the future, by which time there may not be an Irish Central Bank. It is hoped there will be a real European Central Bank at that stage. What number of staff work in the Central Bank because the staff numbers have increased significantly, even though there are fewer banks to regulate?
I will not trespass into the area which is the remit of my colleague, the Minister for Finance, Deputy Noonan. I will confine myself to what is encompassed by the Bill. This is pensions legislation and we are part of a monetary union whose central bank is the European Central Bank, a division of which is the national Central Bank of Ireland. We have expanded the number of people in the Central Bank on foot of a number of oversight recommendations from groups such as Nyberg, who have made particular proposals about strengthening the oversight role. We have also reversed some of the decisions to break up the Central Bank made during the light touch regime of a former Government. Deputy Fleming is correct that the Financial Regulator is now part of the Central Bank structure. In fact, Matthew Elderfield is a Deputy Governor of the Central Bank. All of the Central Bank staff, including Matthew Elderfield and his people, are covered by this provision as is anyone who is by definition an employee of the Central Bank. To be clear, I am advised that this legislation will only impact on new entrants.
The Financial Regulator is charged with the regulation of several financial products, including insurance and a wide variety of issues. I understand matters such as hire purchase agreements are not regulated. The regulator only regulates institutions which take deposits. Many financial institutions in the financial area do not take deposits.
Those are questions the Deputy needs to ask of the Minister for Finance.
I do not wish to delay the Minister but it is a fair point. The role of the Central Bank, as it touches on the role of the regulator and also on consumer affairs and the regulation of the insurance industry and God knows what as the years go by, may be expanded-----
That is a matter the Deputy can properly explore with the Minister for Finance, the scope and function of the Central Bank. My job is to ensure that those who are employed by the Central Bank are covered under the provisions of this Bill. There was an issue to do with ensuring the statutory independence of the Central Bank system and this is the purpose of this section of the Bill.
There is no harm in flagging a matter of interest.
Who regulates debt collection?
I have no idea.
The Central Bank does not.
Every bank is a debt collector of some sort and the Central Bank regulates the banks. Does the Deputy mean unofficial enforcers? I will leave it to the Minister for Finance, Deputy Noonan to answer that question.
I was just wondering if it was a role of the Central Bank because debt collection is, sadly, becoming big business.
Deposit-taking institutions are regulated but institutions which do not take deposits are not regulated. Hire purchase, for example, is not regulated because it does not involve the taking of deposits.
I am anxious not to stray from the subject matter of the Bill.
To clarify, are debt collectors subject to these pension obligations?
The definition section sets out the categories of persons covered by the provisions of the Bill. Does Deputy Richard Boyd Barrett have any other issues to raise in regard to amendments Nos. 53 and 54?
I move amendment No. 54:
In page 22, between lines 42 and 43, to insert the following subsection:
"(9) Where this Part has been applied to the Central Bank of Ireland in accordance with section 6, then—
(a) contributions made under this section in respect of Scheme members who are employed by, or hold any office or other position in the Central Bank of Ireland shall be dealt with in such manner so as to ensure that those contributions are only available for the purposes of the payment of any pension or lump sum to or in respect of the service with the Central Bank
of Ireland by such Scheme members, and
(b) the Central Bank of Ireland shall not be liable for any pension or lump sum in respect of any employment by, or holding of any office or other position in, a public service body other than the Central Bank of Ireland.”.
I move amendment No. 55:
In page 22, between lines 42 and 43, to insert the following subsection:
"(9) Scheme members shall be entitled to purchase years of notional service and the Minister shall publish purchase tables and the rate of contribution for notional service before the enactment of this Bill.".
This amendment seeks to allow members of the new single pensions scheme to purchase years of notional service and asks that the Minister publish details of the rates of contribution for notional service before the Bill is enacted. Many teachers, for example, come to teaching later in life and will not qualify for the 40 year pension. I will not mention the names of the various insurance companies involved, but many such teachers choose to enter into a private scheme of additional voluntary contributions, AVCs. These contributions are deducted, with the consent of the Department, directly from the teacher's pay and transferred to the companies concerned. Many of those who opt to make these additional contributions to bring their pension up to the full amount on retirement are finding that the schemes offer very poor value and that the level of commission charged is high. It would make far more sense if public servants in that position could supplement their pension contributions by purchasing additional notional service directly from their employer - that is, the State - rather than having to go through a third party. If that could be done, the tables should be published in order that people would know how much they would have to contribute and what their entitlement would amount to at the end of each year.
The Deputy made a similarly compelling case when we discussed this issue on the previous occasion. As I told him at the time, I agree that this type of purchase arrangement is a useful facility which should be facilitated. It is, in fact, facilitated under section 18(b) of the Bill which states referable amounts, as provided for in the Bill, shall include “any other money as represents the transfer value of certain amounts that may be accepted on terms approved by the Minister”. This will allow for the purchase of additional pension entitlement by way of a purchase arrangement that will be made available to staff. It is my view that such arrangements should be overseen on an administrative rather than legislative basis. The Bill contains an overarching enabling mechanism, but the detail will be worked out administratively. I anticipate that the options will be to purchase additional pension amounts by lump sum, either in one moiety or over time.
It should be noted that the single scheme is based on the accrual of money amounts towards pension and lump sum. That is the whole basis of the new pensions scheme. It effectively represents a discontinuation of service - in other words, years - as a measure of superannuation titles. This means that rather than purchasing future years of service, employees will be buying a monetary amount and adding that amount to the value of their pension. It would be incompatible with the design of this new scheme to insert a service-based element in respect of the purchase of benefits. I cannot, therefore, accept the methodology set out in the Deputy's amendment, although I agree there should be a provision for augmenting one's pension through direct action.
The Deputy referred to AVCs which are a private vehicle for topping up one's pension. That option will always be open to people, with various companies designing private schemes for various public service groups - teachers, gardaí and others - to supplement their public scheme provision. It is appropriate that there be a mechanism for people to supplement their pension by depositing additional monetary value into the scheme or by way of independent private schemes which might prove more attractive over time. Decisions in this regard are a matter for each individual.
On the last occasion the Deputy asked whether teachers could purchase additional service. The current position is that they can, in accordance with Department of Education and Skills Circular 0129/2006 which sets out the rules applying to such purchases. I take the opportunity to correct the record on the issue of the provision made for serving or former Oireachtas Members in the public service superannuation scheme. The Deputy has correctly said the age threshold was retained at 50 years for these persons when the new scheme was introduced, contrary to what I had incorrectly indicated on the basis of the speaking note provided for me. I hope this clears up any confusion on that point.
I do not propose to press my amendment, given that there seems to be some agreement on the principle that people may purchase additional service by way of a lump sum which, moreover, may be administered on a monthly basis rather than all in one go. However, I remain somewhat confused by some of the specifics the Minister mentioned. Will he clarify if I understand it correctly, that the facility will allow someone to purchase an additional monetary amount but not additional years of service?
Yes, the actual pension is not determined by years of service.
Will the Minister explain that philosophy? He is saying that under the current regime teachers can purchase additional years. People tend to understand their pension entitlement in years of contribution, with 40 years being the full provision. The Minister is seeking to change this, which, by the way, is not necessarily a bad thing. Will he clarify, however, how the number of years in employment will no longer be the determining factor?
We are undertaking a fundamental restructuring of the scheme. Up until now, all public servants worked towards a notional 40 years of service. There were fast accruals and other variations, but the basic premise was that one aimed for 40 years of service, after which one received a pension equivalent to 50% of one's final salary which was adjusted into the future with reference to the remuneration of current incumbents of the position one held at retirement. In very broad, vulgar strokes, this is the regime that has applied up until now. Employees who would fall short of the 40 year term could opt to purchase additional years in certain circumstances, as set out in the specific schemes.
The basis for the new scheme is quite different, being based not on the number of years of service but the amount of money contributed. In other words, one has a monetary value assigned to one's pension fund for every year one works, with the career average worked out on retirement. This will constitute a person's pension provision which will be benchmarked against the consumer price index. Again, this is a broad-brush representation of the replacement model. Employees can purchase additional provisions in the amount of two 80ths for every year worked. Purchasing an additional extra five years under the old scheme would amount to purchasing ten 80ths under the new, monetarised scheme.
I thank the Minister for his explanation. I understand there is a mechanism in place, whereby persons transferring within the public service - say, for instance, a member of a fishery board or the board of a VEC transferring to another body or into the general Civil Service - can bring across their existing pension egg by way of a lump sum payment into their new pension scheme. According to what the Minister has outlined, this transfer will be reckoned in terms of value of pension rather than length of service. Will people coming in from the private sector also be able to bring with them a lump sum or will any such arrangements require the involvement of designated bodies, as is currently the case?
There are two aspects to this. First, what we are introducing will be a single integrated public service scheme. Unlike in the past, when someone moved from one organisation to another, it will now be a single, seamless scheme. As a result, people's pensions and contributions will remain unaltered as long as they remain in the public service.
Are the commercial semi-State organisations excluded in this regard?
I am about to deal with them, the private sector and what happens if someone is outside the public sector scheme. It will be a separate scheme and a person will bring with him or her whatever he or she has contributed previously and this will be parked. He or she will then contribute to the new scheme. If someone wishes to augment his or her contributions under the new scheme, he or she can monetise his or her previous value and buy into the new scheme or he or she can use other cash at his or her disposal to do so.
If a person brings a lump sum with him or her and if this is surrendered to the relevant authorities and placed in the fund, I presume the 1% that applies in respect of the fund will accrue.
A person will be buying into the scheme. The regulations relating to the scheme will be published when they have been drafted. This is why I stated we are going to do that administratively rather than in the primary legislation. What is important is that people will know exactly what they are going to get for their money.
For clarification, it would not necessarily follow that money which is bound up in a private pension - in other words, that which is associated with a person's private sector employment - could be liberated.
The rules of the relevant pension fund would apply in that instance. The Pensions Act would cover that to some extent but there are huge restrictions in terms of what can be moved.
Absolutely. As the Chairman is aware, that is one of the matters we are considering in the context of the pressures on mortgage holders. We are attempting to discover whether people might obtain access to some of the moneys involved. The Chairman is absolutely correct. In the vast majority of cases involving people who move from the private into the public sector, the preserved benefit would be parked and this would be paid out when they reach normal retirement age. I am merely referring to what would be the position if there was a mechanism whereby people could liberate their money. In such circumstances, the capacity to supplement the public scheme will be there.
The Minister is dealing with it at the receiving end rather than at the other end.
For clarity, the relevant fraction will be one 80th. My mathematical ability let me down. Under the old scheme, a person could get 50% of his or her final salary if he or she had 40 years' service. After that, he or she would receive 40, 80ths. In other words, a person accrues one 80th per year of service. I apologise for misleading the committee in that regard.
One of the points made in the digest relating to the Bill is that professionals transferring into the public sector are losing the ability to buy service which was available under the old scheme. I am not disagreeing with the change in this regard, I am merely stating that it is going to make it less attractive for professionals to join the public service. In the past, people may have taken pay cuts in order to transfer to the public service but they may have enjoyed much better pension arrangements. Would it be possible for the Minister to supply the committee with a table on which could be listed a few examples? If it will make matters easier, I could submit a parliamentary question in this regard. The digest relating to the Bill merely shows what the position would be for someone on €80,000 per year under the old scheme and the new one in the context of his or her pension. It would be useful if the Minister's officials could provide a few worked out examples of what would be the position in respect of people joining the public service at age 40 or whatever. Would it be possible for such examples to be provided in order that we might come to grips with this matter in the context of seeing the real numbers involved?
I will try to supply what the Deputy is requesting before Report Stage.
I thank the Minister.
Just for clarification, it is one 40th per year of service in the context of the final salary.
The contribution is one 80th. If, therefore, a person works for 40 years, he or she will receive 40, 80ths of his or her final salary. In other words, it is one half.
So a person who works for 25 years in the service would receive 25, 80ths.
Yes, that is the position in respect of the norm as opposed to that which relates to fast accruals.
So it is one 80th for every year of service up to a maximum of 40, 80ths.
Which is one half.
Is that what a person contributes?
No, that is the accrual rate. The contribution is fixed. A person gets one 80th of salary per year of service up to a maximum of 40, 80ths. This is the norm to which I am referring. When a person retires following 40 years' service in the public service, he or she normally gets-----
That is the position now. It is not the position with the new scheme.
No. As I have explained, the new scheme operates on a completely different basis.
I wish to clarify the position in the context of the scheme for teachers. On the shift from calculating on the basis of final salary to a career average method, will this have an implication in terms of how the scheme will be structured?
No, this is the old scheme. Anybody who is in the old scheme will remain in it.
Yes, they will continue with this. Career averaging is that it does exactly what is says on the tin, namely, it supplies an average across one's entire career. If, therefore, a person has climbed the career ladder to whatever point and if he or she buys further years of service, I presume that this will be more expensive than if he or she had bought in at a lower point. If their are no regulations in place, this would obviously skew matters. The entire purpose of the scheme is that the final pension payment will be a reflection of the average one is paid across one's career.
As I explained to Deputy Sean Fleming, people will no longer be buying years.
I know but it will be monetised at a particular level.
There will be a limit to what people can buy and this will be laid out in the regulations. If a person has five years' service, it will not be possible for him or her to buy a Rolls Royce pension by investing a wad of money.
Essentially, that is what I was asking.
There will be limitations imposed. The final design has not been completed in this regard but it will more or less mirror what is currently in place in the context of the ability to supplement. People who are a number of years short of a full pension and who wish, during the course of their careers, to ensure that their retirement is catered for in a little better fashion will be allowed to supplement their funds by making cash contributions. The details in this regard will be set out in the regulations. The enabling provision is contained in section 18 of the Bill. I will happily discuss the regulations with members once they have been drafted.
If a person transfers in from the private sector and if he or she invests €100,000 in his or her new public sector pension, will the State match this or make an additional contribution?
My next question relates to the table contained in section 16(3)(b), which relates to the contributions paid by public servants.
We have already dealt with that section.
No, we are actually on section 16 now.
I beg the Deputy's pardon.
Why are the contributions of individuals in the bottom three sectors listed in the table lower than those of the people in the other sectors? Is it the position that the people in the groups to which I refer will receive lower pensions? Will they not get half of their final salaries because they will be contributing less?
The Deputy can see from the table those who comprise each cohort. The reason that the contribution rates of those to whom he refers are lower is because they are integrated into the social welfare pension scheme. These individuals make PRSI contributions and the two pensions are aggregated into one. The bottom two groups comprise those who are required to retire early, namely, people who serve in uniform within the State - gardaí, Defence Forces personnel, prison officers and firefighters - and who are not normally allowed to remain in the public service as long as others.
The question is why do they pay so much less and contribute so much less of a percentage of their wage while they are there? Uniformed groups pay 3.3% versus 13% paid by those elsewhere.
No. They also pay a stamp. In calculating what they get, the social welfare proportion of it is integrated into the pension and their entitlement is less. They pay for that component that they get in terms of social welfare separately through a full stamp. If the Deputy reads through section 25-----
No. I understand who they are. I am just trying to understand the numbers. If we take the people on 4.3% or 3.3%, they pay about 9% less but PRSI is not 9%.
The Deputy can see how they are aggregated. If the Deputy looks at column 2, he will see they pay 5.7% plus 4.3%. That is the section 24 people-----
I beg your pardon.
-----and the section 25 people pay 4.2% plus 3.3%.
The difference is PRSI.
The difference is PRSI.
The logic being that if any of us pay PRSI, we have access to the State pension.
The contributory pension.
I thank the Minister for that.
I do not know if this has been done but would it be possible to get a table of the nominal employer contributions? I know these are not done as-----
We will do that.
From an actuarial basis, it could be calculated.
Yes, but, in fairness, we have a huge amount to do in the Department.
Let me explain why I think it is important.
We can all see why it is important but the question is whether the Minister is in a position to produce it.
I am not in a position to start working on that. It would be informative and all the rest but we have an enormous volume work to do in our hard-pressed Department to start to undertake that sort of work. I would have to contract it out and I am not going to spend money doing that.
If the Minister is not going to do it, he is not going to do so, but this is critical legislation dealing with public sector pay for the future. How much is the State contributing to public sector pensions? It is a fairly fundamental question.
The Deputy is right about this. We know the cost of pensions and the projected cost of these pensions but the Deputy is asking for a notional employer's contribution per individual.
At an aggregated level.
I would refer the Deputy to section 40. He will note that when the new scheme is up and running the Minister may from time to time carry out an actuarial review or a review and revaluation of the scheme or any part of it. The Deputy will note from section 40(2) that the actuarial-----
What page is that?
Page 43. I am probably completely out of order in referring to different sections. The drill down of figures the Deputy is talking about is envisaged and encompassed there. The Deputy will note from section 40(4)(c) that the cost of membership of persons or any class of persons and the contributions paid by those persons and the contribution made by the State in respect of those persons can be some of those matters that are reviewed at that stage.
If a review was taking place, that might be the occasion when that information could be extracted. Is that the point the Minister was making?
We will be looking at that.
We will have a final word on this.
It also something that is periodically done in any event by the Comptroller and Auditor General. I do not know whether the Deputy is a member of the Committee of Public Accounts but it is a matter he might examine. I understand that the last set piece evaluation of pensions and costs was done by the Comptroller and Auditor General in the 2009 special study on pensions. It might be worth having a look at that.
I thank the Minister for that.
On a final note, I guess part of the role of this committee in scrutinising this legislation is to determine whether these pensions are good value for money for public sector workers.
That would be more the work of the Committee of Public Accounts, the idea here is to examine the robustness of the legislation.
We are setting up a scheme.
Okay. In considering the scheme-----
It is fair.
-----it would be useful to know how comparable it is to, say, private sector contributions of 5%, 10% or 15%. If it turns out that the nominal employer contribution is 2% or 3%, it would seem this is not a good deal for public sector workers. If, on the other hand, it is at 25%, it would seem this is not a good deal for the State. It is a pretty important ratio for us to understand.
The Deputy is right to that extent but what we are doing is setting the framework and no doubt there will be evaluations and tweakings on this. I accept that within section 40 there is the possibility of a fundamental review. It will be reviewed no doubt by the Committee of Public Accounts on foot of reports that are brought to it from the Comptroller and Auditor General on costs, variations and so on. Like any legislation, certainly any pensions legislation, I have no doubt that sections of this will be revisited.
This legislation is not just a framework for pensions, the mathematics, numbers and percentages are in this.
This is the scheme.
This is the scheme. On the basis that the mathematics is in this legislation which is before the committee, it seems relevant to this committee.
I have no doubt that it is relevant, I think it is highly relevant but we are dealing with Committee Stage, Second Stage have been taken in the Dáil. I agree with the Deputy that members have to inform themselves as best they can in order that they can be in a position to agree or not agree with what is proposed, but this would need to have been done in advance in some way. I am not going to press the Minister on the spot for that information when the section comes up for debate.
I understand that.
Certainly if it had been signalled-----
I accept that is the disadvantage of giving prior notice of this.
-----in advance, I would probably feel I could help the Deputy more on it.
I understand that.
What the Deputy is asking for is relevant and I wish I could put my hand up myself, but even I got a team of actuaries in here to do it, how would they know pay rates, inflation rates, numbers employed and numbers not employed into the future for the next 40 years?
They do it all the time. That is exactly what they do.
It would be a snapshot. We are putting a framework in place and once it is robustly put in place to the best of our ability it will be actuarially analysed with great frequency into the future.
Given that the mathematics, benefits and contributions are set into the legislation, we can figure out afterwards what it will cost the State but my concern is that at that point it is too late.
I have set out what it will cost and what the savings will be.
No. I mean in nominal terms to understand whether it is good or bad value for the State relative to what other employers put in. We can find out, but it will be after we have already agreed the scheme.
The Deputy wants to go beyond the role of Committee Stage debate on the setting of the scheme. On behalf of the Government, I am proposing a new scheme. The Deputy has to check the legislation, the robustness of it and make any commentary he wishes on it. If he has an alternative amendment, he can puts it forward and we will evaluate it, but we will not have an abstract discussion about the right of the Government to propose an alternative scheme.
No. I am not. That is not remotely what I am saying. All I am saying is that it would be very useful to know what the nominal employer contributions are because this is the scheme we are debating. It is relevant information.
The point is that the Bill was published in September 2011. I am not criticising the Deputy because he is asking some relevant questions-----
It is hard on an Independent Deputy.
-----but in terms of the management of business, it would have to have been signalled in advance-----
A fund is available for such research.
It is a fraction of what other members have.
-----and even if the Minister is a bit pessimistic about whether the information could have been achieved, it certainly could not have been achieved without questions being posed.
I appreciate that. I will stop now.
Is section 16, as amended, agreed to?
Do we not get to comment on the section?
I thought that is what we have been doing for the last while.
I indicated that I wanted to speak on it.
The Minister might be able to clarify that when we consider this section, as he has outlined it, with people making a monetarised contribution of one 80th-----
The Deputy is confusing the two schemes. Under the old scheme-----
Yes. The old scheme.
-----a fixed percentage of income was determined annually as one's pension contribution and the benefit that accrued to one was one eightieth of one's pay up to a maximum of 40, 80ths in the course of 40 years of service. The new scheme is not time related, it is a whole-of-career based monetary value annualised on a notional basis to determine one's end of service pension rate which is then linked to the consumer price index, CPI.
That is my point. Could the Minister clarify that the contribution level remains effectively the same but that it is no longer linked to what one gets at the end, which creates the possibility at least that it will be based on career average?
No. One has a much clearer notion of what one will get under the new scheme.
No, because, for example, one does not know how fast one will move up the scale.
The point is that one does not have to move up at all because one will get a career average. If one were to enter the Civil Service now as an administrative officer, one would have no idea of what one's pension would be in 40 years' time because one would not know where one would end up and instead of it being related to one's career average, it is related to the position in which one ends up. If one ends up as Secretary General, one will have a much more handsome pension under the current regime than one would if one ends up as a higher executive officer because one's pension is related to one's final salary. Whereas, under the current scheme it is much flatter. In other words, one's career average is determined from one's position, the number of years one has contributed and the monetary value of one's contribution as an administrative officer, higher executive officer or principal officer. They are all averaged out and the top element of it is only determined by the number of years one received the pay of a Secretary General. One will receive a flatter and fairer pension in the future. It is a preferable system than for someone's pension rate being determined by the fact that he or she spent six or seven years as Secretary General, and for the pension rate to be based on that.
I wish to tease out the issue so that we are absolutely clear.
We did all of this on Second Stage.
We made general comments.
We are dealing with section 16.
I seek clarification on contributions by the Minister. If, for example, one enters the public service with higher qualifications and goes in at a more senior level, that means one could enter at a high pay rate and then it would plateau quickly at a fairly high level but someone coming in at clerical officer level might have to work for many years to get to a similar level. When the latter's career earnings are averaged out the pension rate will be dragged down by the fact that he or she started at a low level and was at a low level for a long time. It strikes me that the opposite to what the Minister said is true; that the majority of public and civil servants who enter at fairly low levels will have their pension entitlement dragged down, whereas people who enter nearer the top of the scale will not suffer as badly from the switch to end-of-career figure to the career average. That strikes me as a fairly obvious consequence. Could the Minister explain why that is not the case?
The Minister might correct me if I am wrong, but an important aspect of how the system works is that the amount one put in and the amount one gets out have a relationship to one another.
The Minister said that in the current scheme one put in one 80th.
No, that is the accrual value of it. It has nothing to do with the amount one contributed.
What does the Minister say to the charge made by some of those representing public sector workers that it is theoretically possible under the new scheme for one to put in more than one gets out?
That is not right. I met the teaching unions who made that case. Will I deal with that issue first?
They were counting the pay-related pension deduction, which is the financial emergency measures in the public interest, FEMPI, exceptional pension levy. I counselled the trade unions that it is a dangerous thing for them to argue that it is part of their fundamental pension contribution. It is an exceptional measure. I am required to bring a report to the House, which I will do shortly, on an annual basis to justify its maintenance under financial emergency measures in the public interest. I do not see that emergency levy as a permanent feature of their contribution. It is dangerous for them to argue that it should be calculated as a permanent feature because there are those who would say that is fine. It is only on that basis, and even on that basis in exceptional circumstances, where one could work out a contribution rate that might not be of benefit in terms of one not living long enough to get back the full volume of one's contributions.
Is it not an understandable mistake given that it is called the pension levy?
I am sure people's fears in that regard would be allayed if the Minister were to inform us of when the pension levy would be removed.
I do not know when we will be finished with this emergency. I wish I could abolish the measure now. One cannot have it both ways. It is wrong for one to say it is a pension contribution, as lawfully it is not. I would counsel against people talking it up as such because it will be absorbed into pension contributions, which many would like to see.
There are many arguing that public service pensions are far too generous. I hear those arguments every day of the week.
In the Cabinet?
Certainly not in Cabinet. The first issue Deputy Boyd Barrett raised has gone out of my head. What was the first point he made?
The Deputy said that people at the lower end of the scale-----
No, I understood the point. Deputy Boyd Barrett is incorrect in that respect. By definition, the new scheme is flatter. It is not related to one's end-of-career payment. Therefore, the pension of people who do not progress, who go in and spend the bulk of their career at a relatively stable level - those who are not high flyers - is determined by their career average but the person who goes in and ends up at the top of the tree, who can now get a Rolls Royce pension because - to borrow a phrase from Deputy McDonald - it is determined by their end-of-career salary, will now have that moderated by a full 40 year perspective on what their contributions were. I can provide the Deputy with some examples because they are easier to understand. By definition, this is a much flatter and fairer scheme.
I do not want to labour the point but if somebody enters the public service at a senior level, for example, a county manager-----
Nobody goes in as a county manager and spends 40 years as one.
Yes, but they do not start as a clerical officer either. The point is that they start on a fairly high salary and they finish on an even higher one.
They only have a short period.
Yes, but the pension is based on a career average.
It is applied to seven years.
It is a seven-year career.
They enter at a high level, which most of those who are senior in the public service do. They do not start at the bottom.
Virtually everyone who is a senior civil servant enters at administrative officer level. They work their way up and some get to Secretary General level. Administrative officer level is the graduate entry point at which the vast bulk of senior civil servants enter. There are exceptions. I am trying to encourage people to come into the public service at a later stage in their career. If I opened up the Secretary General's position to external offerings, which I would like to do, and someone were to get such a position, they would only be in the job for seven years. Their pension would be determined by the monetary value of seven years' contributions. It will not be calculated over 40 years.
My last point is a separate one. The amendment has been ruled out of order but I wish to discuss it in terms of the section.
I am sorry, but if it has been ruled out of order it cannot be discussed.
I wish to speak on the section as a whole.
If it has been ruled out of order then it is out of order.
I wish to comment on the section.
Deputy Boyd Barrett should please allow me to make the point. I am trying to conduct the meeting. I am giving him every opportunity. He may speak on the section but he may not make a contribution on the basis of promoting or otherwise dealing with an amendment that has been ruled out of order.
I oppose this section because it includes the increase in the contribution rate for the people on these fast accrual schemes, namely, firefighters, prison officers, gardaí and members of the Army.
I am not worried about the TDs. They should have their pay cut anyway. I am talking about people who do serious, front line-----
This is a very important point. Occasionally, I do get voluntary pay reductions from across the public service, and I will arrange for a voluntary contribution form to be sent to the Deputy if he is minded to make a contribution.
No. I pay the excess of my salary over the average industrial wage to People Before Profit, the United Left Alliance, the Socialist Workers Party and various campaigns.
No. The State pays. The Deputy does not.
It is my salary-----
In that case he cannot talk about disposal of it.
-----and it is our party policy not to give that to the individual to benefit the individual but to pay it into campaigns and organisations that campaign on behalf of working people against the Minister's austerity measures.
And no doubt the Deputy makes a full disclosure of those contributions to the Standards in Public Office, SIPO. I must check.
I call Deputy Mitchell.
I have not finished making my point. The Chairman allowed the Minister to go off on a tangent.
Finish the point on section 16.
The SIPO has nothing to do with the salaries.
All donations to political parties should be declared.
Yes, of course, and they are within the limits. However, the issue I raise is that because of the nature of the job done by these categories of public sector workers who have the right to retire early - firefighters, prison officers, gardaí and so on - they are already paying a higher contribution rate for the pensions they receive and, therefore, this is further penalising them with a higher contribution rate. Is it not correct that they will be paying more to get less because they will also be subject to the career average provisions of the new scheme? That is what they think anyway.
To deal with the Deputy's first point that all his contributions are within SIPO guidelines, I am very interested to know that. A TD is paid approximately €93,000 a year and the average industrial wage is approximately €35,000, therefore, it is a personal contribution of about €58,000.
That is half the-----
The limit of personal donations is considerably-----
It is about €6,000.
It is £5,000, or whatever that is in euro.
Yes, it is about €6,000.
Is that all the Deputy contributes to his party?
It is €6,000 to People Before Profit, €6,000 to the Socialist Workers Party, money to the United Left Alliance, money to the campaign against household and water charges, and money to local community organisations. That is all perfectly legitimate.
If those are all declared it is perfectly legal. I am sorry. I-----
If the Minister wants to have a closer examination he can look at my website which has accounts of where the salary goes.
Excellent. It is very transparent of the Deputy.
Very transparent. I wish the rest of the Members would do the same.
I am anxious to move on to Deputy Mitchell who indicated some time ago, and Deputy McDonald. Is there anything else to be said in regard to Deputy Boyd Barrett's contribution?
No. I am sorry to-----
To be honest, Chairman-----
The Minister did not reply to the point.
We are now designing a scheme that will relate the contribution more closely to the benefit. It is self-evident that if one reaches a pension through fast accrual, as a member of the Defence Forces, a member of the Garda Síochána or a Member of this House, one's contribution should be more significant because one is paying over a shorter period to get a benefit quicker.
They were doing that already.
I wanted to clarify something about which Deputy Boyd Barrett spoke. The benefit of having a career average is that it stops the practice of promoting people in the last three months of their employment, which in my experience was widespread in the local authorities, which is the area I would know best. Far from having seven years in a job, as the Minister suggested, some of them did not even have seven months yet they retired on a retirement pension based on their salary in the last three months in some cases. There would be rapid promotion in the last few years of their employment whereas there was no such benefit for those on the lower scales. It was a dreadful practice. It meant also that promotion was for the wrong reason and the wrong people were coming to the top.
The merit of career averaging is that it stops the Rolls Royce pensions at the very high level. That is a strong argument in favour of that method. However, it is fair to say that everybody across the board will lose something because the scale will be flatter. I assume the Minister has run the figures and that, relatively speaking, he figured out what is the loss for the person who spends their entire career at a clerical officer grade as against those who might move further up the system. Has the Minister run those figures and does he have-----
By definition, the Deputy is right. People who are on flat career averages, for example, a nurse who does not want to be a matron or a staff nurse, someone who spends their life as a nurse, will be relatively unaffected by this new scheme. Similarly, the career average for someone who goes in as a garda and who does not become a sergeant or an inspector but retires as a garda would be very flat and would be relatively unaffected by that. Similarly, a clerical officer is relatively unaffected. The people who will be affected most will be the high flier who goes from administrative officer to Secretary General or from garda, and apparently one must be a garda to enter the Garda Síochána, which is a little odd in itself, to Commissioner. Instead of that person's Commissioner salary determining his or her pension forever, it will be based on his or her career average, namely, the period of time one is a garda, a sergeant and right through.
We have done some profiling of it. It is immeasurably more advantageous for those on a flat career as the ones I have mentioned. They are relatively unaffected by this whereas there is a very significant reduction for those who have a high trajectory.
I appreciate and acknowledge that. That stands to reason but what does the Minister mean when he says that those on the flat career trajectory are relatively unaffected?
It goes back to the point I made in my answer to Deputy Donnelly. It is very hard to be prescriptive. One can only do a notional estimate, as actuaries would do, of what the profile would be over time, adding in a notional inflation aspect on that but if the Deputy is interested we can run some numbers for her.
Yes. It would be of interest to me and obviously of interest to people who would choose to enter the service in the future and who are-----
We will select a few career paths and send that information to the secretariat but they would only be indicative
That is very useful.
That would be very useful.
It would be the mirror of what the Deputy is talking about. It is probably easier to achieve.
I move amendment No. 56:
In page 23, subsection (2), line 7, to delete "the Scheme contributions" and substitute "his or her contributions".
It is simply a drafting amendment to delete "the Scheme contributions" and substitute "his or her contributions".
At the outset I mentioned that there were some typographical errors on the amendments list members were given. This is an example of where it arises. Amendment No. 57 should state "to insert 23* before the existing 23 in the Bill and not after. Does that make sense? It is on page 9 of the list where it states "Section 18". Where it states: "In page 23, line 35" the word "after" should be changed to "before". The same applies in amendment No. 58. Instead of reading "after 23, to insert 23,*" it should read that it be inserted before 23,*. The word "after" is being changed to "before" in both of those cases. Is that understood?
I move amendment No. 57:
In page 23, line 35, after "23," to insert "23,".
I move amendment No. 58:
In page 23, subsection (1), line 47, after "23," to insert "23,".
Amendments Nos. 59, 65, 69, 73 and 78 are related and may be discussed together by agreement.
I move amendment No. 59:
In page 24, subsection (1), line 1, after "subject to section 51" to insert the following:
"and upon application being made to the relevant authority"
Amendments Nos. 59, 60, 73 and 78 are all technical amendments. The scheme provides for a pension to be payable upon application, as is the case at present for public service pensions. I am advised that formal provision should be made to require individuals to apply for their pensions.
That is perhaps understandable.
I note the line "and upon application being made to the relevant authority".
That is the current practice.
Is there provision for refusing the application?
Only if the applicant is not entitled to it.
The legislation requires individuals to formally apply for their pensions. Is it a requirement that the pension be granted?
No. The current situation is that an individual must apply for a pension if he or she believes she or she is entitled to one. This saves us from monitoring and chasing down those who might be entitled to a pension.
The onus has been put on the individual to chase his or her own pension.
He or she must apply for it. The corollary is that applying for a pension does not convey a pension. One must be entitled to the pension to receive it.
The onus is being removed from the employer to provide a pension to staff who reach retirement age and the applicant will be required to apply to the relevant authority.
It is exactly the same as the requirement that currently obtains.
Be that as it may, we are discussing a new scheme. What if an individual forgets to apply for medical or whatever reasons and subsequently realises that he or she was not paid a pension for the preceding 12 months? It is similar to social welfare benefits in that some people do not know they are entitled to payments. I could envisage a situation whereby an individual assumed he or she would get the pension and because he or she was in receipt of a gratuity or additional holiday pay, only realises at the end of the year that he or she never received a pension. Is the money lost if individuals do not apply for it?
No. I cannot imagine many public servants who have worked 40 years forgetting to apply for their pensions when they retire. This provision avoids a situation in which the State must be mindful of everybody who might be entitled to a pension.
Should the State not know?
The State does its calculations on the basis of those who apply. There are complicating factors, however. We discovered when I introduced the increased levy on top pensions that pensions were not aggregated. For example, the Department of Education and Skills might not be aware that one of its staff is also entitled to a pension from the Department of Defence. The requirement on individuals to apply for their pensions has always been in place but if somebody is late for health or other reasons, his or her full entitlement would accrue when he or she finally applies. In the event of death, spouses, children and civil partners can also apply.
I could envisage a situation in the case of a death that one spouse thinks the other had applied. Will the pension be backdated in such circumstances?
That is what the Minister said.
I presume in the normal course of good management practice, individuals do not simply walk away from their desks one day. Their retirement would be preceded by a period in which they are informed of these matters. Deputy Fleming raised an interesting issue but it is probably more relevant in the event that the primary pension claimant is either incapacitated or deceased. I am sure that would be catered for in the normal course of events.
Absolutely. The vast majority of people profile their entitlements well in advance of retirement.
Amendment No. 60 has been tabled by the Minister. If members agree to amendment No. 60, amendments Nos. 61 to 63, inclusive, cannot be moved because they are alternative amendments to amendment No. 60.
We can discuss them together, however.
We can do so but I have to indicate to members that it will be not be possible to move amendments Nos. 61 to 63, inclusive, if they agree to amendment No. 60.
As I noted, amendments Nos. 61 to 63 are alternatives to amendment No. 60. Amendments Nos. 66, 70, 72, 74 and 79 are related to amendment No. 61. Amendment No. 80 is related to amendment No. 60. Amendment No. 81 is an alternative amendment to amendment No. 80. Amendments Nos. 81a, 81b, 82a and 82b are consequential on amendment No. 80. Amendments Nos. 60 to 63, inclusive, 66, 70, 72, 74, 79, 80 81, 81a, 81b, 82a and 82b will, therefore, be discussed together by agreement.
I move amendment No. 60:
In page 24, subsection (1), lines 3 to 14, to delete paragraphs (a) and (b) and substitute the following:
"(a) an annual pension equivalent to the sum of the referable amounts in respect of each calendar year or part of a calendar year for the pension,
(b) a lump sum payment equivalent to the sum of the referable amounts in respect of each calendar year or part of a calendar year for the lump sum.”.
The intention of this amendment is to remove the benefits cap set out in the Bill as published, which would impose a special ceiling on pensions and lump sums of half pay on net final pay and of 1.5 times final pay on ordinary non-fast accrual on members of the single scheme. I engaged in detailed discussions on this matter with public service unions and they made a strong case for removing the cap in light of exceptional circumstances where individuals who made contributions might find their final pensions unnecessarily abated. I do not think the cost to the State is such that I need to persevere with the cap and I am minded to accept the arguments made by the trade unions.
Due in particular to its career average design, benefit accrual in the new single scheme will not usually approach the half pay limit. This means that a true half pay ceiling is unlikely to be breached by ordinary scheme members and, therefore, the cap can be set aside without imposing an overly large burden on the State. A cap could on occasion impose an unwarranted stalling of accrual or even a reduction of already accrued referrable amounts in cases where public servants made job switches to lower paid positions late in their careers. This sometimes happens where an individual wants to step down to a lower position with less responsibility but does not want to retire. That should not be discouraged and I listened to the case made by the trade unions that it is desirable in terms of fairness and labour market flexibility to provide for that option. Where feasible, I want to allow people to step down in late career if they so wish. I believe this is a sensible decision if we are going to push the age of retirement upwards. By contrast with current public service schemes, pension accrual in the new single scheme will not stop after 40 years. As long as one works in the public service one is accruing benefits and adding to one's pension. On that basis, the retention of a half pay based pension limit, as featured in the scheme, is not appropriate.
The Bill as published provided that a career average pension will not exceed 50% of final salary. The proposal was made in the context of this figure being the existing limit and because the Bill also introduces for all existing public servants a clear public service wide cap of 40 years of service that can be pensionable. However a final salary link of the type proposed could be unfair to those who in late career step down in terms of grade or job responsibilities. Accordingly, I am proposing to remove cap in this amendment without creating the risk of accruing significant additional costs to the State. The cap will be retained for certain categories, including office-holders, politicians and judicial fast accrual classes because, given the longer expected service implicit in the higher pension ages provided for the Bill and the higher accrual rates for these groups, a long serving office-holder could conceivably otherwise breach the half pay limit.
The argument made earlier that I am providing more generously for office-holders then for the average public servant is reversed in this proposal but I think it is a fair amendment. The removal of the ceiling on pay is explained by a number of key factors, including in particular the absence of the historical 40 year limit on accrual and the reality that ordinary non-fast accrual members of the single scheme are unlikely to breach pension and lump sum accrual ceilings based on the traditional 1.5 times lump sum and half pension. The amendment simply removes the proposal in the Bill to limit the pension that could accrue based on half pay. There will be exceptional circumstances in which people will have worked long enough to breach that cap and I will allow that to happen except in cases of fast accrual.
I support the Minister's proposal, which is similar to my amendment No. 62. My amendment proposes to remove from consideration the final post occupied by the individual concerned. If amendment No. 60 is passed I have no problem with my amendment not being moved because it would have the same effect.
Two questions arise in respect of the Minister's proposed amendment. Will there be a reduction in the contributions paid by those who stepped down a grade? The new paragraphs in the amendment appear to say the same thing.
Paragraph (a) refers to pension and (b) refers to the lump sum.
I ask the Minister to explain the reference to "calendar year". The outcome of the previous debate was that we should no longer be thinking about years because it is now a question of the amount of money contributed rather than 40 years of service. Why has the calendar year re-emerged?
That is the time period within which we calculate the referrable amount.
I ask the Minister to explain that. The reference to the calendar year is confusing me.
For every year an individual works he or she will make a notional contribution to the pension pool. We have to book-end the reference period.
I see the merit in accommodating the scenario described by the Minister, particularly given that people will be working longer. However, in setting a clear cap on pensions my amendment would not discount this scenario. The amendment would set a maximum of €60,000 for pensions. This is a generous ceiling even if it falls far short of the Rolls Royce arrangements that currently exist. The Minister removed the cap for reasons that are fair but it will no longer be limited to the specific circumstances to which he referred. It will take account of those circumstances but it is not limited to them. I am concerned not only that my proposal to set a cap of €60,000 will be unacceptable to him but that the arrangement has been loosened in a way that could be taken advantage of by workers who do not step down a grade.
The Deputy raised a number of important questions. In regard to the proposal to introduce a cap of €60,000, it is not appropriate to pick a figure to be included in primary legislation governing pensions which will only begin to be paid in 40 years' time. I do not know what €60,000 will look like 40 years from now. The principle of the Deputy's proposal is to reduce pensions. The programme for Government introduced what I regard as a better formula in this regard by limiting tax supported pension contributions in either the public or private sector to €60,000. We have not yet found a mechanism for putting that into effect but we continue to consider it in the context of finance Bills. Such a formula would not be appropriate in this legislation because we are devising a new scheme which provides that net benefits in 40 years' time will depend on contributions. I do know what currency we will be using in 40 years' time.
It will not be the euro anyway.
I do not know what the value of money will be at that time. One cannot include a notional figure based on what seems like a reasonable pension today. Who knows what €60,000 will be in 40 years' time? I accept the principle of putting a ceiling on public pensions but we have to find contemporaneous ways of achieving the objective rather than lodging it into this Bill.
In regard to whether the removal of the ceiling on half pay will allow certain categories to receive generous or Rolls Royce pensions, I am excluding fast-accrual pensions from the amendment. Those who can accrue a pension more quickly, such as politicians, gardaí and members of the Defence Forces, will not be subject to the exemption.
Where is that exemption made?
They are not referenced in the amendment. The caps will remain for those categories. Amendment No. 60 removes the cap for the categories set out in section 19, namely, non-fast accrual public servants.
I have just been advised that gardaí are not subject to the cap. I may have misled the committee. The fast accrual categories for which the cap continues to apply are Members of the Oireachtas and the Judiciary.
Just the politicians and the judiciary.
There are other office holders who are linked to these categories. I can provide the exact reference.
Are Secretaries General included?
The relevant office holders include the Director of Public Prosecutions, the Ombudsman, the Master of the High Court, a county registrar, a member of the Labour Court, a member of An Bord Pleanála, a member of the Competition Authority, a director of the Environment Protection Agency, a Revenue appeals officer or a person holding any other office or position in a public service body who the Minister, having consulted such person, considers appropriate in analogous circumstances.
Is the Minister referring to section 24?
The Minister argues that we cannot arbitrarily include a figure in this legislation but he sees merit in defining a pension ceiling, whether in the Bill or elsewhere. My frustration comes from his response to my repeated efforts to raise the issue of excessive pensions for those who are currently employed in the upper echelons of the public service. He has indicated that he is legally precluded from dealing with the issue because the individuals concerned have an expectation and a legal entitlement. However, when I make a suggestion on a ceiling in the context of this new scheme he offers another argument for why it cannot be done. Not only can it not be done but the capping mechanism is being removed other than a list of exceptions that is not exhaustive and does not deal with all the senior categories. When, where and how do we deal with the question of setting a reasonable cap on pensions in the public service? Notwithstanding career averaging the new scheme could still allow for a scenario in which individuals receive overly generous pensions. I want that issue to be addressed and I am frustrated that road blocks are thrown up regardless of whether our proposals pertain to current incumbents or future entrants.
I accept what the Minister has to say in regard to those who decide to take a step back. There is merit in addressing that scenario but in doing so the exemption is opened to others. I urge the Minister to reconsider because it would have a negative outcome.
I have an open mind but I want to get the principle right. Deputy McDonald has not acknowledged the changes that have already been made. Secretaries General are not entitled to fast accrual, the added years that used to available under TLAC terms have been abolished this year and the severance arrangements to which they were formerly entitled have been discontinued. We have fundamentally altered their pension arrangements.
The Deputy is correct to note that we have taken careful advice. The Chairman, as a competent barrister, will know better than I that pensions are a preserved property right. We cannot arbitrarily change those constitutional rights. We are instead putting in place a new regime that all sides of the House acknowledge as fairer. It is a flatter regime and it will not allow for Rolls Royce pensions. I originally provided for a ceiling but I acceded to the arguments from public service unions by tabling this amendment. If the amendment throws up anomalies I will happily consider them but I think it is fair. I do not see many people breaching the half pay limit. It is somewhat anachronistic at a time when we are replacing references to pay with a contribution based model. Should individuals be debarred from making significant contributions in order to build up a more generous pension? I do not think so on balance.
I ask the Minister to repeat his question.
If a person wants to contribute more over a 45 or 50 year working lifetime in order to provide more generously for his or her retirement, should we cap the final pension? That would run against the structure of the new scheme, which is based on the monetary value of one's annual contributions over the lifetime of work rather than on final salary.
In other words one invests to make one's pension.
Should one be debarred from doing so?
It is not a question of debarring somebody.
Allow me to finish. Deputy McDonald spoke about the €60,000 cap on pensions but she would impose a lower limit of €37,500 on pensions payable to Members of the Oireachtas. I do not know why she believes Members of the Oireachtas should be singled out. There are obviously cheerleaders for doing anything that disadvantages Members but why should their pensions be capped at €37,500 if the people determine that they should be in office for 40 years?
To return to the point at hand, this is not a question of debarring people from making additional contributions to their pensions. The Minister already indicated that he will be drawing up similar guidelines to those which apply in respect of teachers.
The Deputy is referring to the past regime.
The Minister indicated that future regimes will be along these lines. I am not referring to that.
I am not referring to that. I am simply pointing out that the single scheme was intended to perform several functions, including flattening the range of payments, providing greater cost effectiveness and being more equitable and fair.
All of that is true.
My concern is that in the absence of a cap - I have suggested €60,000 because I think it is a generous amount - the system will not achieve the goals set for it, whether through the absence of the 50% rule or the ability to invest additional money into one's pension provision. I am not arguing against the Minister's rationale of accommodating those who step back a grade towards the end of their working life. My problem is that the flexibility will apply to everyone except the categories outlined in section 24. I am sure the Minister recognises the problem.
No, I do not. I invite the Deputy to think about the purpose of the new scheme. This is a single pension scheme.
I know that.
It does not allow TLAC terms for some and not for others. This is a flat scheme. There is no fast accrual or severance pay for senior civil servants. Those who are subject to fast accrual are subject to the cap.
On a point of clarification, is that all of them?
The Garda and Army, as I indicated, are not subject to the cap.
They are not?
They are not subject to the cap.
Are firefighters subject to the cap?
Nor are firefighters. If Deputy Boyd Barrett wants to include them-----
No, I do not.
I am sorry.
I just want to clarify who they are.
The Minister has told the Deputy who is excluded from the cap.
I am proposing that they be excluded, but I am open to listening if there are others the Deputy wishes to include in the cap. My interaction with the trade union movement was fair. The trade unions said this is a new scheme, which moves away from relating end of career pay to level of pension, yet one is arbitrarily picking end of career pay as a ceiling on one's pension despite the move to a different method of calculation and a different timeline in terms of 40 years not being the average length of service any more. That is a fair point. I kept the cap because I want to be fair and I did not want people who are in some categories of fast accrual getting pensions that are more generous than is reasonable. All in all, this is a very fair and balanced set of proposals.
Before I call Deputy Donnelly, may I point out to members that we are discussing amendments Nos. 60 to 63, inclusive? I remind members, in case they feel they are taken short later, that this is also the time for members to speak if they wish to comment on amendments Nos. 66, 70, 72, 74, 79 to 81, inclusive, 81a, 81b, 82a and 82b. There will be no opportunity later to speak on those amendments.
I agree with the Minister's logic in amendment No. 60 on removing the caps. Has he costed the change?
Yes. I asked my officials to go away when we had the proposition to see what would be the impact, and I am told that our best shot at it is that the financial impact is very modest, as I said earlier.
Is the figure a few million, tens of millions or hundreds of millions?
It is a notional figure in 40 years time. It will be a tiny fraction. I think it is best expressed as a fraction of the total liability. It will be a tiny fraction.
Before I call Deputy Boyd Barrett, does anybody else wish to comment on this group of amendments? As nobody is offering, I call Deputy Boyd Barrett.
As with Deputy McDonald, I see the rationale behind removing the cap in so far as it does not penalise ordinary public or civil servants from making some extra contributions, particularly given the fact that they may be working longer. They should be allowed to do that and not be penalised for doing so. That seems entirely reasonable, but I question the way in which the Minister is doing it. First, particular categories are not included and there is nothing in the legislation to prevent those categories getting large pensions. I have mentioned two - Secretaries General and county managers, who are high earners in the public service. In the case of Secretaries General, a group about whom there is a great deal of anger regarding large pension entitlements, if my understanding is correct, there is nothing in the legislation, as a result of removing the cap, that stops them walking away with enormous pensions. I would appreciate if the Minister would return to me later on that point.
I do not have a problem with the vast majority of public or civil servants having a decent pension. I do not have a problem with somebody who is on a fairly low salary throughout most of their career getting a pension of more than 50% of their average pay if they were earning an average of €30,000 to €40,000 per annum. Why should they not have more than that, based on their contributions?
That is my intention.
That is reasonable. On the other hand, it opens it for people who are on very high salaries to make large contributions towards the end and get tax breaks on them. If I am correct, and the Minister can clarify the position, people who make large pension contributions are entitled to tax breaks. It would be a way for people who are high earners essentially to avoid paying a certain amount of tax and walking away with a nice substantial pension.
The Deputy is quite right in that the intention of the amendment is to do that on foot of the request from the trade union movement to address the situation where people who have been in a prolonged career want to step back to lower paid work, but want to have the full value of the contributions made over the total time of their career. I think that is reasonable. I propose to maintain the ceiling, which is fairly arbitrary because why would one have half final salary in the context of this new scheme? However, I wanted to create a ceiling for fairness. The 50% ceiling on final salary will apply, if this Bill is enacted, to the President, all officeholders, including the Attorney General, the Taoiseach, the Tánaiste, members of the Government, the Ceann Comhairle, and Leas-Cheann Comhairle, the people covered in section 24 which are the designated officeholders, including the Ombudsman and so on, the Judiciary and all Oireachtas Members. Who else should be subject to the ceiling? Deputy Boyd Barrett mentioned Secretaries General.
And county managers.
Under this new scheme, the final pension of Secretaries General will not be related to their final salary. Most will be a Secretary General for seven years, but it is their career average salary over 40 year to 45 years that will determine their pension. There is no fast accrual for them. They should not be uniquely penalised because they are in the ordinary accrual category like everybody else.
Let me clarify this point with the Minister. Is he saying that, based on the fact that Secretaries General and similar high paid civil and public servants are not in a category that has fast accrual, they will not retire on a pension above 50% of final salary? If that is the case, I begin to wonder at the possible arbitrariness of some of the grades that have been designated - for example, a person who is a member of the Labour Court. Is that because the person is a judge?
It is analogous to a judge.
A member of An Bord Pleanála is similarly analogous. That is a reasonable point.
Is the Minister saying that he does not think that those groups of highly paid people at the highest level in the public and Civil Service, or others that we may not have thought of, are not going to walk away with more than 50% of final salary as a pension?
No, that will not happen under this scheme.
In respect of the Minister's main objection to Deputy McDonald's cap of €60,000 on pension, I take the Minister's point that we do not know what that figure may mean in 20 years or 30 years time. The advantage of setting a figure of €60,000 - in fact, I would go a bit lower, because who needs more than €50,000 when they retire - or whatever figure we choose, is that it has the advantage of being easily understood and not obscure from the public's point of view. They may have difficulty with an obscure formula because it may be difficult to understand what it means. The public is concerned about people, such as politicians and top level public or civil servants, walking away with massive pensions. What is so difficult about naming a figure that is meaningful now, such as €50,000 or €60,000 and updating it periodically at budget time? It could be based on inflation or just general appreciation of salaries and so on. Would that not be easier for people to understand and more transparent in terms of setting a cap on the amount with which people could walk away?
I come from a different generation than that of Deputy Boyd Barrett, that is, the generation of 1970s inflation. If pensions became subject to even 4% or 5% inflation one would be very fast running out of money and unable to put bread and butter on the table. I ask him to remember that. Inflation is the great killer of pensions because unless they are inflation proofed one is left literally stranded when the tide goes out and one will not put bread and butter on the table. That is what happened pensioners in the 1970s. It was a very real experience.
I agree with Deputy Mathews. I will not plonk a figure in the Bill for tokenistic reasons. We can address the issue of dealing with pensions, and we should not deal with it in the public pensions area alone. We should cap the public contribution to all pensions through tax, but that is to be done separately.
Amendments Nos. 61 to 63, inclusive, have already been discussed with amendment No. 60 but cannot be moved as they are alternatives to amendment No. 60 for the reasons I explained earlier.
I move amendment No. 64:
In page 24, between lines 46 and 47, to insert the following subsection:
"(3) Where a formula is being used for the calculation of retirement benefits, the Minister shall publish the basis for such formula, prior to the enactment of this Bill.".
This is one of the most important elements in the legislation because a great deal hinges on a figure of €44,944 implicit in this section. The calculation of retirement benefits will be based on a formula, and the formula hinges around a figure in the main section 19, which deals with contributions, but there are different levels of contributions up to 3.74 times the contributory State pension. The contributory State pension is approximately €230 per week, which is €5,000 a month, and 3.74 times that brings it up to a figure of €44,944. The essence of that figure is very important in that it is a figure on which the Minister wanted to put some equalisation or floor in the pension contributions for public servants. My understanding is that 3.74 times the contributory State pension is €44,944, above which the level of contribution changes. There is one level of contribution below that figure and above it there is a higher level of contribution. I understand the Minister's Department went to the Labour Court on this issue.
The Labour Relations Commission.
Yes, the Labour Relations Commission. I know we love to do everything by agreement but as a general principle the Minister's Department, as the employer, came up with a figure. It went to the Labour Relations Commission. We are talking about a financial measure for pensions for years to come and the outcome of this has been decided not on financial grounds but on industrial relations grounds through the Labour Relations Commission. When the Minister's Department was at the Labour Relations Commission as an employer, and the public sector unions were there representing their employees or possible future employees, who was there representing the taxpayer? It is not always the same to wear the employer's hat because an employer's job in those circumstances is to get an agreement. We may not like the agreement but we got an agreement and therefore we can go along with it.
In terms of the purpose of my amendment, if the formula for the calculation of retirement benefits is 3.74 times the value of the contributory State pension, the Minister should publish the basis for such a formula. In this amendment I am asking the Minister to supply to the public, not just to me, how that figure was reached. I am not talking about it being the outcome of a Labour Relations Commission adjudication. That is not adequate. We know that. I want to know the Minister's view, the case he made and, ultimately, the reason he is accepting this particular decision. This is a financial issue, not just a labour relations issue. I am not saying the figure is right or wrong but I do not know the discussions that took place to arrive at it. We should know that because I would call this a fulcrum figure on which a great deal hinges in terms of the calculation of contributions and benefits that will emerge out of this process. The Minister might give us some information on that following which I will pursue the matter with him.
I do not believe the Deputy's amendment is necessary but he did not argue for the amendment. He argued a different case which was to explain the basis for the calculation figures in the Bill. The Bill sets out in section 19 how the calculation is done. To be blunt, I am proposing a figure. The Deputy can agree or disagree with it. I do not have to give the rationale for the way Government arrived at that figure. It was a figure we worked out that is reasonable. It was a figure that went to the Labour Relations Commission. My Department was represented there as employer and as a representative of the taxpayer. We listened to the case. We made our own case, and this is the figure I am now proposing on behalf of the Government that I brought to Government and on which the Government settled. I can give the Deputy a briefing note on it that might lay it out for him but it is only the technical impact of it.
On the reason we picked that 0.58% of the scheme's pensionable remuneration for that year and the actual numeric value of each one, I cannot justify every single figure and say it should have been a percentage point one way or the other. This is what I am proposing, and I believe it is fair and reasonable. It is what the Government has agreed and is what I am proposing to enshrine in the Bill.
I am genuinely amazed that the Minister, Deputy Howlin, is telling this committee, which is discussing the future pension rates for public servants, and where this figure of €44,944 has been extracted as 3.74 times the contributory State pension, that he does not have to give its members the rationale for what he is doing. I am surprised by that response. The Minister sounded arrogant, although that may not have been his intention. He just said, "Here is the figure". He is telling us he does not have to explain the rationale for how it was arrived at.
No. It is not-----
What are we doing here if the Minister believes there is no-----
Perhaps I did-----
The Minister sounded arrogant.
I did not intend to be that but I was taken aback by the tone of the Deputy's original contribution in which he suggested that my Department trotted down to the Labour Relations Commission and disregarded the views of the taxpayer. I do not accept that.
I asked who represents the taxpayer.
My Department represents the taxpayer. I am the Minister with responsibility for public expenditure and my Department and the officers of my Department represent the taxpayer in these negotiations and we were involved in negotiations through the Labour Relations Commission and the Labour Court with the public service unions all the time. I can give the Deputy the basis for the calculation and will give him a technical note on it. However, if he suggests it should be a percentage point more or less, that is a matter for debate. We believe the calculation is fair and will achieve the target of reduced pension contributions of 35% over the time we have set. It will provide a fair basis for people in the public service in the future and is a different and flatter and fairer system of accrual. That is the principled argument I need to give. However, I can give the Deputy a technical note on the actual sums if that is of benefit to him and, having read it, we can report on it on Report Stage.
I would welcome the receipt of that note. However, my understanding is that the Department, representing the taxpayer, had a view on this issue and went to the Labour Relations Commission and that what we have here is as a result of the decision in the Labour Relations Commission, but perhaps I am wrong about that. If that is the case, I would be happier if the Minister said that this was the figure the Department had arrived at as fair, reasonable and correct, taking all things into account. I would accept that. However, I have difficulty with the fact that the figure here is not the figure the Minister felt was the right one, but one decided by the Labour Relations Commission, which is an industrial relations body not concerned with looking after the taxpayer's interest.
The point the Deputy appears to be making is that in advance of preparing a fundamental changed basis for the pension entitlements of public servants we should not have engaged with the unions and with the structure of industrial relations interaction that has served the State well. The principle we brought to the trade union movement, the one the Government wanted to achieve, is to have a career averaged pension scheme accepted. With regard to the argument put forward in terms of the numbers, we had to listen to a case, there had to be a fair base level and we had to ensure those on the lowest pay were protected. A robust presentation was made by both sides and a recommendation was made by the Labour Relations Commission. With regard to the principles we have achieved in this Bill, the trade union side is not happy by and large because it is not as good a pension scheme for many people as exists now. However it is fairer. The principles of career average, a later pension age and future pensions not being tied to final salary but linked to the consumer price index, CPI, are important principled changes into which we have bought. We nudged figures here and there to get agreement on them and, by and large, the recommendations of the Labour Relations Commission were the ones we have accepted.
The reason I ask this question is that page 15 of the Bills digest produced here in the Houses of the Oireachtas charts figures for the single scheme as a percentage of the current scheme, based on various salary scales in the public service, ranging from €20,000 up to €170,000. This chart shows that there is no real or very little reduction in the pension figures for those on salaries up to approximately €45,000.
The scheme is designed to protect the lower paid.
I have not said whether I consider the scheme good or bad. My concern is that I may be asked, as a Member of the Oireachtas, to explain how the figures were arrived at. All I am asking of the Minister is to publish the basis for the formula. I am not saying it is a good or bad formula, but we should have the facts so that we can explain it to the public. Some will think it good, while others will not. All I ask for is information. I am neither criticising nor praising the proposal.
I promised the Deputy a technical note and will provide it.
I mentioned salaries up to €45,000. The chart demonstrates the figures for pensions for those on salaries up to €170,000 and we referred to it during Second Stage debate. In essence, it shows there are no savings from salaries up to €45,000. That is fine, because we all agree with the principle that the pension of someone on a salary of €45,000 should not be reduced as a result of this new scheme. Most of us would agree with that. However, the figures for those on salaries up to €170,000 show the saving will only be approximately 10%, even from someone on €170,000. The difference between the old scheme and the new scheme would only be a reduction of approximately 10%. However, the Minister has said the scheme will achieve a saving of, possibly, 35%. I have not met anybody who can reconcile that with the charts produced in the digest. They show the maximum saving at the highest salary of only 10%.
We will have a look at the chart produced, but it does not take account of the fact that first of all the pension will be paid later. Also, it will be linked to CPI in the future, as opposed to being linked to the incumbent in the position. Those two factors are not represented in the chart. I do not have the chart in front of me, but from what the Deputy has said, those factors are not replicated in it.
It refers to a 1% real wage growth each year, so it has built in some projections. I understand the Minister does not have the chart in front of him.
That is a notional calculation for increases of pay during service, but is not a calculation of augmentation of pension post service, which will be linked to the CPI.
We are talking about the pension of those highest paid persons retiring having a pension that is 90% of that they would get on the current scheme.
We are talking about the average savings. Not only will the full volume of pension payments be less across the board, except for the lowest paid, but they will be payable later because people will work for longer and they will only increase by the CPI as opposed to being linked to the incumbent in position.
That is fine. The Minister has said the scheme can give a saving of up to 35%. Will he explain how he arrived at that figure, because it is hard to reconcile it with what we as Oireachtas Members are hearing.
If I recall, it was all set out in my Second Stage speech. However, I will provide the Deputy with a technical note on it.
I have the Minister's Second Stage speech here and I have been glancing through it. We have spoken to the public sector unions on this as part of our considerations on the Bill. We had ICTU in some time ago and they saw the savings mentioned, but they concurred with what the Oireachtas has produced. They came to a similar conclusion to what is in the Oireachtas digest and could not understand how those figures gelled with those of the Minister. We want to be able to marry the two. There is no point in us going out and saying this will bring a saving of 35% when other people are saying it will only be a saving of 10%. We just want information so that we know what we are talking about.
The Minister has undertaken to work on the figures and to provide a technical note on the calculation.
I will give the Deputy a technical note.
I will not press the amendment now, but I will reintroduce an amendment on Report Stage.
I ask that the technical note be provided to all members of the committee.
It will come to the clerk and be sent to everybody. Does Deputy Donnelly wish to add a comment?
That was an amendment in my name. It was not from me.
I propose we take a ten minute break.
I move amendment No. 65:
In page 24, subsection (1), line 49, after "subject to section 51” to insert the following:
"and upon application being made to the relevant authority".
I move amendment No. 67:
In page 25, subsection (4), line 12, to delete "for the Scheme" and substitute "of the Scheme".
Amendments Nos. 68 and 77 are related and may be discussed together.
I move amendment No. 68:
In page 25, subsection (1), lines 15 to 17, to delete all words from and including "Where" in line 15 down to and including "shall" in line 17 and substitute the following:
"A person having completed the vesting period and been the holder of a qualifying office who has attained normal pension age, shall".
These amendments clarify, in particular, that the two year vesting period may be achieved by qualifying officeholders or Oireachtas Members in any single scheme pensionable post, including as a public servant, in some other capacity before appointment as a qualifying officeholder or Oireachtas Member.
I move amendment No. 69:
In page 25, subsection (1), line 17, after "subject to section 51” to insert the following:
"and upon application being made to the relevant authority".
I move amendment No. 71:
In page 25, subsection (3), line 45, to delete "any".
It is a minor drafting amendment to harmonise the wording with other similar sections. There is no change to the meaning.
I move amendment No. 72:
In page 26, subsection (6), line 10, after "servant" to insert the following:
", however the combined pensions earned may not exceed an annualised pension payment rate of €60,000".
I move amendment No. 73:
In page 26, subsection (2), line 28, after "shall" to insert the following:
", upon application being made to the relevant authority,".
I move amendment No. 75:
In page 26, subsection (3)(a), line 48, to delete “for the Scheme” and substitute “of the Scheme”.
I move amendment No. 76:
In page 27, before section 23, to insert the following new section:
23.—(1) A person having completed the vesting period and having been a holder of the office of Comptroller and Auditor General shall, subject to section 51, be
eligible to receive a pension and a lump sum as provided for by this section if he or she either—
(a) has attained the normal pension age and has ceased to be a holder of that office before reaching the retirement age for such a holder prescribed by law, or
(b) has attained the retirement age for such a holder as so prescribed.
(2) A person who is a Scheme member or former Scheme member to whom subsection (1) relates shall, upon application being made to the relevant authority,
be eligible to receive upon his or her retirement—
(a) an annual pension equivalent to the sum of the referable amounts in respect of each calendar year or part of a calendar year as a holder of the office of Comptroller and Auditor General, subject to a maximum equivalent to one-half of the annualised rate at that time of the pensionable remuneration that stands provided for the person concerned at the time he or she ceased to be a holder of that office, and
(b) a lump sum payment equivalent to the sum of the referable amounts in respect of each calendar year or part of a calendar year as a holder of the office of Comptroller and Auditor General, subject to a maximum equivalent to one and a half times the annualised rate at that time of the pensionable remuneration that stands provided for the person concerned at the time he or she ceased to be a holder of that office.
(3) In this section "referable amounts in respect of each calendar year or part of a calendar year", in relation to a calendar year or part of a calendar year of service,
(a) where the office of Comptroller and Auditor General is held on a basis which is not fully insured for social welfare purposes, means—
(i) in the case of an annual pension an amount calculated at a rate of 2.5 per cent of the Scheme member's pensionable remuneration for that year or part of a year as a holder of the office of Comptroller and Auditor General, and
(ii) in the case of a lump sum payment an amount calculated at a rate of 7.5 per cent of the Scheme member's pensionable remuneration for that year or part of a year as a holder of the office of Comptroller and Auditor General, as adjusted thereafter, until payment of the pension and lump sum arises
in accordance with this Part, by reference to such adjustments as may arise as provided for in section 39,
(b) where the office of Comptroller and Auditor General is held on a basis which is fully insured for social welfare purposes, means–
(i) in the case of an annual pension, an amount calculated at a rate of—
(I) 0.58 per cent of the Scheme member's pensionable remuneration for that year or part of a year as a holder of the office of Comptroller and Auditor General that is or equal to 3.74 times the value of the contributory State Pension at that time, and
(II) 2.5 per cent of the Scheme member's pensionable remuneration for that year or part of a year as a holder of the office of Comptroller and Auditor General that is greater than 3.74 times the value of the contributory State Pension at that time,
(ii) in the case of a lump sum payment an amount calculated at a rate of 7.5 per cent of the Scheme member's pensionable remuneration for that year or part of a year as a holder of the office of Comptroller and Auditor General,
as adjusted thereafter, until payment of the pension and lump sum arises in accordance with this Part, by reference to such adjustments as may arise as provided for in section 39.”.
I move amendment No. 77:
In page 27, to delete lines 8 to 11 and substitute the following:
"23.—(1) A person having completed the vesting period and having been a member of either House of the Oireachtas shall, subject to section 51, be eligible to receive a pension and a lump sum as provided for by this section if he or she either —”.
I move amendment No. 78:
In page 27, subsection (2), line 21, after "shall" to insert the following:
", upon application being made to the relevant authority,".
Members should note that if amendment No. 80 is agreed to, amendment No. 81 cannot be moved.
I move amendment No. 80:
In page 28, lines 1 to 26, to delete subsection (1) and substitute the following:
"24.—(1) A person having completed the vesting period and having been a designated office holder shall, subject to section 51 and upon application being
made to the relevant authority, be eligible to receive a pension and a lump sum as provided for by this section if he or she either—
(a) has attained normal pension age and is no longer a designated office holder, or
(b) after attaining normal pension age ceases, other than by death, to be a designated office holder.
(2) A person who is a Scheme member or former Scheme member to whom subsection (1) relates shall be eligible to receive—
(a) an annual pension equivalent to the sum of the referable amounts in respect of each calendar year or part of a calendar year as a designated office holder, subject to a maximum of one-half of the annualised rate at that time of the pensionable remuneration that stands provided for the person concerned at the time of his or her retirement, and
(b) a lump sum payment equivalent to the sum of the referable amounts in respect of each calendar year or part of a calendar year but—
(i) in the case of a designated office holder who last held one of the designated offices set out in paragraphs (e), (f), (g) or (h) of the definition of “designated office holder” in subsection (2), subject to a maximum equivalent to three-quarters of the annualised rate at that time of the pensionable remuneration that stands provided for the designated office holder at the time of his or her retirement, and
(ii) in the case of any other designated office holder, subject to a maximum equivalent to one and a half times the annualised rate at that time of the pensionable remuneration that stands provided for that designated office holder at the time of his or her retirement.".
I move amendment No. 81a:
In page 29, subsection (2)(a)(ii)(I), line 17, to delete “subsection (1)(b)(i)” and substitute “subsection (2)(b)(i)”.
I move amendment No. 81b:
In page 29, subsection (2)(a)(ii)(II), line 20, to delete “subsection (1)(b)(ii)” and substitute “subsection (2)(b)(ii)”.
I move amendment No. 82:
In page 29, subsection (2)(b), to delete lines 33 to 50 and substitute the following:
"(i) for the purpose of the calculation of an annual pension, an amount calculated at a rate of—
(I) 0.58 per cent of the Scheme member's pensionable remuneration for that year or part of a year as a designated office holder that is less than or equal to 3.74 times the value of the contributory State Pension at that time, adjusted, when not working on a full-time basis, by reference to the proportion that the number of hours worked bears to the number of hours that would have been worked if working on a full-time basis, and
(II) 1.67 per cent of the Scheme member's pensionable remuneration for that year or part of a year as a designated office holder that is greater than 3.74 times the value of the contributory State Pension at that time, adjusted, when not working on a full-time basis, by reference to the proportion that the number of hours worked bears to the number of hours that would have been worked if working on a full-time basis,".
It is a technical amendment which makes clear, by way of the revised paragraph (b)(i)(II), that the 1.67% pension accrual rate for those particular designated officeholders would, as is intended and as applies to others, apply to that part of the affected officeholder’s salary above the 3.74 times the State pension and not to all of the salary.
I move amendment No. 82a:
In page 30, subsection (2)(b)(ii)(I), line 4, to delete “subsection (1)(b)(i)” and substitute “subsection (2)(b)(i)”.
I move amendment No. 82b:
In page 30, subsection (2)(b)(ii)(II), line 7, to delete “subsection (1)(b)(ii)” and substitute “subsection (2)(b)(ii)”.
Amendments Nos. 83 to 85, inclusive, 89 and 90 are related and may be discussed together.
I move amendment No. 83
In page 30, subsection (1)(b)(i), line 26, to delete “for immediate payment” and substitute “to immediate payment”.
It is a minor drafting amendment to delete the words "for immediate payment" and to substitute "to immediate payment". Amendments Nos. 84, 85, 89 and 90 relate to certain members of the Permanent Defence Forces who are required to retire - in other words, who are discharged - on completion of a specified period of service. They provide for retirement benefit to be calculated under the fast accrual terms and for payment to preserve pension benefits to commence at the age of 60.
Will the Minister explain in layman's speak what that is about?
It allow for people - some members of the Defence Forces - who are required after, say, 21 years' service to retire because we want-----
Aged people like me.
It has nothing to do with age but, I suppose, with alacrity. Of course, that would not apply to Deputy Mathews who, as we all know, is very dextrous. As we do that we allow them to get pension accrual more quickly, but it is preserved until they are aged 60.
So, there is no backward adverse effect on these people?
No. This is a benefit for them, as opposed to the normal accrual rate.
I move amendment No. 84:
In page 30, to delete lines 38 to 44 and substitute the following:
"(2) A person who is a Scheme member or former Scheme member to whom paragraph (a), (b)(i), (c) or (d) of subsection (1) relates and who—
(a) has completed the vesting period, and
(b) attains the age to which that paragraph relates,
shall, subject to section 51 and upon application being made to the relevant authority, be eligible to receive upon commencement of retirement or discharge—".
I move amendment No. 85:
In page 31, lines 9 to 11, to delete subsection (3) and substitute the following:
"(3)(a) A person who is a Scheme member of former Scheme member to whom paragraph (b)(ii) of subsection (1) relates and who has completed the vesting period shall, subject to paragraph (b) and upon application being made to the relevant authority, be eligible to receive—
(i) an annual pension equivalent to the sum of the referable amounts in respect of each calendar year or part of a calendar year as a Scheme member to whom subsection (1) applies, and
(ii) a lump sum payment equivalent to the sum of the referable amounts in respect of each calendar year or part of a calendar year as a Scheme member to whom subsection (1) applies.
(b) For the purposes of paragraph (a)—
(i) where the person concerned is retired or discharged from the Permanent Defence Force on completion of a specified period of service or on age grounds or in accordance with subsection (1)(b)(ii), then, without prejudice to section 27(5) or 28, the commencement of payment of retirement benefits shall not be earlier than the age at which a person is entitled to the pension and lump sum payment under section 27(1)(a),
(ii) where the person concerned retires, resigns or is dismissed or discharged from the Permanent Defence Force—
(I) as a consequence of any fault, omission or action of that person, or
(II) otherwise than in accordance with subsection (1)(b)(ii),
then, without prejudice to section 27(5) or 28, the commencement of payment of retirement benefits shall not be earlier than the age at which a person is entitled to the pension and lump sum payment under section 27(1)(b).
(4) Section 13 shall be read subject to this section.".
I move amendment No. 86:
In page 31, lines 28 to 30, to delete all words from and including "adjusted" in line 28 down to and including "basis" in line 30 and substitute the following:
"as adjusted, when not working on a full-time basis, by reference to the proportion that the number of hours worked bears to the number of hours that would have been worked if working on a full-time basis".
I move amendment No. 87:
In page 31, lines 35 to 37, to delete all words from and including "adjusted" in line 35 down to and including "basis" in line 37 and substitute the following:
"as adjusted, when not working on a full-time basis, by reference to the proportion that the number of hours worked bears to the number of hours that would have been worked if working on a full-time basis".
We oppose this section, which relates to gardaí, firefighters, members of the Permanent Defence Force and prison officers and increases the contribution they are required to make, or the basis on which it is calculated.
It relates to the calculation of benefit and not the actual contribution. Contribution comes later.
They are linked. The objection the groups affected have articulated is that they are already, under the current scheme, paying a higher contribution.
They will continue to do so. That is what is intended.
This section will require them to make an even higher contribution. Is that not correct?
This section does not deal with that issue but, with your permission, Chairman, I will address it.
By definition, if one is in a fast accrual, if one has the benefit of getting to one's pension more quickly, one makes a bigger contribution for the period of payment to the pension. That is only fair. That is the existing scheme which will be replicated in the new scheme.
The people who are affected currently make a higher contribution because they retire earlier. Their point is that under the new scheme their contributions will be even greater with no extra benefit. They are, in fact, losing out because they are also affected by the new career average provision and will have to work for longer.
Everyone is affected by the career average provision. That is the basis of the new scheme. Everyone is also affected by the later retirement provision. That is a characteristic of the new scheme. It is fair that people, whether members of the Defence Forces, gardaí or Members of the Houses of the Oireachtas, who get their pensions more quickly should pay more for them. That is all that is expected.
That provision is not covered by section 25. This section relates to the enhanced benefit gained from fast accrual. It is odd that Deputy Boyd Barrett should object to this section.
I will not say much more. I ask the Minister not to mix up gardaí, firefighters, prison officers and soldiers with politicians.
They are all in fast accrual pension schemes. That is all I meant.
Yes, they are all in fast accrual schemes. The critical difference is that there is a very good reason the people I refer to have to retire early. It is because of the nature of their jobs.
Some politicians have to retire early, because of the nature of their job. They are retired by the people.
It is not by choice.
It is of a different order.
It is like the Graham Norton lever.
Politicians should take their chances, but these ordinary workers who do difficult jobs are being required to make a bigger contribution and get less for it. It is on that basis that we oppose the section.
The Deputy is talking about senior officers in the Army or the Garda Síochána, many of whom are better paid than Members of this House.
Our concern is for the ordinary rank and file and for low and middle income earners in these categories and across the public service. We want to protect their pension entitlements and not overburden them. We have no difficulty with legislation that reduces the pension entitlements of people at the top of the Army, the Garda or anywhere else in the public or Civil Service. We are concerned about the rank and file
If there was an amendment to that effect we could debate it. Section 25, however, relates to the benefits these categories of employees are getting. I presume the Deputy does not object to that.
I have a problem with what is proposed in the section with regard to the benefits that will accrue to gardaí, members of the Defence Forces, prison officers, members of fire brigades and retained firefighters. The Chairman might advise what section will deal with contributions, because we will want to connect these.
We have dealt with that already.
What section was that?
I was ruled out of order.
I am sorry. It was section 18.
With regard to section 25, I have met representatives of the Prison Officers Association who expressed serious concern about this section. The multiplier being used for fast accrual groups under the proposed new single scheme does not bring their future pensions up to a similar percentage as the future pensions of grades not operating fast accrual. I am talking about their pension scales, future pension scales and benefits. For example, under the proposed new single scheme a higher executive officer will get a pension somewhere between 85% and 91% of the present pension.
How could one know that? It would depend on one's career path.
I am relaying what prison officers said to me. I am sure they have taken account of the factors mentioned by the Minister, so that the new pension entitlement of a higher executive officer will be somewhere between 85% and 91% of the current pension. However, the multiplier for fast accrual grades under the proposed new single scheme will bring the pension of a prison officer to only 80% of the present pension. Prison officers acknowledge, as we all do, that the purpose of the new scheme is to reduce the pensions of future entrants into the public service. They are saying, however, that the pensions of higher executive officers will be reduced to somewhere between 85% and 91% of the current pension while those in a fast accrual scheme will see their pensions reduced to 80% of the current pension. It was their understanding that future entrants would be worse off, but not worse off relative to other grades. They believe this will be the case, because the fast accrual issue is seriously affecting them.
I asked the prison officers about the position of gardaí, soldiers and firefighters because I had not heard from those groups directly to the same extent. That may be because two of the biggest prisons in the country are in my constituency. The prison officers felt the other groups may not be aware of this effect of the new scheme and were not pursuing the matter. Prison officers are satisfied that new entrants will be significantly worse off, relative to other public servants.
I am not happy with the section, in light of what I am being told by people in my constituency who have looked at the new scheme from their own perspective. I will be submitting an amendment on Report Stage on this issue. I did not get an opportunity to do so in time for Committee Stage.
There is no group out there that does not want better treatment. Deputy Fleming is asking that those who are on fast accrual have faster fast accrual. They have made the point to us. The presentation they made to Deputy Fleming they made to us in terms of picking the most advantageous comparator they can. We have looked at it and they are getting a very good deal.
The most important aspect of the deal they are getting is that they will get their pension at a much earlier age than anybody else, which was really an extraordinarily good deal. For example, members of the Garda Síochána will get their pension entitlement at 55 years.
Soldiers at 50.
The Permanent Defence Forces will get theirs at the age of 50. That is an extraordinary actuarial advantage to them. They are doing very well indeed. Prison officers will get theirs at 55.
The Minister probably has analysed their submission and probably has a response somewhere. Will he give it to us so that we can feed it back? I am still saying I will probably be back on Report Stage having analysed that response.
I guess this exact conversation comes back to the employer nominal contribution. I interpret the Minister's statement in terms of them getting a good deal as saying that were this a defined contribution pension, the employer contribution to it for the fast accrual for these staff would be significantly more than for those who do not fall under this stipulation. Is that reasonable?
I agree with the Minister's point that they are getting a better deal and, therefore, they contribute more.
In terms of the additional contribution versus the additional benefit, does the Minister have a ball-park figure for what percentage of the additional contribution from the staff is of the additional benefit?
I do not have that in front of me, but let me say this to Deputy Donnelly. First, we are talking about select groups of public servants, for example, the gardaí. We ask them, to use the Americanism, to go in harm's way and the State recognises that. We want to contribute more to their support because, by definition, they must retire earlier. They need to be physically fit. It is a strenuous job. They are out there on the street.
Actuarially, no doubt they are more advantaged. I cannot give Deputy Donnelly a figure in terms of the net benefit. We have an in-house actuary who works on all of these matters, but we are working on the basis of what is there already as well and the acknowledgement of public service duty. In terms of persons in this category, it is not simply a matter of crude numbers.
On this issue of fast accruals, I assume the Minister had some contact with the unions as well. For all of the reasons the Minister outlined, there are those specific categories of staff who must accrue more quickly because they work shorter service because of the nature of the function that they carry out. In the current regime, those fast accrual groups can get 40 years benefit for 30 years service.
I have figures for the changes to this scheme because I am familiar with the categories of workers that fall into the fast accrual system who have examined these measures carefully. As I understand it, they will be disadvantaged under the new regime. Those workers understand that under the new scheme change will affect them just as it affects every other worker but it is only fair for those workers, fire fighters, gardaí, etc., that some kind of parity be maintained and that they not be disadvantaged. Would the Minister respond because I am sure he and his Department have run the figures? Is it true to say that fast accrual categories are disadvantaged under the new scheme or am I wrong? Can the Minister assure us, and give us the basis for that assurance, that it still remains a 40 year contribution although 30 years service given?
The scheme impacts on everybody. If Deputy McDonald is asking me to compare the old scheme and the new scheme, across the board staff would be disadvantaged because we are trying to save money. In terms of the integrity of the scheme relative to other accrual rates, however, these categories of workers are very significantly advantaged.
First, they have fast accrual from their first day of service. Under the existing scheme they get double accrual after 20 years service to give them the cushion towards the end but now they will have the fast accrual rate applying to their public service pension from the first year.
Added to that, they have the really plum addition of getting their pension from a much earlier age than everybody else. It depends on the category. If one is in the Permanent Defence Forces, one does well as he or she gets the pension from 50. The gardaí and prison officers will get it from 55. Actuarially, that is a significant advantage to them. Within the integrity of the new scheme, I can assure Deputy McDonald they are not disadvantaged relative to their position vis-à-vis other workers under the old scheme.
If the net take-out is lower, it is a technicality to get fast accrual from year one as against at year 20 at a more accelerated rate.
If one does not make it in one's career and one has dependants to claim a pension entitlement, it is obviously a very significant advantage to one's spouse and children.
The nub of this is the level of consultation in which the Minister has engaged specifically with the representatives of these categories of workers. I am looking at figures that suggest a relative disadvantage for some of nearly 23%. These are the figures available to me. I presume the Minister has figures.
People make a case, as I stated to Deputy Fleming in Deputy McDonald's absence. These are fast accrual groups which would like faster accrual and their unions make that case. Deputy Donnelly, on the other side, makes the case of asking what is the actuarial cost of this to the taxpayer, and it is significant. There is a balance to be drawn between acknowledging staff, such as prison officers, members of the Defence Forces or members of An Garda Síochána, whom we put in harms way in the interests of the State and the people to give them a good deal relative to all other workers but not, as Deputy McDonald would say, a Rolls Royce deal. It is a fair deal. They get fast accrual. They are advantaged in the ways of which I spoke - fast accrual from day one, a fair career average in a much shorter time and their pension paid in full from a much earlier age.
How much consultation has the Minister had?
We met everybody repeatedly.
The Minister stated they are not disproportionately disadvantaged. What is the extent of the disadvantage that these groups of workers-----
They are not disadvantaged relative to anybody else in this new scheme.
There is clearly a change. What is the magnitude of it?
Everybody is disadvantaged.
I am asking about these.
To the same extent. Every individual will be different, depending on how long he or she works and whether he or she has other public service entitlements. It is impossible to answer that question because one is talking about a category of person.
By and large, the aim is to save in the order of 35%. We had the discussion about that. Those on the highest rate of pension in the old regime will be most adversely affected. Those on the flattest rate of accrual in the old regime will be least affected. That is what we have explained in some detail.
I understand that individuals have different contributions and different work histories but it is difficult to believe that the Minister would introduce this new scheme not having worked up various scenarios. I accept that the Minister, as he said earlier, will work up scenarios relating to clerical officers with a flat career projection and administrative officers all the way up to Secretary General. I assumed he would do the same for the fast accrual groups.
Why can the Minister not tell us-----
I promised I would provide a table with all the categories, including the fast accruals.
The Minister has given an undertaking and I am sure it will be done.
- Howlin, Brendan.
- Humphreys, Heather.
- Humphreys, Kevin.
- Mathews, Peter.
- Mitchell, Olivia.
- Spring, Arthur.
- White, Alex.
- Donnelly, Stephen S.
- Fleming, Sean.
- McDonald, Mary Lou.
I move amendment No. 88:
In page 32, subsection (2)(b), line 16, to delete “preserved pension and lump sum benefits” and substitute “pension and lump sum benefits”.
The section deals with cost neutral early retirement. Since the definition of "preserved pension" in the next section specifically excludes CNER cases, it is not appropriate to use the word "preserved" to describe the pension payment in such cases, hence the amendment. We will deal with the issue in the next section but this is a technical amendment.
I move amendment No. 89:
In page 33, subsection (1), lines 1 and 2, to delete paragraph (a) and substitute the following:
"(a) in the case of a person to whom section 25(1)(b)(ii) applies other than where section 25(3)(b)(ii) also applies, upon attaining the age of 60 years, and”.
I move amendment No. 90:
In page 33, subsection (1), to delete line 3 and substitute the following:
"(b) in any other case (including a case to which section 25(3)(b)(ii) applies)”.
I move amendment No. 91:
In page 33, subsection (3), line 20, to delete "adjustment" and substitute "adjustments".
This is a minor drafting amendment.
"That section 27, as amended, stand part of the Bill."
We are opposing this section on the basis of the increase to 66 years of age regarding the entitlement to the preserved pension and preserved lump sum, as set out in subsection (1)(b)(i).
I move amendment No. 92:
In page 35, subsection (7), lines 15 and 16, to delete "shall not exceed 7 times the value" and substitute "shall not exceed 10 times the value".
This amendment, which deals with pension enhancements, coincides with the amendment tabled by Deputy McDonald. The increase from seven to ten in regard to the referable amount multiplier is considered appropriate on the basis that the threshold of seven is less than the ten years that can currently be added in certain cases. The fact that the referable amounts are calculated in the most recent year means they are more valuable than the average of the career average scheme. It is also the case that the new scheme is not counting service and, therefore, the added years comparison is not valid and ten years will remain a cap or outside limit on the norm. Trade union representatives made the case for this amendment and Deputy McDonald and I seem both to be minded to agree to their position.
Amendment No. 93 in the name of Deputy Mary Lou McDonald is out of order.
I am getting used to this.
I move amendment No. 94:
In page 35, subsection (7), line 17, to delete "member" and substitute the following:
(a) so long as the scheme member does not retire, is retired or discharged on medical grounds within 7 years of last promotion,
(b) where a scheme member retires within 7 years of promotion, the gross amount of an enhancement to any pension and lump sum that may be made by virtue of regulations under subsection (6) shall be calculated based on—
(i) a career average, or
(ii) salary rate paid prior to promotion,
whichever is greater".
This amendment relates to pension enhancements. The wording, which was proposed to me by way of a representation from an interested party, is exceptionally generous, which is good. However, it is worth noting that the references to seven years may be anomalous given that we are moving away from the length of service model.
As I said in respect of amendment No. 92, I have accepted the position proposed by Deputy McDonald in regard to pension enhancements. Deputy Fleming is seeking to reverse that in this amendment. I am satisfied that what I have proposed is an appropriate means by which to calibrate ill-health enhancement of pensions under the new single scheme. As I said, the ten-year figure is an outside cap on enhancements, which may be made but will not be the norm. Under the scheme as provided for in the Bill, a pensioner who retired for medical reasons will simply receive his or her pension without actuarial reduction at the point of retirement on medical grounds. My Department will draw up regulations to provide similar enhanced benefits to those currently applying.
I move amendment No. 95:
In page 35, subsection (8)(iii), line 35, to delete "retirement on medical grounds," and substitute "retirement or discharge on medical grounds.".
I move amendment No. 96:
In page 35, subsection (8), to delete lines 36 and 37.
I move amendment No. 97:
In page 36, subsection (1), line 11, to delete "member's actual pensionable remuneration" and substitute "member's pensionable remuneration".
I am on the same track as Deputy Fleming on this occasion, with a coincidence in our proposals on this point. Although his amendment cannot be moved, I hope he will accept mine. The use of the term "actual" in this context could have adverse consequences on those cases where, for example, an employer had elected to work-share or was otherwise on reduced pay immediately before death. It would not be unusual for persons in poor health to have reduced remuneration in the period immediately preceding their death if, for instance, they were on half pay or pension-related pay. What is intended here is that the normal pensionable remuneration attaching to the job should determine the value of the lump sum payable on death. It is an issue Deputy Fleming has articulated very well on previous occasions. His argument was convincing enough for me to support him.
Amendments Nos. 98 and 99 are out of order.
Amendments Nos. 100, 146 and 147 are related and may be discussed together.
I move amendment No. 100:
In page 36, subsection (1), lines 37 and 38, to delete "a preserved benefit" and substitute "a preserved pension or a preserved lump sum".
These are minor amendments intended to harmonise references within the respective sections.
I move amendment No. 101:
In page 37, subsection (2), line 47, after "retired" to insert "or been retired or discharged".
I move amendment No. 102:
In page 39, lines 10 to 16, to delete subsection (6).
This amendment is related to amendment No. 148. The provisions in this section are now included in the new section covering survivors' entitlement to pension, as set out in amendment No. 148. The new section provides that one survivor's pension may be payable, save in cases where a deceased person had an entitlement to more than one public service pension. For example, someone whose public service spouse has died would receive a pension, but this would cease if he or she remarries. If the second spouse is a single scheme pensioner and also dies, the person would not be entitled to a pension in respect of the first former spouse and a pension in respect of the second former spouse. Is that clear?
Not at all.
We are talking about a twice bereaved survivor. In essence, if one's public servant spouse dies, one will receive his or pension. If one subsequently remarries, one will no longer receive the spouse's benefit. If one's second spouse dies, one will receive the second spouse's pension entitlement but not the two.
To clarify, the Minister said this amendment was related to amendment No. 148, and undoubtedly it is. However, it is not grouped with that amendment.
I accept the point about avoiding a double payment. I wonder, however, whether it would make more sense to have this the other way around, that is, where one is the spouse of a deceased public sector worker, one will receive the latter's pension. If one subsequently marries a second public servant, one would not be entitled to the latter's pension on his or death, save any differential if the second pension is larger than the first. If I understand correctly, where a first spouse dies, one is entitled to his or her pension in perpetuity unless one remarries, in which case one loses it. That seems bizarre. Why would it make any difference whether the person remarries?
These provisions are related to those attaching to the social welfare pension, where exactly the same principles apply. We discussed this with the Department of Social Protection. In essence, one does not receive a widow's pension if one is not a widow.
The only affect this will have is to stop people remarrying. It seems a bizarre provision to include in law.
The Deputy will not be pleased to hear that it will also apply to cohabiting relationships.
Does the Department have a problem with that?
It is a matter of common sense. A widow's pension-----
I called Deputy Donnelly on the Minister's amendment.
We are talking about amendment No. 148, which we will deal with later. For clarity, however, I have rehearsed this with the Department of Social Protection because I wanted to be clear on it myself. One does not get a widow's pension if one is not a widow.
It is simply that.
If one remarries, one is not entitled to a widow's pension.
Hang on, let us play this through.
It is an occupational pension.
Let us say that a widow or widower is getting a pension of €40,000 from their late spouse who was a public sector worker. Let us say that he or she falls in love with somebody who is unemployed, or on the minimum wage or is bringing in far less than that pension, if he or she ends up just living with that person is the Minister saying that he or she will lose the €40,000 per year?
If he or she is married, he or she is not a widow or widower.
That is nuts. It is crazy.
All social welfare pensions are paid on the same basis. One does not get a widow's pension if one is not a widow.
That is absolutely nuts. It says to a widow or widower of a public sector worker that basically, for the rest of their lives, there is a massive financial disincentive.
There may be incentives that come with the other proposition.
Yes, sure, there might be but there is a massive financial disincentive.
Does the Deputy think that people who are not widows should get a widow's pension?
To answer the question, let us take an example of the widow or widower of a public sector worker who has died and who is getting a pension of €40,000 a year. They may fall in love and decide to cohabit with or marry somebody whose income is significantly less than that. Do I think that they should still get the pension based on what their late husband or wife did? Absolutely, because otherwise it would create a bizarre disincentive for widows or widowers.
That is the status quo and all social welfare operates on this basis. The Deputy should think it through. He is saying that we provide a generous package for the survivor of a public servant. Their contribution, to use the Deputy’s own focused actuarial terms, would never justify a pension for life. However, the notion that somebody would get a widow’s pension and then go off and marry somebody else-----
Or live with somebody else.
Or live with somebody else, and then continue to get a survivor's pension - the whole idea is to sustain somebody who has lost a breadwinner and a supporter. That is the idea of it.
In terms of social welfare provision, it would be extraordinarily expensive to provide for a situation where once one had an entitlement like that, one could not lose it by remarrying. One could not start parsing and analysing it, by saying that if one married somebody poor one could get it, but if one married somebody a little bit better off, one would not get it.
That is just a means test which is done all the time in social welfare.
One cannot means test a survivor's pension in the same way.
It is not a social welfare benefit. I am making the analogy to it, but it is not a social welfare benefit. It is a pension entitlement.
But one can.
I will take Deputy McDonald and will then come to you.
I would like an extra minute, if I can.
I think I have made the case that, by definition, it is something that would be too costly to try to do.
How much would it cost?
I do not know.
Then how can the Minister say it is too costly?
It would link into social welfare pensions and would be a principle that I am not prepared to concede.
The Minister is saying he cannot means test it because it is linked to social welfare, but he can. The State means tests all the time, so the capability to means test-----
This is not an occupational benefit. We do not means test pensions.
My point is that the capacity to means test is available to the State. It is done all the time so if we wished to means test in this case we have the capacity to do that. For the record, if someone on a €40,000 widow's or widower's pension is marrying somebody who is earning €100,000 I understand that the State will say "We're taking the €40,000 back off you". I get that and would support it. However, I absolutely would not support what, in fairness, seems like a perverse disincentive, which says "If that person is earning significantly less, we're taking your money off you for the rest of your life." That just seems bizarre.
We are saying that one is not entitled to a widow's or widower's pension if one is not a widow or a widower. If one remarries, one does not hold onto that status.
I understand the principle but applying that principle blindly will create perverse incentives.
It is not creating anything. It is the status quo.
I call Deputy McDonald.
The distinction between the widow's or widower's pension and this is that one is a social welfare pension in recognition of somebody's family status and circumstances. This is an occupational pension. Can the Minister tell the committee what is the standard practice in the private sector? This is not a question of a pension for a widow or widower; it is a survivor's benefit that has been paid for by the deceased worker over a period of time.
The Minister will note that the report of the Commission on Public Service Pensions recognises this as being as perverse as Deputy Donnelly has said it is. The report recommended that it should be changed, not least because the traditional view of how one treats dependants had a working assumption that the remaining spouse was female with children, and that should that person remarry or cohabit it would replace the lamented departed with another provider. It is based on an outmoded view of things.
This is contained in section 33. There is a distinction between a social welfare payment and an occupational payment. I understand that in the private sector where somebody is bereaved and is entitled to an occupational benefit, it is not confiscated from that person in the event that they cohabit or remarry. I have an associated question. In circumstances where there is an issue in the family law courts, such as a divorce or separation, orders are placed on pensions and a deal is reached whereby the divorce or separation agreement may be granted. Let us imagine that one fasts forward and the primary pension-holder dies, but the person has moved into a new relationship, has the Minister tested this legislation in terms of its adequacy? Is it fit for purpose and is it in line with the body of family law?
The Deputy has raised a number of questions. In terms of how this compares to a private pension, I can say from all the representations I have received from the private sector that they regard the public sector pension scheme, which I am putting in place, as extraordinarily generous. Very few in the private sector would have pensions comparable to this.
I am advised that the European norm is that a survivor's pension ends on remarriage. Are there pensions whereby they can preserve pensions after remarriage? I am sure such pensions exist, if there was a robust enough pension fund to pay for it and if the trustees write the rules accordingly, but I would say there are very few.
On that issue, in terms of legislation-----
The Office of the Attorney General proofreads all legislation and it has to be compatible with existing law and the Constitution. The State's law officers ensure that everything we present fits into that category.
I am opposing the section on the grounds that we have been discussing it as part of the amendment. The Minister can see the disquiet involved. I know that on the one hand, wearing his ministerial hat, the Minister is always keen to point out this generous pension scheme for public servants. Public servants have contributed to this scheme, however. This is not like a means-tested social welfare pension. I know the Minister is trying to integrate apples and oranges here. One is something where people have made a contribution, while the other is a means-tested payment which is not dependent on any contribution.
One does not get a contributory widow's pension either if one remarries, and has paid for it.
Yes, but they have contributed.
The Deputy was talking about one big means test. That is the point. A person pays PRSI during all his or her working life in respect of social welfare benefit. A person whose spouse dies, following which he or she receives a survivor's pension, will lose that pension if he or she remarries.
We are speaking about the widow or widower's pension, which is specifically awarded-----
It is called the survivor's pension now.
-----on the basis of one's family status.
It is the same thing.
Is this a new requirement?
No, it is the status quo.
How many survivors' pensions have been ceased as a result of a person having remarried and so on?
I will get that information for the Deputy.
I do not wish to tie the Minister to specific numbers. I am just interested in hearing if that actually happens.
I am informed that it does happen.
The unfortunate case of two surviving spouses of two deceased public servants who later cohabit and lose both pensions comes to mind. This is an extraordinary measure. The Minister is trying to legislate for between the sheets.
I am not. I am trying to legislate for some level of reality. The purpose of this is to save money and ensure fairness for the taxpayer. It is normally Deputy Donnelly who gets agitated by these provisions. The notion that two surviving public servants would each retain their former spouses' pension would be a very generous provision. I have made my case. There is no point going over it again.
The Minister also stated that a person cannot be in receipt of more than two pensions. However, both pensions could be quite small and might not even add up to the amount of a full pension. The person might have been married for only a few years in both cases thus the amount involved would be quite minimal. What is the Minister trying to save from this? The previous section makes generous provision for the person on sick leave while this section makes life difficult for widows and widowers.
I am trying to discourage serial widows.
The Minister is reading too many crime books.
A person accruing too many pensions would arouse suspicion. I will reflect between now and Report Stage on the final point made by the Deputy.
I need a little more time to think about the point which the Deputy made.
The legislation is generous in terms of the person on sick leave but not in respect of the widow-widower of a public servant.
I will come back to the Deputy on the issue of a double accrual where both pensions would be quite small.
Provision is also made in this section for payment on compassionate grounds. However, that does not cover the particular issue I have raised. Is there a mechanism in place to police this? Is the onus on the two people cohabiting to notify the Department? What happens if they do not do so? Is there a mechanism in place to claw back money?
The person receives a form annually on which he or she makes a declaration in terms of eligibility. I can provide the Deputy with a copy of it.
I have never seen that form. I would welcome if the Minister could forward me a copy of it so I could see what he is talking about.
I will do that. The Deputy rightly points to the saver clause provision, which I am advised has been used generously enough in the past. For example, where the spouse of a public servant who dies remarries and his or her new partner is violent or a barring order is taken out against him or her and so on the saver clause can be used to reactivate the pension which had been stopped upon his or her marriage.
This is interesting. The Minister is saying that a person who is in receipt of the survivor's pension is no longer entitled to that pension if he or she remarries or cohabits but if that relationship breaks up the pension can be reactivated.
No. There is no automatic entitlement to reactivation of the pension. However, there is the potential for a case to be made. Where a sustainable case can be made the Minister can reactivate the pension on compassionate grounds.
Is it reactivated where the second relationship breaks up and the surviving spouse of the public servant who died has no other means?
That would be a stateable case too.
So the person is caught by this clause when in the relationship.
No. The person is in that case a sole trader again. However, if his or her personal income is such that it could well maintain him or her then it would not be possible to make a compelling case.
It is based on financial means.
I do not believe a person could make a compelling case on that basis.
The Minister is correct that I am generally concerned about public expenditure and additional costs on the State. However, there is a principle at stake here. Traditionally, these provisions were structured to address the situation where the man worked and the woman stayed at home.
There are more female than male public servants.
Traditionally, women had to retire when they got married. This smacks of the same type of measure. While I understand the principle to which the Minister refers there is a different principle here, namely, where one person is working in paid employment and the other is at home raising children. For example, a TD the husband or wife of whom is doing a huge amount of work supporting him or her, raising the children and so on, which work is unpaid and non-pensionable. The principle would be that both of those people have essentially contributed to the pensionable earnings and, therefore, the widow or widower is paid half the pension, which is reasonable. However, that is not a handout. There is a whole different principle that says that that person has contributed in a wide variety of non-paid ways to the wage. We all know as TDs that our partners do a huge amount of work in the background. There is a different principle here which says both partners are contributing. What this does is say we are giving the person a hand-out because we feel sorry for him or her.
As stated by Deputy Fleming, a widow or widower of a deceased public servant who lives with a second person for a year loses entitlement to the pension and may or may not get it back for the next 20 years. I am asking the Minister to reconsider that provision. I would argue that the partner has earned his or her half of the pension. However, traditionally in our society we do not recognise that. Perhaps the Minister would reflect on that.
- Creed, Michael.
- Howlin, Brendan.
- Humphreys, Heather.
- Mathews, Peter.
- Mitchell, Olivia.
- Spring, Arthur.
- White, Alex.
- Donnelly, Stephen S.
- Fleming, Sean.
- McDonald, Mary Lou.
Amendments Nos. 103 to 109, inclusive, are related and will be discussed together.