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Dáil Éireann díospóireacht -
Wednesday, 27 Mar 1996

Vol. 463 No. 4

Pensions (Amendment) Bill, 1995: Second Stage (Resumed).

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

The Minister for Social Welfare is in possession and has 16 minutes to conclude his contribution.

I moved the Second Stage of this Bill on Wednesday, 13 March. I outlined that it is mainly a technical Bill based on reports made to me by the Pensions Board and is the completion of a cycle that began in 1990 when the Pensions Bill, 1990, was introduced in this House. I draw Deputy Wallace's attention to the fact that this is another example of the Government's implementation of recommendations from a commissioned report. It is also evidence that the Government does not procrastinate. I see the Deputy is ignoring the point I am making but that is not surprising.

On 13 March I set out the functions of the Pensions Board, I highlighted the importance of the pensions industry with an estimated asset value of £16 billion and outlined recent developments in the occupational pensions area. I also outlined how a period of legislative stability is now desirable but that further changes may be required in the equal treatment area where final clarification of European court cases is awaited and where draft directives on equal treatment are under consideration. I went on to outline the specific provisions contained in the Bill and had concluded my remarks on section 14 when time ran out.

Section 15 clarifies the priorities in relation to the winding up of a scheme. Section 16 defines the employer for the purposes of submitting a funding proposal under section 49 of the Act, including circumstances where a number of employers may be involved. In addition it provides that such a funding certificate should also be signed by the trustees of the scheme as they may have a direct responsibility over some matters contained in the funding proposal. At present they are not obliged to do so.

Section 17 provides that where the Pensions Board, under section 50, directs trustees to reduce the benefits in a scheme, in a case where the trustees have failed to submit an actuarial funding certificate or a funding proposal, the trustees must take the necessary measures to carry out the direction. It also provides that such a direction made by the board shall override any other provisions of the Act.

Section 18 provides that the trustees of a scheme must disclose information on that scheme to the Pensions Board. At present the board is not listed among the parties to which the trustees must disclose information. Section 19 allows that an annual report of a scheme can be prepared for a period of up to 23 months. This, however, could only be done in certain clearly defined circumstances and then only with the approval of the Pensions Board. Section 20 clarifies some matters in relation to audited accounts and actuarial valuations. Section 21 allows trustees to meet the costs of appropriate trustee training from the resources of the scheme.

Section 22 deals with the rules against perpetuities which require that trusts cannot continue beyond the lives in being on the commencement of the trust, plus a further period of 21 years. It is considered reasonable that this should not apply to trusts that govern pension schemes. The employer and the trustees will often intend that the pension scheme should continue indefinitely, or at least while the employer remains in business. This section will allow this to happen. Section 23 clarifies the conditions under which the board may seek from the High Court the removal and replacement of trustees.

Section 24 allows the board to apply to the High Court for an order suspending a trustee or trustees. It also sets out that the order may contain including the appointment of a replacement trustee and the transferring of the assets into the names of the new trustees. It also sets out penalties for a person who might continue to act as a trustee while he or she is suspended.

Section 25 streamlines the procedures for the board to appoint trustees where there are none or the existing trustees cannot be located. Section 26 makes minor amendments in definitions dealing with equal treatment. This limits jurisdiction to employment "within the State", as otherwise it could be implied that the Pensions Act has powers outside the State, which is not the case.

Section 27 clarifies the provisions which deal with differences in pension rules prior to the date of the European Court of Justice judgment of 17 May 1990 in the Barber case. Sections 28 to 32 provide for equal treatment to apply to collective agreements, regulation orders, registered employment agreements and contracts of employment and provide for consequential amendments. Section 33 provides that an employee who liaises with the Pensions Board is protected against unfair dismissal provided, of course, that he or she acted in good faith.

Section 34 makes it mandatory for certain persons to make a written report to the Pensions Board of any material misappropriation or fraudulent conversion of the resources of a scheme where they have reasonable cause to believe that this is happening. The persons covered by the section are any auditor, actuary or trustee of the scheme, any insurance intermediary or investment business firm which has advised on the scheme or has received any payment in relation to any investment on behalf of the scheme, a person who has prepared an annual report of the scheme under section 55 of the Pensions Act and a person who carries out any of the duties of the trustees of the scheme under section 59. This section provides protection to persons who make such reports. It covers not only mandatory reports but also voluntary reports made in good faith to the Pensions Board. It also makes it an offence for a person to knowingly make a false report to the board. There is also provision that any report published in relation to this section will be privileged.

In introducting this provision, I am going further than recommended to me by the Pensions Board. While myself and the board share the common objective of protecting the pensions of individual members of schemes, the board felt that this would best be achieved by encouragement rather than by compulsion. Nobody can, of course, say with certainty what the right approach is. However, following detailed consultation with the board, in the final analysis to afford maximum protection, the compulsory route is the correct way to proceed. I hope that this section of the Bill will never need to be used, but nonetheless, it will act as another important safeguard for members and a deterrent to potential wrongdoing.

Section 35 deals with applications to the High Court by the Pensions Board to seek orders to have the employer pay arrears of contributions, and for the restoration of resources of the scheme where they had been wrongfully paid or transferred to any person and such payment or transfer is likely to jeopardise the rights and interests of the members. The court may also make an order directing trustees to dispose of an investment where it is satisfied that the retention of the asset could again jeopardise the rights and interests of the members. The section also deals with injunctions where a person could be prohibited from any misuse or misappropriation of any of the resources of the scheme. It also provides that following an application by the board, the court may grant an injunction prohibiting an investment or for the freezing of the scheme assets pending the outcome of an investigation by the board.

Section 36 clarifies the situation in the event of the chairperson of the board having to be replaced, for example, if he or she died or resigned. This section also provides for the expansion of the membership of the board to include two new ordinary members. This will increase the membership from 12 to 14 ordinary members. One of the new members will be nominated by the Irish Congress of Trade Unions — ICTU — and one by the Irish Business and Employers' Confederation — IBEC — and each must be a trustee of a pensions scheme. Trustees are the main custodians of pension schemes. This new provision will ensure trustees representation on the board, which I consider to be desirable. Until now there has been no one specifically representing the concerns of trustees. I believe this provision will add a further dimension to the board and will give it a wider representation. This is especially important since the advent of statutory member trusteeship.

Section 37 is a technical amendment that provides for the elimination of anomalies in relation to the calculation and revaluation of preserved benefits under the Second Schedule to the Pensions Act. Section 38 similarly deals with practical difficulties in relation to actuarial funding certificates under the Third Schedule to the Pensions Act. Section 39 increases summary fines from £1,000 to £1,500. Section 40 provides for fines where a person has been convicted of an offence and continues to contravene the provision concerned. Sections 41 and 42 deal with the saving of instruments and give the short title of the Bill.

There are of course a number of other issues where the possibility of future legislation may arise for consideration. A few issues that spring to mind immediately would include the possibility of a compensation fund, the need for a pensions ombudsman, the extension of preservation to pre-1991 service, the accrued rights of people who remain in the scheme as opposed to those who leave the scheme and the encouragement of the extension of pension coverage to part-time and atypical workers. These are some of the many issues that face the new Pensions Board and which they will be considering in detail over the next five years. I look forward to their deliberations, reports and recommendations during that period.

This is an important time for the occupational pensions industry. I aim to play my part in ensuring its growth and stability by keeping in place a strict but fair regulatory regime so that people who provide for their future can be confident and certain that their expectations will be realised when they retire.

This Bill seeks to update the legislative provisions in place and introduce some new ones to ensure the continued safeguarding of individuals' entitlements. I commend this Bill to the House.

I welcome this important Bill to update pensions legislation. Pensions are becoming increasingly important to society. Pension rights under an occupational pension scheme are often a person's most valuable asset. According to the most recent Pensions Board annual report, a pension can be even more valuable than the family home. This puts in perspective the position of occupational pensions in the everyday life of many people. It demonstrates clearly the importance of pensions to individuals, employees, employers, trustees and various organisations and bodies, including the State.

Continuing changes in society mean there is a need to update the legislation at this time because the notion of a pension has changed dramatically over the past decade or two. For example, the phrase "a job for life" has all but disappeared. More often than not, the norm nowadays is for people to change jobs many times during a working career, engage in casual labour or, indeed, transfer from the status of employee to that of self-employed. It is a good trait that young people start off by getting some experience and move on to different jobs. They have not the same requirement to stay in the same location, organisation or job. Therefore, pension schemes should allow for a degree of flexibility and mobility.

Few other activities have as many glossy brochures and advertising features as pension schemes and it is incumbent on the State to ensure the small print of these glossy brochures stands up to examination. There have been some well highlighted scandals where pension funds have been raided and found inadequate to meet the demands made on them or where all that is invested is not put into the fund.

I welcome wholeheartedly this update of the legislation. Before proceeding to the Bill, I want to refer to the principal Act upon which the amendments debated today are founded. The Pensions Act, 1990 is one of the most significant pieces of legislation concerning occupational pensions. Its purpose is to regulate occupational pensions schemes, ensure their proper administration and ensure the pension rights of members and their dependants are adequately safeguarded.

The 1990 Act set out to lay down minimum standards in key areas by providing a framework for the regulation and supervision of schemes. The Act sought to ensure members could change jobs without forfeiting their pension rights, schemes would be funded properly, employers delivered on promises made to employees and members would have full access to all information about the running of their schemes and the security of their pensions. The Act also sought to provide for equal treatment for men and women in relation to the scope and conditions of access to schemes, benefits, rights and contribution levels. I will return to the issue of equal treatment with regard to the scope of schemes because this is another classic case of women being shabbily treated. We will try to address this under this Bill.

The Pensions Act, 1990 is a monumental piece of legislation. Its enactment was a milestone in the history of the system to provide for adequate and secure pensions. Five years on, it is appropriate that we update that legislation. As outlined in the introduction to the explanatory memorandum, the Bill provides for the amendment of the 1990 Act with the majority of the amendments being of a technical but important nature. The amendments were brought forward following a review of the principal Act. The Bill also introduces some welcome new provisions.

Pensions are a minefield. No matter how well people felt they were prepared in making contributions to pensions, when it came down to it they found they did not understand fully or were not made fully aware of the provisions of particular schemes. They are a minefield, not alone in their technical and administrative complexity but also because of the explosive demographic time-bomb which will confront us all soon. We have all been made aware of that by various reports. The Pensions Board reported that demographic patterns indicate a considerable increase in the proportion of elderly people in the population during the first half of the next century. If there is to be this increase in the numbers of elderly people, we should provide for them. As far as occupational pensions are concerned, we should ensure people are treated fairly when they come to claim their pension.

Politicians tend to be forgetful at times of the debt society owes to elderly people and of the important role played by them in society. We sometimes forget there are almost 400,000 people aged 65 or over living in Ireland today, that is, about 11 per cent of the population. While this is significant, demographic projections from the CSO predict that the proportion of the population aged 60 and over will constitute 19 per cent by the year 2011 and 23 per cent by the year 2021. These figures are in the public arena. We should reflect on them and be aware of this demographic trend. Concurrently, the ratio of those of working age to those over 65 is projected to fall from approximately 5 to 1 at present to 3 to 1 in the year 2035. The Pensions Board noted that these demographic changes would result in an increasing burden of the costs of pensions falling in future generations of PRSI contributors and, of course, the general taxpayer.

These projections provide a challenge for us all. Many challenges must be met, not only in the provision of pension entitlements but also in additional health and welfare services. We must address the issue of the participation of elderly people in the labour market, their general social standing and the respect for elderly people within society. They have a valuable contribution to make to society from their experience. In some countries, provision is being made to use the vast array of skills and experience gained by many retired people to ensure their expertise and the benefit of their experience is made available for the betterment of society. Many of our elderly people are to be commended for their commitment to, and involvement in, many voluntary and community organisations and associations. Their expertise and knowledge of administrative systems is invaluable in many communities and they give of their time unselfishly and without remuneration. We owe them a great debt.

The changes taking place will have a massive impact on the future costs of social welfare pensions, which are estimated to increase by a phenomenal 90 per cent. While demographic movements are removed from any Government direction or control — at least they have been to date — pension legislation is not. It is the duty of any administration to ensure that all legislation is thoroughly debated. Therefore, it is important that all necessary amendments to the pensions Acts are fully debated and considered.

For reasons outside the control of everybody, we were constrained in our discussions on the previous Bill. We did not have adequate time to consider amendments because they could not be printed on time. There should be a gap of at least one week between the different Stages of a Bill, and I hope it will be the case with this Bill, because complex matters are involved. The best legislation is that which has had the benefit of the collective wisdom of all sides of this House.

Any debate on pensions must, of course, include an examination of the pension funds which represent a major investment in the Irish economy. For example, the total assets of Irish pension funds at the end of 1994 was close to £14 billion and was nearly £16 billion by the end of 1995. This massive amount of money is contributed by taxpayers and Irish workers.

The type of pension funding in Ireland is deferred remuneration, money which would otherwise have been paid as a salary and is set aside to provide for a pension. Ireland shares this approach to pension fund operations with most OECD countries. Our taxation system is also similar to most other European and OECD countries. It is aimed at encouraging the development of occupational pension arrangements. Our taxation regime is benign and generous in relation to pensions. Up to certain limits, a person can get the full benefit of contributions to pension schemes against tax and that is welcome. This fact is especially important in the Irish context to ensure that people provide adequately for their retirement. It is desirable that people who can afford to set aside part of their remuneration in their earlier years for their retirement should do so. It is hard for people who have to depend on low levels of social welfare pensions. However, it is important for people who can do so to make provision for having an occupational pension.

Some sectors in our society would like to have a social welfare pension but for a number of reasons they are not entitled to it. I raised the matter of the workers in Telecom during the debate on the Social Welfare Bill 1996. These workers should seriously consider not having such a pension. While costs are involved and they would have to make contributions to it, it would be worth their while for their long-term planning to make alternative pension arrangements.

There exists a specific problem in relation to a social welfare pension for self-employed people who have made less than ten years' contributions. Many self-employed taxpayers continue to be denied the opportunity to qualify for a State old age contributory pension because of requirements laid down in legislation. From April 1988, the self-employed were required to make PRSI contributions based on a percentage of their income; that figure is now 5 per cent. They became eligible for a limited range of social welfare benefits, such as the State old age pension, the contributory survivor's pension and the orphan's contributory allowance, based on contributions, yet the Department of Social Welfare has stipulated that to qualify for the State pension, a contributor must commence paying PRSI before reaching 56 years of age. This, of course, means that self-employed persons of 56 years of age and over in April 1988, when the PRSI system was extended to them, are excluded from State pensions despite the fact that they are required to make PRSI contributions until they are 66 years of age. If they will not qualify because of age why should they contribute money to it? They will not get a pension from it.

This is totally inequitable. It denies a pension to those nearing retirement age and stops them from getting access to, or use of, sums of money contributed to the State PRSI fund for which they will receive no value. The Government must at least seriously consider one option which would overcome the problem, providing a pro rata pension based on the number of contributions made by the taxpayer on reaching retirement age.

The 15 per cent earnings bar is unduly restrictive on employees. Employers have no upper limit other then the actuarial valuation of the pension scheme. Self-employed contributors to pension schemes are particularly badly and inequitably treated. For example, small shopkeepers, sole owners and farmers are limited to 15 per cent of their net earned income. This restriction is unfair in many cases because these people spend most of their early years building up their business, farm or organisation and they have to reinvest all available resources. Many of them do not get a chance to invest in a pension scheme until later in life. Consideration should be given to allow personal contributions relate to age. A person wanting to make extra contributions later in life, having built up a business should be allowed to do so.

There is approximately £16 billion in Irish pension funds. However, only 23 per cent of this is invested in Irish equities. The total exposure to Irish investments, including property and fixed interests, is approximately 63 per cent. The main reason exposure to Irish equities is not higher is because of the necessity to maintain a reasonable level of investment return combined with security. There are not enough Irish equities on the market that satisfy both conditions. The sum of £16,000 million is substantial by any standard. It is contributed by taxpayers and 23 per cent of it is a very small slice for investment in the productive sector. There should be a greater degree of co-operation between the pension industry, the State and industry generally. There should be greater discussion and debate as to how best more of this money could be invested in industry for the betterment of the economy, society and to create jobs. It could lead to openings for an increase in the investment of pension funds in Ireland.

An Irish pension fund manager may wish to gain access to, for example, the telecommunications field. The Minister concerned is trying to dispose of a portion of Telecom Éireann to any multinational company which will show an interest in it. It appears only one international company is showing an interest and for little enough money for the major asset which has been built up by our workers. Pension funds managers might well examine the telecommunications industry to see how they might invest in it.

With some ingenuity an Irish fund could be made available for investment, it could involve employing Irish workers. Imaginative restructuring could create a forum for such investment. The National Treasury Management Agency could issue special gilt-edged investments aimed at targeting the long-term requirement of the pensions industry.

A few years ago, as Minister for Agriculture, Food and Forestry, I encouraged the forestry industry to avail of Irish pension funds. I recall launching one fund which was a vehicle for investment by workers through pension funds. Forestry is an ideal vehicle because we have good tree production capability. We now have technology and expertise in processing timber. It is a natural resource industry in which there are a tremendous number of jobs.

Counties such as Leitrim and others in the west of Ireland do not have much industry and have been plagued by emigration for many years. During my time as Minister with responsibility for forestry, I succeeded in attracting a major company to invest in the processing of our natural resource in Carrick-on-Shannon. The project was almost derailed but, thankfully, will come to fruition and provide valuable jobs. I am not aware of further funds in the forestry area or any other area of industry which have been promoted and developed by the State. I ask that the opportunity be re-examined.

One of the most controversial aspects of the Pensions (Amendment) Bill, 1995 is what we might term the whistle blowing provision, which is section 34. This section provides that professional advisers are obliged to report cases of pension fund fraud. I accept that pension funds should be protected against fraudulent conversion but it appears that the wording of the provision is too wide.

The provision, correctly, makes it mandatory for certain persons to make a written report to the pensions board of any material misappropriation or fraudulent conversion of the resources of the scheme of which they become aware. Those who will have to blow the whistle will include auditors, actuaries, trustees, insurance intermediaries, investment managers, those who prepare annual reports and those to whom the trustees have delegated any trustee duty. Failure to make a report is an offence. A person found guilty shall be found liable on summary conviction to a fine not exceeding £1,500 or to imprisonment not exceeding one year.

I am concerned about the wording, specifically the words "or is being contemplated". The Bill states there is a duty to report the contemplation of a misappropriation. This poses problems since, from time to time, we have had linguistic difficulty regarding terminology in various areas. At one time in the penny catechism it was a sin to contemplate certain activities. Contemplation is a nebulous word and I am a little concerned about it. I believe strongly that there must be the closest and most vigilant tracking of fraud and misappropriation but whistle blowing or informer sections, if too loosely worded though, will ultimately do more harm than good.

A major anomaly in occupational pension schemes is that they have not kept pace with changes in work practices, particularly in the length of years of service. As I said at the outset, the notion of a job for life has all but disappeared. For example, current pension legislation, which is largely tax driven, is based on the old norm of 40 years service which is no longer applicable. At the end of 40 years one is entitled to a maximum pension of 1.5 times one's salary tax free, in a lump sum and the rest of the pension is paid in annuity payments.

In modern society 40 years service is a typical and retirement age, rather than being 65 years of age as it was 20 years ago, is now more likely to be 55 years of age. Years of service are more likely to be 20 to 25 years rather than 40 years. The revenue limit of 1.5 times a person's salary should take account of that change. Our situation as Members of the House is that 20 years service allows for a maximum pension. I am nearing that threshold. If 20 years service applies to me and everybody else in this House, it should also apply to contributors to occupational pension schemes and allow them avail of 1.5 times their salary tax free in a lump sum. This anomaly also has the effect of discouraging State bodies and employers from establishing early retirement schemes. A person will say he has a few more years to work to completely fund his pension. Employees will be loath to leave employment and allow younger people take over from them because they have insufficient years of service to qualify for the maximum lump sum payment. I will address that matter on Committee Stage.

We must take account of changes generally in society. I mentioned that women are treated badly under existing legislation. I regret I see nothing in this Bill which would improve their situation. At present a person — much of the time it is the man or head of the household — contributes to a pension scheme and the householder — the partner or wife — does not, because she is not earning. If the marriage breaks up and there is a settlement, the woman should be entitled to a 50:50 division of the pension fund. That is not allowed but it should be because she is surely entitled to half the assets. She is told she can have it when she retires but what will she do until she retires, which could be 15 or 20 years down the road? Various other arrangements may be entered into in the meantime. That matter should be addressed in this Bill and I will return to it on Committee Stage.

The passing of the Bill will increase the strength of the pension board to act on behalf of members of pension plans and that is a good thing. The general theme running through the Bill is a strengthening of the pension board's powers of investigation and intervention. The board will have authority to authorise a person, other than an employee of the board, to carry out investigations. It also envisages that reports by authorised persons will be published. This means legal action cannot be taken against the person who publishes the report. The board will also have greater powers of removal and replacement of trustees. In general, all those matters are to be welcomed.

Another section which gives me cause for concern is section 21 which enables trustees to meet the cost of appropriate trustee training from the resources of the scheme. The cost of trustee training is a clause relevant to trustees and it should again be looked at.

I welcome the Bill and its provisions which will give additional protection and safeguards to those contributing a certain amount of their remuneration which will be later available to them by way of pension. It is only right to commend the Bill's positive features which address developments since the Pensions Act was introduced in 1990. While I welcome the general thrust of the Bill, I will table amendments to it on Committee Stage.

The Bill is welcome and on behalf of my party I offer the Minister broad support for it. It is a fact that as people grow older their needs narrow and their demands become more modest. Essentially all they ask of life is that there is a place for them with proper health care, security and a reasonable pension to enable them to live out their days in some kind of decency and dignity. We are all concerned that proper pension provision will be in place for us so that when the time comes we can avail of it.

The importance of pensions cannot be over-emphasised. An occupational pension is the most valuable asset many people have, although it is not always recognised as such. The value of pension entitlements can be worth far more than the family home. In some instances they can be more important than the family farm or business. It is vital, therefore, that the State does everything it can to ensure that the highest standards of honesty and probity apply to the pension industry, and that it is properly policed. That is part of the intention of this Bill.

In recent years we have seen a number of examples of the terrible difficulties that can arise when pension fund moneys are improperly managed. The Maxwell case is the most notorious example, but less notorious cases here have given rise to grave concern. On the basis of those experiences this Bill is significant and welcome. It will strengthen significantly the Pension Board's power of investigation and intervention. When the Bill becomes law, the board will have power to bring in outside expertise to conduct investigations which will greatly augment the resources available to it without any increase in the State's bureaucracy. In a valuable addition to its existing powers, the board will also have the authority to reverse wrongful asset transfers or payments.

For these reasons I welcome the provisions of the Bill, but I raise a question about section 34 — the "whistle blowing" section"— even though it is essential. Section 34 imposes a duty on those involved in the pension fund industry to disclose and report any fraud or misappropriation of funds of which they become aware, and that is as it should be. I have no objection to that requirement being enshrined in law, but the Bill will also require reporting where a fraud or misappropriation is being contemplated.

Defining or proving contemplation in such a case would present enormous difficulties. We may well have to call in the assistance of the Jesuits if we are to put into law the kind of procedures that would enable that aspiration of the Bill to be implemented. Having said that, I would welcome a mechanism to implement such an aspiration — if it can be found — in the Bill although I cannot see how it could be done. However, we can tease out that issue in more detail on Committee Stage. In the meantime, if any ideals can be brought in to enable that part of the Bill to be implemented there should be all party support. In matters of this nature we cannot leave too much to chance. It is a lesson we have learned, not only with pension funds but in many other areas.

The Irish Association of Pension Funds has indicated that this provision might present great difficulties for its members. It may be, however, that we can come up with something implementable having discussed the matter further. If we do, we will have the makings of very fine legislation.

The Bill enables the pensions board to give guidelines on the often complicated workings of the Pensions Act. This measure has been welcomed by the pension fund industry. I know from experience the difficulties some people have in understanding the basic principles of how a pension fund works and what they are entitled to as a result of the contributions they make during their working lives.

The importance of the pensions issue is highlighted by the country's changing population structure. To put it simply, this country is ageing and the elderly, as a percentage of the total population, will increase significantly over the next 20 years. There have been dramatic improvements in health services and living standards generally since the foundation of the State. This means that people are now living longer.

It is estimated, for instance, that the average life expectancy has increased by 15 years for Irish males since 1926, and by 20 years for females over the same period. It is interesting to note that nature has given gains to females they have not achieved in other areas of life. That presents us with another set of issues that must be confronted in relation to pension rights for women. We will have to come back to that issue on Committee Stage.

We are assured that this demographic trend is set to continue, and the result will be a substantial increase in the number of elderly people of pensionable age. The 1991 census showed there were 403,000 people over the age of 65. On the basis of projections published by the Central Statistics Office last year, this figure is set to surge upwards in the years ahead. The CSO estimates that within ten years the section of the population aged 65 and over will have increased by 43,000 above the record in the last census. That would put the total number of people over 65 at 446,000 or 12.6 per cent of the population, as opposed to 11.5 per cent at present.

Looking forward another 20 years the picture is even more dramatic. By the year 2026, the number of people over 65 will have risen to almost 700,000 and, if present trends continue, will account for 19 per cent of the country's total population. These changes in the population structure will have an enormous impact on economic life. It is imperative that politicians and policy makers make provision now for this eventually. At present, the annual cost of old age pensions to this State is about £1 billion per year. This figure will increase sharply as the number of elderly in the population rises. Health care costs will also rise as the elderly are one of the groups most heavily reliant on the public health service. It is particularly important that we emphasise the need for all working people to make private pension provisions for themselves. Otherwise, the pressure on the State's old age pension system will become unsustainable. It is disturbing to note that a very large portion of the working population is not covered by any form of occupational pension.

We must also take into account the changes taking place in the labour market. Traditionally, a person entered a job on leaving school or college and continued to work in the same organisation until reaching retirement age. That still applies to the majority of people working in the civil and public service. Throughout the rest of the economy, however, the picture is changing dramatically. The number of people working part-time or on contract has increased markedly in recent years. I understand that about two thirds of the jobs now being created in the Irish economy are part-time jobs. There is also the phenomenon of greater mobility, with people moving from job to job, while the unemployment crisis means that people may spend significant periods out of work. Female workers may alternate between working and family duties, with significant breaks in service.

We are moving into a highly changed situation and there is clear need for education on the whole area of pensions. We must engender in our young population a much greater awareness of the need to make provision for retirement. We must get the message across to people, regardless of their employment situation, that their post retirement living standards will depend crucially on the pension arrangements they make now.

We are fortunate to have a well developed and professionally managed pension fund industry which is quite sophisticated by European standards. An essential prerequisite for any professional fund manager is investment freedom. The manager must be able to invest the funds under his control so as to obtain the best possible return for scheme members. In a small country like Ireland, where investment opportunities are necessarily limited, it is particularly important that fund managers are given the freedom to diversify their investment portfolios.

Pension funds are among the main investors in the Irish economy. However, they could play a much greater role in financing Irish industry and commerce if they were allowed to so do. The situation in this country is very strange. Irish pension funds have invested substantial sums in companies such as British Telecom, British Airways and Northern Ireland Electricity, yet they are precluded from investing in any of these industries in Ireland. This is because the Irish Government still believes the State should be directly involved in ownership of large sections of Irish industry. Even when it is decided to dispose of all or part of a State controlled asset, the pension fund industry continues to be ignored.

In the case of Telecom Éireann and TSB bank, the Government, under Labour Party influence, has opted for trade sales rather than stock market flotations. It is a very twisted kind of ideology indeed, that would prefer to see strong and successful Irish companies sold to foreigners rather than given the opportunity to thrive as independent entities financed by Irish money and the Irish Stock Exchange.

When my party was in power we presided over two successful flotations of State-owned companies, Greencore and Irish Life. These flotations were successful from the point of view of the companies themselves, from the point of view of their employees, and from the point of view of the Irish taxpayer. Both companies are now strong independent businesses, Irish-owned and controlled. Irish pension funds are major shareholders in the two companies and are ready to provide them with additional funding via the stock market should they need new capital to finance corporate expansion.

I strongly commend the examples of Greencore and Irish Life to the present administration. It is surely ironic that the Minister for Finance should tell the pension fund industry to invest more of its money in Ireland when his Government continues to deny that industry investment opportunities in the Irish economy. Irish pension funds have proved that they will invest in Ireland if given the chance. They will invest in Irish airlines and airports, telecommunications and electricity generation, but they cannot do so if the Government refuses them the opportunity.

The pension fund industry in Ireland remains a great untapped source of capital, and that is something we should address. If this Government was willing to sell commercial State companies to the pension funds via the stock exchange, the Irish taxpayer would benefit greatly, as would the State companies. The companies would benefit because they would have gained commercial independence and would be free from State and foreign control. The taxpayer would benefit as the receipts from privatisation would enable the national debt to be reduced and also because he or she would no longer have to foot the bill for capital injections to fund the development and expansion needs of these companies. It is a remarkable fact that we have such a highly developed pension fund industry and at the same time such an underdeveloped political understanding of how to use that industry for the greater benefit of the Irish economy.

I welcome this Bill which sets out clear procedures designed to safeguard pension funds. There is great scope for this Government to proceed on the lines that I have described in relation to Irish pension funds. They could be used to assist the economy if the Government had the will to make it happen. Much could be done to unleash their potential and the economy could be revitalised, with consequent benefits, not alone to people who are dependent on pensions to guarantee comfort in their old age, but to younger people contributing to their pensions.

While the Bill will not be the talking point around the country tomorrow, it is most important. If people only knew of its importance in terms of their pension rights and retirement, there would be much greater interest in it. I have noticed over the years that it is almost impossible to encourage people under the age of 35 years to think seriously about a retirement pension of any description. This has not changed and it is important to encourage people in all walks of life to prepare at a young age for retirement. If they want a good quality of life in retirement, they must consider taking out a private pension.

I wish to make a number of important points. I have taken an interest in this issue over the years and — I hope I am not being over pessimistic — I am aware problems would arise if there was an immediate draw down of pensions. I hope it would not happen but there would be a liquidity problem in the pension funds if people were allowed to draw down their pensions when they reached 45 or 47 years. It is one thing to point out that various categories of people are excluded — I intend to mention a category which should not be excluded because it is most unfair — but we must take account of the likely demographic patterns in the future as outlined by the Minister.

The population is ageing and in the future a smaller number of people at work will carry a larger proportion of elderly people, those with disabilities and so on. The engine room of the economy, that is, the people who make up the workforce, will reduce in size but the number of people who must be carried will increase. I am oversimplifying the position but, given that background, the word must go out loud and clear that people should not just become interested in financial affairs relating to their retirement when they turn 40 or 50 years of age. This message should be got across to young people in civics classes in schools. They must get used to the discipline at an early stage in their lives of providing for their retirement. The House should get that most important point across.

The pensions industry is a huge operation. It is much larger than most people realise given that it involves approximately 55,000 pension schemes of various sizes and has an asset value of £16 billion. It is mind boggling to consider how that money could drive the economy in many ways. There must be huge checks and balances and one of the reasons the Bill was introduced was to ensure that investment projects undertaken are successful and that there is a good return on the money invested. I occasionally think we were over cautious in the past but I understand many of our fund managers are whizz kids possessing a high level of competence and expertise in that area. It involves high finance and a certain amount of risk, but it is most important to relate that to the people paying weekly contributions from their hard earned income.

Many people who contribute to private pension funds believe they are not entitled to know the stages their pensions have reached and how they are progressing. They do not know where to get information on what is happening. This is one of the reasons for the appointment of a pensions ombudsman. I do not known whether it is the intention of the Minister, the Government or the pensions boards to appoint an ombudsman but it is important people can contact a person about such matters. I do not suggest this information is not available at present but an ombudsman should be appointed. Many people share this view. I have often heard people say they do not have a clue who is managing their pension, how it is doing or where they should go to get information. Most important, they do not know whether their pension will be available when they reach retirement age. That information may be readily available but it is not good enough that a great many hard working people are not aware of it.

On the asset value of pension funds, I understand certain constraints on fund managers prevent them investng in Ireland and I ask the Minister to deal with this aspect in his reply to the debate. As an engine for growth, one is not likely to find another economic operation in the State which has the strength of £16 billion behind it. It cannot all be directed towards the State but it is most important that the parameters which exist are explained and, if necessary, changed to ensure greater investment within the State.

In comparison with other countries in a similar situation, people receiving old age contributory pensions have been looked after relatively well in recent years. We all wish they could receive a little more, but, given all aspects of the economy, they are being looked after quite well. Nobody should take credit for this because people who have worked hard over many years on behalf of the State are entitled to that; it is the least any country can do for them. The non-contributory pension is not covered by the Bill's provisions and I ask the Minister to refer to it.

Many people, particularly the self-employed, are worried about their assessment for an old age pension because they did not pay self-employed PRSI. They hope that whoever is in Government at that time will not tell them that they had their chance to invest in a pension and as they did not take it, they cannot have a pension. Some people are becoming suspicious of that. I expect that is not the case but it should be said officially.

In 1988 provision was made for huge numbers of the self-employed to pay for their own pensions, which I welcomed. Many farmers and the self-employed were not too happy at that time because they thought it was another form of taxation but they rapidly changed their minds when they understood the system. At that time it was decided the minimum period of paying contributions should be ten years. A number of problems have arisen with that scheme in the past three or four years, in particular, which are now becoming acute.

People such as small farmers, shopkeepers, plumbers, painters and so on who are now approaching 66 years of age have paid contributions for only eight or nine years and, under the legislation, are debarred from receiving a contributory pension. Worse still, unless they divest themselves of their assets they will not be entitled to the non-contributory old age pension. They have the worst of all worlds and the most they can expect to receive is a partial refund of the contributions they paid when they reach 66 years of age.

I know the Minister has sympathy for this group and I make an impassioned plea to him for his Department and the Pensions Board to do something to alleviate the problems which have arisen. These problems will not exist in another couple of years because by that time those who have not paid contributions for the minimum ten year period will not deserve a pension as they will have been given ample opportunity to pay. Through no fault of their own but as a result of their age pattern, this group could not have paid sufficient contributions before they reached the age of 66 years.

This may prove costly on an actuarial assessment basis and there may be a case for paying a pro rata pension, in other words, to allow the person to continue making payments until they have paid for ten years or to pay them a reduced pension. I am not talking about an indiscriminate opening up of this but of targeting a specific group. The Minister is fully aware of what I am speaking about. A national association was recently formed for the self-employed. That makes good sense and there is a case to be met. I hope something will be done for them before another year passes. They are morally right in what they are looking for and this problem occurred through no fault of theirs. It will be a once off adjustment for a few years because the problem will not exist in the near future.

Some of the Bill's provisions are very welcome. It is a general tightening up of the checks and balances in the pension fund market. It is galling for men and women who have worked hard all their lives and looked forward to their retirement to find that, through roguery or corruption, somebody has squandered their pension. Apart from sickness, nothing could be worse. I congratulate the Minister on the provisions of the Bill, with which I do not think there will be any problems in this House. One would need to work closely with the industry to give a blow by blow analysis of what is needed on a technical basis.

Whatever changes need to be made in our system, given our ageing population, fewer people at work and people living longer — which we hope will continue — must be made on time and take full account of the available research. It would be easy to bring in grandiose schemes which could not be paid for later or would be paid for the wrong way by virtue of the fact there might not be a retirement pension scheme. Some of the business which will have to be done over the next five or ten years will be costly and there are no free lunches for anybody — everything has to be paid for. There will have to be major changes.

It will be a huge help if the economy continues to grow. However, it was not always as good as it is now and might not continue in the present vein. As the Minister said, note must be taken of the liquidity of the system and the potential draw down. I presume we have facts and figures which will show clearly every few years the exact draw down. If the shortfall begins to mount up, there is no point in waiting until Doomsday, for which nobody would thank the Government — if there has to be some bad news over the next few years we must talk about it openly. We must put in place a pension scheme which everyone will be proud of and feel secure with, and which will allow us to say we cherish our elderly.

I welcome this Bill which, among other matters, provides for many technical adjustments. The 1990 Pensions Act was, as several speakers said, a milestone in safeguarding and protecting workers' occupational pensions. It was a particularly significant development and ensured that pension promises made to employees would become a reality in practice. There have been cases where pensioners discovered their pensions did not exist because the funds had been used in another way.

In practice it has worked well and has been acclaimed and used by other countries in framing their pension legislation and ensuring funds are neither abused nor misappropriated. If the UK had similar pension safeguards in place the Maxwell disaster would have been less likely to have happened and probably could not have happened.

Debate adjourned.
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