I welcome the opportunity to speak on this provision. It is timely and appropriate that we discuss the important matter of the provision of pensions. I wish to put on record my appreciation and thanks to the Government for addressing this concern that has arisen in recent years. However, if we were not forward planning and looking to the future, we would have made no efforts to address the problems that will arise from 2020 onwards owing to demographic changes and an ageing population with longer life expectancy. Some of the issues have been addressed already in terms of the introduction of PRSAs.
I raised this issue some years go because of my concern that young people in particular, because of the Celtic tiger and their consequential affluence, were not looking to the future and saving to provide for the rainy day and for pensions further down the road. The provision of PRSAs by the Government was very welcome. They made saving attractive for young people at a time when an ideology of invincibility had grown among young people involved in technology stocks and blue chip investments. Many were making a lot of money at an early age and they were not being encouraged to save any of it. They were led to believe that they would never experience poverty, fall ill or grow old and require some pension to sustain them and maintain quality of life in their latter years.
That is something that has been addressed through the introduction of PRSAs. There has been a great take-up of these, but it is important to keep driving home the message that while we have a young population the most effective way of addressing the issue of support for them in the years ahead is by getting them involved in pension schemes at a young age when payments are not as large as they would be for people in their mid-40s. If we do nothing else, we should drive home the message that people should invest in pension funds to allow a quality of life as they grow old.
The purpose of this Bill is to address two major problems. One is demographic change. We have a very young population, the result of the baby boom of the 1970s and 1980s. That population will begin to grow old from 2020 onwards and we need to make provisions for pension payments. That is the reason for introducing this Bill. Raising the age limit for retirement will allow people who are capable and willing to continue working. It means that people with ability and something to offer can stay within the public service. This is fundamentally important.
We have been saying for many years, since the Celtic tiger came about and since unemployment figures dropped, that there is a need to address this issue. Some of our very best, brightest, most experienced public servants must leave the public service, whether they wish to do so, simply because of the age barrier in the public service. This Bill provides for a major change in this area. The Commission on Public Service Pensions had major consultations and dialogue with the various unions and representatives. While this has been happening since 1996 and the publication of the report in 2001, there has not been consensus. We accept that. However, the Government must make a decision for the betterment of all society, not for particular interests. Unions are obviously trying to address the concerns of their members and highlight the issues they want included in any report, decision or legislation. The Government has been fair in addressing the underlying issue of ensuring that enough is put aside, through the pension reserve fund and through this public service superannuation Bill which provides for change in the age of retirement and more flexible arrangements throughout the public sector.
We must be honest with ourselves. If we took the short-term view, this would not be an issue for the coming years and we would not be making these changes. Governments must look to the longer term as well. The Government has been forward-looking in discussing issues relevant to the middle of the century, as far ahead as 2056. The Government is looking to the problems of the future and addressing those problems now. France and other countries experienced a similar demographic shift in a short period. Their populations were suddenly older, they had lower birth rates and longer life expectancy. All this culminated in an ageing population dependent on a small ratio of younger people in the workforce. That created huge problems in France and massive industrial problems as well. The French Government addressed the problem by changing the pension entitlements of people who had already retired because of concern that the country could not afford to maintain the current pension payments.
People have asked why we are taking the soft option. This is a soft option simply because the Government is making the decision in good time. If it put its head in the sand and did nothing until the issue arose more immediately some time down the road, it would have to make very difficult decisions that would cause much hurt to people who had contributed to pension funds for many years. If the State found it could not continue to pay these pensions we would have major problems. There would be huge industrial problems and huge personal problems for people who had assumed they would have a certain quality of life if the State had to renege on paying pensions. I do not accept that the proposals in this Bill constitute a soft option. It is an option that seems soft simply because it is an option of foresight. The decisions being made today will benefit people in the future.
There is concern on the part of the unions. They have expressed their grievances. They have contacted public representatives and made submissions to the commission. Some public sector unions are not happy with some of the changes proposed in this Bill. However, it must be accepted that new entrants to the public service are clearly defined in this Bill. Anybody entering into a contract of employment with the State, through the public sector, on or after 1 April will be fully aware of what will be involved when they reach retirement age, namely, that the latter will be increased and that they will have more flexibility in the later years of their working lives. We should emphasise this in a positive way. We are trying to highlight the importance of people making a full and meaningful contribution in the public sector, in society and in their lives and those of their families. If these people are capable, willing to work and have an ability to contribute, why should they not be allowed that opportunity to continue working?
In the past when we had high unemployment rates, there was always the option of trying to encourage people to retire early in order that spaces in the public service could be freed up and new employees recruited. It was a case of churning people out and taking others in. We should try to retain for as long as possible the bank of experience we have developed. This provision will help us to do so.
I have already referred to demographics but some of the figures are quite alarming. For example, the Department of Social and Family Affairs has indicated that older people will comprise a larger proportion of the population in the future. At present, there are 430,000 people of pensionable age in Ireland. During the next 17 years, this will increase by 55% to almost 660,000. That is an alarming increase in such a short space of time. If we do not address this matter in the next number of years, we would face major difficulties in trying to pay these people's pensions. The national pensions reserve fund is an integral part of our long-term planning and overall strategy to ensure that we can afford to support people in the public sector when they cease working and go on pension. These people must have available to them the dignity and quality of life for which they planned.
We have made many strides forward in recent years, particularly in terms of changes to budgetary and taxation measures designed to encourage people to save their money. We have encouraged people earning good incomes to make their regular pension contributions and also to save more money through other available pension schemes to ensure that they will have a good quality of life and will not be the burden on others that they would have been if they did not take action in this regard. I urge the Minister and those involved in the pension schemes to market this matter in a positive light and encourage people to join such a scheme at an early age. I compare this to young people smoking. One might say to them at 17 or 18 years of age that cigarettes will affect their health but, at that age, it does not make a great deal of sense to them because they believe they are invincible and will never get sick or grow old. At 35 or 40 years of age, however, they may discover that they have cardiovascular difficulties as a result of their smoking. They will look back and state that if they had not smoked, they would not be in that position. The same mentality applies in respect of pensions. We must do whatever we can through taxation changes to encourage people to save money and invest in their pensions.
The Commission on Public Service Pensions did a great deal of work. It was established in 1996 and reported in 2001. This body is owed a debt of gratitude for producing its in-depth analysis. The commission was made up of a broad cross-section of people representing the social partners, the various Departments and those involved in the insurance and pensions industries. The Government has taken on board the majority of the commission's recommendations, which is one of the reasons the Bill is before us today.
While various unions may have difficulties from the point of view of their members, we must try to address societal and demographic changes as a whole. Everybody concerned must take the broad and long-term view that this issue must be confronted and addressed now to ensure that there is no pain or difficulty in the years ahead. New entrants are clearly defined in the Bill and this makes those entering the public services after 1 April fully aware of what will be involved when they reach retirement age, which will be increased from 60 to 65 in most cases.
It is not possible or practical to try to change a pensions system halfway through. On commencing employment, people enter into contracts with their employers — in this case, the State — and certain pension provisions are made for them. It would be unthinkable that, in 2020, 2025 or later, the State would be obliged to renege on the contracts into which it entered with public sector workers and that their pension payments would be changed. The latter happened in France and it is continuing to create problems for that state and its employees.
Everyone is conscious of the importance of increasing social welfare and pension payments to elderly people. The Government has made a commitment to try to increase the pension payment to €200 during its term of office. We must ensure that we can afford to do so in a comfortable way and that, by increasing pensions in one area, we do not short-change those in other areas who are entitled to payments. The provisions the Government has made in recent years are coming to fruition in the sense that the Bill has come before the House and the national pensions reserve fund is already in place. Under the Bill, people in the public sector will be able to continue to remain in employment until they reach 65 and, in some cases, beyond, particularly if they are capable, willing and want to contribute.
We have planned ahead and I hope that those who oppose us and have concerns will consider the fact that the Government is making the decision for everyone. It is in the best interests of everybody to make these decisions now as opposed to doing so down the road. While individual unions and sections of the public sector have highlighted their concerns, there is no doubt that we have, in general, taken a balanced and long-term approach.
I compliment and place on record my thanks to everybody who sat on the Commission on Public Service Pensions. They faced an arduous task by becoming involved in this huge undertaking. The commission issued many good recommendations and the Government has taken most of them on board. Such action is a compliment to the commission and its approach which entailed bringing everyone into the loop and discussing and explaining the issues. It was not merely a case of the commission obtaining submissions from a few people and drawing up a report for submission to the Government. The commission's approach was detailed and well thought out from the point of view of extracting information and its report was well presented.
I commend the Bill to the House. I thank the Minister and those involved in this area in recent years. While members of the Opposition might complain about the fact that we have been in Government for so long, it is at times like this they must accept that it is important to have continuity on this side of the House in order that there is a follow through regarding decisions that are made and commissions that are established. The Bill, the national pensions reserve fund and the various tax changes in recent years aimed at encouraging people to save are representative of the continuity of Government, policy and personnel in the different Departments. This continuity has helped us to begin to address the alarming problems with which we would be faced in the future.
The Minister for Finance, Deputy McCreevy, must be commended because he highlighted this matter many years ago when in Opposition. It was part of our policy platform before the 1997 general election that, in the event of our returning to Government, this issue would have to be addressed. I do not wish to make political points about something that will happen in the future regarding changes in public sector pension services. However, some Opposition parties accused us of having election slush funds, etc.
Before the previous general election, the parties in Opposition stated that, if they got their hands on the reins of Government, they would use money from the national pensions reserve fund for various projects. The Government has made a commitment, through the enactment of legislation, to ensure that a fixed percentage of gross domestic product, GDP, would be invested in the pension reserve fund every year, whereas members of the Opposition have indicated that, if elected to Government, they would loot and pillage the fund which was established to address the concerns, fears and anxieties of many people whose pensions the State may otherwise not be able to afford. I highlight this point to show the paradox of Deputies who have accused the Government of not planning sufficiently for the future stating in the same breath that they would plunder the national pensions reserve fund.
I thank everybody involved in the presentation of the Bill and commend it to the House.