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Joint Committee on Social Protection, Community and Rural Development and the Islands díospóireacht -
Wednesday, 17 Nov 2021

Report of the Commission on Pensions: Discussion (Resumed)

Apologies have been received from Deputy Paul Donnelly. Before we commence, I remind members participating remotely that they must do so from within the precincts of Leinster House.

Today, we convene to continue our discussion on the recently published report of the Commission on Pensions. We are all aware that the State pension is valued by all of society and it is the bedrock of the pension system in Ireland. It is extremely effective at preventing pensioners from falling into poverty, and we want to make sure that this remains the case into the future.

The Commission on Pensions chaired by Ms Josephine Feehily was an independent body comprising pension experts, academics and workers' representative groups. As Members will be aware, the committee made its own submission to the commission with 18 specific recommendations. The commission has completed its work and a comprehensive report was published in October. The report stated that the current State pension is not sustainable in its current form and changes are needed. The population, as we know, is set to increase from 5 million currently to over 6 million by 2050, which is something that we need to plan for in order to ensure that older people have an adequate pension and a safety net to keep them out of poverty.

There will also be fewer working age people supporting each older person. Currently, 4.5 working-age people support each person over the age of 65 but this is set to halve to 2.3 working-age people per person over the age of 65 by 2051. It is important to note that the proportion of older people in receipt of a fully Exchequer-funded non-contributory State pension is decreasing steadily and will continue to do so. Eventually everybody will have paid some entitlement to a State contributory pension into the future. There are clear challenges in ensuring the sustainability of State pensions for future generations. This has been known for many years and confirmed in the report of the Commission on Pensions.

The Government has asked this committee for our views on the recommendations set out in the report. This follows on the from the committee's remit and our recent submission to the Commission on Pensions. In this regard, I welcome Ms Josephine Feehily, Chairperson, Commission on Pensions, and Ms Roma Burke, who is the Chairperson of the technical subgroup, Commission on Pensions. I also welcome Mr. Tim Duggan, Assistant Secretary, and Mr. Alan Flynn, principal officer, Department of Social Protection. All of the witnesses are very welcome here this morning.

Witnesses are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if the witnesses' statements are potentially defamatory in respect of an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such directions.

Witnesses are reminded that full parliamentary privilege only applies to those participating from within the precincts of Leinster House. Witnesses participating remotely should exercise caution in terms of their utterances accordingly and be attentive to the direction of the Chair in this regard.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

I call Mr. Tim Duggan to make his opening remarks, which will be followed by a presentation to the committee by Ms Josephine Feehily.

Mr. Tim Duggan

Good morning everybody. I thank the Chairman and the committee very much for this invitation to discuss the Report of the Commission on Pensions. I apologise for not being able to attend in person.

As I am sure the committee is aware, the Department is required by law to conduct an actuarial review of the Social Insurance Fund every five years. The last such review, reflecting the financial position of the fund at the end of 2015, was completed in October 2017. Among its projections were that annual shortfalls were estimated to increase from 2021 onwards as the ageing of the population starts to have an impact and that in the absence of action to tackle it, the deficit will increase to €3.3 billion by 2030 and to €22.2 billion by 2071. Those are annual figures. Since then, certain findings of the 2015 review were examined again in preparation for the work of the Commission on Pension's work. In short, this examination confirmed the significant deficits that the fund is expected to experience. We are now finalising preparations to conduct another review for completion in 2022.

It is clear to the Department that considerable change is under way in the demographic make-up in Ireland whereby, thankfully, people are living longer, healthier lives, which means that action is required to secure the viability of the Social Insurance Fund in the near and distant future and, by extension, to protect the current contributory State pension system which is, as the Chairman said, the bedrock of pension provision in Ireland. In that context, the law had been changed to increase the State pension age to 67 this year and to 68 in 2028, preparations were under way to change the system from the yearly average approach that applied for the past 60 years to a total contributions approach. In addition, consideration was being given to options for increasing funding. This resulted in considerable debate during election 2020 about State pensions and, in particular, about the imminent increase in the State pension age. Arising from that, the Government committed in its programme for Government to establish a Commission on Pensions to examine sustainability and eligibility issues with the State pension system and the Social Insurance Fund and to defer any changes in the State pension age pending its analysis and report.

The commission was established this time last year. It was an independent body and, as stated by the Chairman, its membership comprised 11 people who were pension experts, academics, members of civil society and representatives of workers and employers.

As a result of the State pension age deferral, the Department estimated that the increase in expenditure in 2021 on State pensions would be €221 million, that this would increase to an additional €453 million next year and that the figure would continue to increase every year thereafter. The actual additional expenditure to the end of September 2021 was €207 million. It is now expected to total approximately €275 million by the end of the year. That increase is also likely to be reflected in future years. As a result, the additional expenditure will actually be likely to be in the region of more than €500 million next year and will get higher every year from then on. This shows clearly how the demographic impacts on the State pension are real and how the sums involved are large and grow quickly, even when relatively simple decisions are made or proposed alleviating actions are postponed.

This underscores the need for very careful analysis of policy options and positions and highlights how the establishment of the Commission on Pensions was necessary to look at the State pension system in the round and provide independent advice to Government, first, on the options it has and, second, on a recommended course of action. The commission, as referred to by the Chairman, has completed its work and its report was published on 7 October 2021. It is a comprehensive report that takes account of an extensive consultation process, an examination of international approaches, and an assessment of various analyses of population, labour force and expenditure projections. It has unambiguously established that the current State pension system, as it stands, is not sustainable into the future and that change is needed.

In this regard, the commission has set out a wide range of recommendations. Some of these are designed to make the system fairer, some to mitigate cost pressures and some to increase the funding of the system. In the interests of older people and future generations of older people, the far-reaching recommendations in the report need to be considered very carefully. With that in mind, in its initial consideration of the report at its meeting on 7 October, the Government decided first: to ask the Commission on Taxation and Welfare for its view with respect to the PRSI changes recommended by the commission by end February 2022, which is in keeping with that commission's terms of reference; to refer the report to this committee for its views; and to refer it to the Cabinet sub-committee on economic recovery and investment for consideration over the coming months. It is expected that this will be done over a number of meetings.

Taking all of this into account, the Minister intends to bring a recommended response and implementation plan to the Government by end of March 2022. In this regard, the Minister is looking forward to hearing this committee’s view, at its convenience, and I hope this morning’s discussion will be helpful to it in developing that.

I would like to conclude by saying that there are no policy proposals for the State pension system that cannot be challenged or, equally, that would find universal support. We need, however, to be realistic here as our State pension system is facing very serious sustainability challenges. We need to consider the very real consequences of failing to implement essential reforms to fund a sustainable and adequate State pension system.

I would like to compliment and thank Josephine Feehily, who was chair of the Commission on Pensions, Roma Burke, who chaired its technical sub-committee, and their nine other colleagues on the commission on an excellent analysis and report. My team provided the secretariat to the commission, and I can assure this committee that it was a very busy team indeed such was the intensity of the commission’s activities over its eight months. I will now hand over to Ms Feehily to take the committee through the work of the commission and its recommendations in some detail. Mr. Flynn and I will be more than happy to assist the committee with any questions it has after that.

I thank Mr. Duggan and call Ms Feehily to speak now, please.

Ms Josephine Feehily

I thank the Chairman. Good morning everybody. I have a long presentation but the committee will be pleased to know that I do not intend to read it all. I want to give the committee more of a sense of the commission's approach and the reasoning behind the findings rather than necessarily reading them out literally.

The commission considered it very important to say that it is a good thing that older people are living longer and are living healthier, longer lives resulting in there being more older people. This is a good thing. Characterising this as a problem and a crisis is not language we like to use, nor is not something we want to contribute to. It is a challenge that has to be planned for and managed rather than having it characterised as a problem.

Intergenerational equity was one of the considerations in the commission's terms of reference. Characterising the fact that there are more older people as a problem gives rise to a real risk of breaking the intergenerational solidarity that we have, and we are very clear that that is not something we want to do.

With that in mind, beginning with the commission's approach, we had very narrow but focused and specific terms of reference. They were set within the programme for Government. When we looked at the programme for Government, we found that a number of elements there, which I will list, and members can read them at their leisure, were already settled Government policy and so we obviously had to take account of them. The other thing we found when we examined the programme for Government's direction, was that a number of other aspects of pensions had already been given to somebody else, for the want of a better word. For example, a universal income pilot had already been agreed and was located somewhere else and the Commission on Taxation and Welfare had already been agreed and was located somewhere else. Focused terms of reference and certain jobs that were already focused elsewhere were very much part of forming our approach to the work.

After we reviewed those and the terms of reference, we concluded that the most useful thing we could do was contribute to fixing the "system within the system", which was the language that we used to describe it. We set ourselves the task of identifying the scale of the sustainability challenge. In that context, we defined fiscal sustainability but also social sustainability as important. It was not just about money. We had a lot of contributions from experts. We had a consultation process where we had in excess of 200 submissions. Some 80% of them were from individuals. We had a survey which had more than 1,100 responses, so we had a lot of inputs to our work. We established a technical group chaired by my colleague, Roma Burke, to help us to establish with some certainty what all the inputs were telling us. I will hand over to her now because that group gave us an evidence base for the recommendations. I will come back in to outline the recommendations.

Ms Roma Burke

In your opening statement, Chairman, you stated that the population of Ireland is currently 5 million and is going to increase to 6 million by 2050. You also observed that the relative proportion of younger to older people is going to change. As the population ages, there will be more older people and they will be living longer. It is great news. The challenge of that is that at the moment the State pension works on a pay-as-you-go basis. That means that the current working population supports the State pension paid to older people. At the moment, there are approximately 4.5 working age people to every older person. As the population evolves and people gradually get older, that will reduce, so that by 2050 we estimate that the number of working age people to older people is going to drop to just 2.3 for each older person. This is a big challenge.

When we are looking at a big demographic challenge, we look at big levers to try to address the challenge. The two big levers available to us are fertility and migration. The committee found that fertility is quite slow-moving and is unable to react quickly enough to address this very significant challenge. Another lever is net inward migration. That can react in a much faster manner in order to address this problem. Putting it in the context of the total expected population in Ireland in 2050 of 6 million, we would need a working population of 7.2 million people in order to maintain the dependency ratio. That translates to an extra working population in the order of 3.3 million, over and above the official Central Statistics Office, CSO, figures. We concluded that in order to maintain the dependency ratio at its current levels, it would require actual fertility and migration rates that would be multiples of the current assumptions.

With more older people and older people living longer, the cost of the State pension is going to increase. There is going to be twice the number of older people by 2050. That means that the cost is going to double by 2050. At the moment, expressed as a percentage of modified gross national income, the cost is 3.8%. That is going to go up to 7.9% by 2050 and then it will continue to increase and will reach 9% by 2070. To put it into context, if we were in 2050 today, we would need all of the PRSI income just to pay the State pension.

We looked at how to address the increasing cost of the State pension. If we can get more people working, that would certainly help to address the challenge, and it does help, but the difficulty with that is that even if we have more people working within the working age population, the fact that the population is ageing in total means that as a proportion of everybody, the number of workers continues to fall. It is like maintaining a boat on the sea. You are maintaining your boat, but the tide keeps coming in and it is very hard for the boat as there is not much that the boat can do in that case.

We looked at other ways to address the challenge, such as increasing the State pension age. We looked at increasing the rate of employment of older people, facilitating them to work longer. We looked at net inward migration, which I talked about a moment ago. We also looked at higher economic growth and higher employment. While all of these levers help to address the challenge, we found that changing the State pension age had the most significant impact. Notably, helping older people to work also has a fairly significant impact on addressing the challenge.

The State pension has a role in poverty prevention. We did a lot of work on this. The committee concluded that the State pension plays a very positive role in reducing poverty among older people. We have already heard that without the State pension, poverty rates among older people would be in excess of 85%, and that is reduced right down to below 11%.

I will make a few points to help the committee with its discussion today. There is a range of poverty measures and one of them, which is used quite a lot, looks at poverty in relation to income. It compares what your income is to what is called an at-risk of poverty measure. However, the State pension target is pegged against an earnings benchmark – gross average industrial earnings or a more recent iteration of that. We must be aware that even if you are targeting an earnings benchmark for your State pension, there is a risk because the formula or the definition of poverty is related to income, but that does not move in the same manner as an earnings-related benchmark.

We then went on to have a look at increasing the State pension. When the State pension is benchmarked, it gets increased in future in order to give certain benefits such as maintaining people's purchasing power and keeping them out of poverty and so on. We looked at linking it to price inflation, earnings and other measures. We must be careful, because if we link it to price inflation, there is a risk that more people can fall into poverty. If we link it to other measures, there is a risk that the cost could escalate beyond what has been expected. It requires a careful approach going forward. That is a whistle-stop tour of what the committee did. We fed in a series of papers to the commission for consideration. I will hand back to Ms Feehily to continue.

Ms Josephine Feehily

I thank Ms Burke.

In a nutshell, in terms of the commission's report, our key considerations led us to conclude that there is a very strong attachment in the community to the State pension. That attachment is built on certainty. Certainty is required for all sorts of reasons. It enables people to plan and to feel confident but it is also important for other aspects of their lives, including working and saving. We considered that there was a need for transparency and much better communication around the whole issue to avoid surprises and to help people to better understand the issues involved. We were very much driven by considerations of equity and fairness. An overarching conclusion was that we should move on funding first rather than on other policy levers.

Our overall conclusions related to social solidarity. The attachment of the community to the pension was evident in submissions to the commission not only from pensioners and those soon to be pensioners, but from people right across the different demographics and in work done for us among young people. It is the view of the commission that, if it is accepted that we want older people to have an adequate pension, everybody should contribute to ensuring that outcome on the basis of social solidarity. The five key elements of our conclusions and recommendations involve increasing funding through a gradual increase in PRSI, an increase in PRSI for the self-employed, broadening the PRSI base, contributions from the Exchequer and a gradual increase in the pension age. I will address those various points in the next few slides.

Based on those five levers, we put together four packages. We considered a range of options and settled on package 4. Package 4 uses all of the levers I have mentioned. With regard to extending the PRSI base, the details of this extension being set out in some detail in the presentation, we excluded its extension to social welfare payments but recommend extending the PRSI base to remove the exemptions currently in place for people aged over 66 and for supplementary pensions. We do not recommend a universal pension for a range of reasons, which I am happy to discuss if members wish. The principal reason is that the job is also located somewhere else.

I do not expect the members to be able to interpret the graph on slide 9. It gives a visual sense of what we were about. The detail is in the report. The coloured bars represent the elements of the packages. They show the contribution made to addressing the challenge under each package by the various elements, including funding, a change in the pension age and Exchequer contributions. The commission is strongly of the view that, if the Government and Parliament choose a different mix for the future policy direction, as they are absolutely entitled to, compensating measures will be needed. If it is decided to use less of a given measure and to invent a package 5 or a package 6, each of these elements will need to be addressed. Otherwise, there will be a shortfall.

On the funding side, we confirmed the pay-as-you-go approach. This is a structural piece which we think is quite important. There was some discussion in the committee's meeting last week about the notion of the Social Insurance Fund. The commission fully understands that this is not technically a fund in the sense that there are pension funds which have been put away for 20 years. It is a pay-as-you-go fund, almost like a bank account. We recommended that, within the fund, the funding and costs for pensions should be separated out to make them visible and transparent. This would mean there would be no risk of it getting confused with other demand-led schemes. We consider that an important transparency measure.

On the payment rates side, the Minister made it clear to us at our first meeting that the Government would not contemplate reducing rates, which is an obvious lever to consider when there is a funding problem. The commission would not have been inclined towards that view anyway. We did say that, since the roadmap on social inclusion, there has been a proposal in place with regard to a smoothed earnings approach to benchmarking. We asked that this be implemented because, if the rate going forward is not known, how can the sums be done? How can the shortfall be worked out? We recommended that an independent standing body be put in place to advise the Government on the rates derived from that benchmark each year. Having done that, the body should then periodically review whether that was the best benchmark in terms of pensioner poverty. We were very mindful that the risk of poverty is higher for people living alone than for a couple. We were therefore keen for the Government to continue to increase the living alone allowance at a faster rate than the basic pension, as it did in the recent budget.

With regard to calculation methods, it has been the policy of a series of Governments to move to a total contributions approach on the basis that it is fairer. However, this has not been fully implemented. The commission is basically asking for it to be implemented. If that is the Government's policy, it should implement it. Again, how can we know what the shortfall is if the denominators keep changing? There has been a policy of maintaining the old system, the yearly average approach, and allowing applicants for a pension to take the better of the two options. That is a recipe for serious cost increases. If the total contributions approach is fairer, which we believe it is, then the yearly average approach should be gradually removed. We recommend that people be allowed to calculate which approach is better for them but that, over ten years, the payment under the yearly average approach be reduced by 10% per year so that, at the end of ten years, that option will be off the table. By then, the total contributions approach will be serving a greater population and more and more people will be getting full pensions, based on the trajectory of employment. If that is not done, the grounding for calculations in respect of the pensions challenge will be shifting all of the time. The Government might as well forget about the total contributions approach because there is no point in having it as a policy while implementing something else.

We recommend that the total contributions approach become the definitive approach. This is based on 40 years or 2,080 contributions to include ten years of credited contributions and 20 years of home-caring periods. That policy change with regard to home-caring periods has been really important with regard to the point the Chair made on the increased proportion of pensions being based on the contributory rather than the non-contributory side.

We also believe that regular PRSI statements should be issued to contributors so that they are aware of how much they are paying and when their pensions are likely to kick in. If the Government accepts the recommendation to phase in pension age changes, people should be able to see that, based on current policy and so on, they are likely to get their pensions at, for example, 66.75 years of age. I am aware that the Department will issue pension contributions statements on request. We are talking about more than that. We want interpreted statements to be issued rather than just a list. Again, this comes back to the idea of better communication and no surprises.

We made a recommendation in respect of carers. I will not go into it in detail. We had very specific terms of reference to address. We came up with a solution which we think achieves the objective of making sure that there is special recognition and a special credited approach for the particular group of people for whom 20 years of caring credits are not enough when they reach pension age. We also took up a recommendation from Family Carers Ireland. It told us that it would like to see the establishment of a register of family carers. This would run across government and not be confined to pensions.

As we thought it was a good idea, we recommended that the relevant Departments might look at that, so it will be broader than the Department of Social Protection.

The retirement age on employment contracts was one of the dilemmas that arose from the pension age discussion; there was a gap. We received many submissions pointing out that people do not necessarily want to retire at 65. A European directive is also in place. It is hard work for somebody to challenge it and it requires going to the Workplace Relations Commission and so on. Equally there are people who want to retire and have the right to retire in their existing contract. Therefore, it is not as simple as changing everything. The recommendation is the legislation should allow but not compel an employee to stay in employment until the State pension age. That is designed to take care of two different groups of people.

Again, having taken account of submissions, we also felt that the social partners in government and the WRC could issue guidance to employers and workers on how to manage the transition if people want to stay at work. There are issues with recurring contracts, issues with people who may want to reduce their working hours and so on. That is a discussion which goes beyond our scope, but we felt that might be the right place for it.

We then come to the age. As members of the committee will know we recommended that the age should increase beginning in 2028 at the rate of one quarter per year reaching 67 in 2031, which is ten years' time. We then recommended it should increase by one quarter every second year reaching 68 in 2039. It is gradual and much slower. We felt the gradual approach which removes some of the cliffs and surprises was appropriate. The table displayed on your screen shows at what year the different age changes would come into being.

Many people raised the issue of flexible access with us and it is also contained in the programme for Government. We made a number of recommendations on it. One is that a person could choose to defer access up to age 70 and receive a cost-neutral increase in their pension. The second one was that a person whose insurance record was short might continue to contribute in order to establish an entitlement. The third recommendation is an option for the Government to consider done in conjunction with an age increase. The commission sees merit in recognising very long PRSI histories by including a provision whereby those who choose to retire at 65 with a very long record of 45 years may receive a full pension. The reason we say this must be done in conjunction with an age increase is that on its own it is a cost-increasing measure, which would only add to the sustainability challenge. It certainly has merit in the context of a total flexibility package where the age in general is going up.

The recommendation on the funding side of PRSI for self-employed has come in for some comment. The commission was unanimous in this. I should have said, when discussing the slide about the recommendation on age, that it was not unanimous. Ten out of the 11 members recommended the age increase; I should have made that clear. The self-employed PRSI of 4% is the best bargain anywhere for return on investment. I used to work in social welfare and I remember when it was invented everybody was very excited. I believe 4% or £102 was the number. Now 4% or €500 is the floor. The benefit range was modest. It covered State pension and widow's pension. The benefit range has been increased, but the rate has not.

To maintain equity and fairness relative to other workers, the self-employed PRSI contribution rate needs to increase. We are very clear and we suggest a steeper increase for self-employed PRSI than we do for class A, which is workers and their employers. There was a range of views in the commission about how far it should go. We settled on 10%. There is an argument for it to go to 11.05%, which is the employers' rate. There is an argument for it to go to 14%, which is the combined employer and employee rate having regard to the range of benefits. However, we will leave that to the Minister. We did not go there, but we debated it at some length.

We are also recommending an increase in the class A rate for both employers and employees. This is much more modest and does not need to kick in until after 2030. We were very mindful not to impact on the labour market by increasing it too soon and too steeply. It was not necessary in the context of package 4. Some of the other packages have a steeper and larger increase, particularly if the age is not included.

In a way, base broadening is not new. In 2014, PRSI was extended to unearned income on a social solidarity basis in the form of class K, which is payable on income over €100. It is payable on a class K solidarity basis by Members of the Houses of the Oireachtas without entitlement to benefits. Therefore, it is not a novel idea. Other than applying it to the social welfare payments themselves, on a social solidarity basis PRSI class K, which is 4% on all income currently subject to PRSI, would be payable by people over 66 and would be payable on existing supplementary pensions - occupational pensions, personal pensions and public sector pensions - by way of a contribution from existing pensioners. If the community at large wants pensions to be sustainable, adequate and certain, then the community at large ought to contribute to the balancing required.

I thank Ms Feehily for that detailed presentation.

I thank the witnesses for the presentation and for the enormous amount of work that went into the development of this document. I very much agree with the values underpinning it - the idea, as Ms Burke set out, that having an ageing population who are living longer is not a bad thing, but providing for that into the future must be underpinned by values of social solidarity and intergenerational solidarity. I strongly agree with the value system that underpins this piece of work.

I have some broad questions and some more specific questions. I will begin with the broadest question and this may or may not be useful. A certain formulation of words occurs several times in the document and it was repeated this morning about the terms of reference being quite narrow or focused, whichever way we want to put it. The commission noted that the scope of its work was positioned within a set of parameters and decisions already made by the Government. A particular formulation of words occurs a few times in the document. It struck me that it was repeated. Should I read into that that the members of the commission would have liked a broader frame of reference? This may require them to unpick their entire document and so it may not be worth looking at. Was there something they would have liked to address in their body of work that they did not have the opportunity to address, given their terms of reference? That is a very broad question.

The second slightly less broad question is about universal pensions. There is one line, saying we are not doing that.

I would like to have that investigated in more detail.

On the specifics did the modelling examining the various packages in respect of the funding contributions concerned consider issues such as income smoothing? Is that already built into that modelling? Regarding the total contributions approach, were the figures outlined to us earlier predicated on the income smoothing and total contributions approach being in place?

The Chair can cut me off if I hit my limit on questions, but on that income smoothing aspect as well, I had a look back over the Roadmap for Social Inclusion 2020-2025. Two elements of that are being considered, but do the witnesses have an opinion regarding whether we should have the third element as well, and a triple lock? It might be concerned with the concept of the minimal essential standards of living, MESL. Should that be in there as well?

Mention was made in the report as well of using "non-labour revenue sources to help fund the State Pensions system". Was that captured in the information presented to us regarding base broadening? Is that what we are talking about in respect of PRSI contributions being paid elsewhere or being payable on optional pensions, or is there something else captured that I am not understanding?

Would Ms Feehily like to take those questions?

Ms Josephine Feehily

To begin with the Deputy's broad question, we debated the point he is raising at some length at the beginning of our work. We formed the view that if there was something that we felt strongly enough about, then we would not constrain ourselves in that regard. For example, we made a recommendation concerning a register of family carers, an aspect that was outside of our focus, and we also made a recommendation regarding the provision of guidance to ensure that older workers might be prepared. In the end, however, we decided, given the short timeframe we had, that our work was mainly addressed to the audience. That is why it is repeated.

I said to the Minister about six months after we started our work that if I had thought of it at the start, we should probably have been called the commission on State pensions, because the audience, the submitters and the commentariat were giving us jobs that we did not have. Therefore, this facet of our work was more addressed to the audience to make it clear that the reason we stayed in the areas where we stayed was a function of our terms of reference. We did not have a function in respect of private pensions, and neither did we have one regarding the tax system. Many of the submissions and much of the material addressed to us raised those hares. The main reason this point is repeated, then, is because we were probably feeling that much of the audience did not quite get how focused and specific were our terms of reference. That was the reason. We debated this point, and we were content that a job of work needed to be done and that was a useful contribution we could make. Therefore, we came up with this language we used about "fixing the system within [...] the system".

Moving onto the matter of universal pensions, a longer text in the full report deals with this aspect. I just cannot find the relevant reference now. What we state there, however, is that aspect is outside of our terms of reference, because those are based on a contributions system and a universal pension does not have that idea. The concept, therefore, was outside the scope of our terms of reference, but we did examine it. We found that not only was it out of scope, but we also decided that it was placed somewhere else in the form of a basic income pilot. We arrived at that conclusion because, in the context of a basic income pilot, a pension is clearly a version of basic income.

In addition, inherent in the idea of a universal basic income, whether for pensions specifically or for everyone, is the involvement of the tax system. That was definitely out of scope, and was also placed somewhere else. In the end, therefore, it was not a case of us having decided to recommend against the concept, we just did not recommend it on those grounds. I hope that is okay by way of an answer. We took that approach particularly because of the contribution element. Once our job was grounded in the Social Insurance Fund and contributions, then the dynamic of a universal basic income would have been a different job, as it were.

Regarding the information we presented earlier, I am certain that the total contribution approach, TCA, change is included. Ms Burke will be able to help me to clarify whether the income aspect is addressed in that information as well.

Ms Roma Burke

The numerical breakdown of the information we presented earlier, including the bar charts, can be found on page 224 of the full report. It shows that there will be an SIF shortfall of €13 billion in 2050. It then shows all the bits of each part of the package, and how much each will contribute to reducing and, ultimately, eliminating the shortfall. The full move to total contributions, then, reduces the hit by approximately €1.1 billion.

I think that bar chart is reproduced on page 13 of the full report as well.

Ms Roma Burke

Yes, it is, but the numbers behind those charts can be found on page 224 of the full report.

I wonder if those figures include income smoothing as part of the modelling.

Ms Roma Burke

We might ask Mr. Flynn about this aspect, to double-check.

Mr. Alan Flynn

If it is okay with the Deputy, we will come back to him with the clarification. We will have to go back to the model and dig out those figures, and we will reply later to the committee on that specific issue.

I thank Mr. Flynn. Regarding the final-----

Ms Josephine Feehily

Yes, a few other aspects were raised by the Deputy, including the triple lock and the non-revenue sources. The Deputy is correct about the non-revenue sources. It was essentially the non-labour revenue sources, and that was part of our not wanting to overly impact on the labour market.

We did examine the triple lock, and concluded that the triple lock can result in pensions being increased ahead of the curve. The Deputy may recall that at the time there was some fairly intense debate in the UK about what is really an intergenerational issue in the context of the national budget. The triple lock seemed to prevent the most equitable outcome, so we did not recommend a triple lock for that reason. We certainly feel that by setting up the independent standing body, and by giving it the job of periodically reviewing the form of indexation, as well as the mathematics in that regard, that the form of indexation might need to evolve over time. The most important thing, though, is to implement this first version, and then to review it.

I thank the witnesses.

I thank Deputy Ó Cathasaigh. I call Deputy Kerrane.

I commend the work of Ms Feehily, the entire commission and Ms Burke. A large volume of work has been done. It is just a pity that it was not done before any mention was made of pension age increases in the first place. It would have been a huge help. The report contains a great deal of knowledge, and a great deal of work went into it, and I thank the witnesses for that.

I agree with much of what is in the report, especially regarding the need for a pension for carers. That has been an issue for a long time and it is something that must be sorted out as quickly as possible as well as the need to allow for PRSI to be accrued by those who remain working beyond the age of 65, to examine retirement ages in contracts and to establish a body that will recommend increases in respect of the State pension, similar to the Low Pay Commission, as has been suggested. The remit of that body should go beyond the State pension and we should require a body to recommend increases across the board for social protection payments overall every year before budget time because we have this issue, as has been said, where people receiving the State pension or other social protection payments experience great uncertainty regarding those payments. They have no idea what they are going to get, and we have the annual football being kicked around in this regard concerning the debate on an extra fiver every year. Therefore, I agree with a great deal of what is contained in this report.

What was suggested concerning the Exchequer making annual contributions to the Social Insurance Fund was interesting. I wonder if consideration was given to a situation where the State would make that contribution and then we are also asking the State to make a contribution regarding auto-enrolment. I ask the witnesses to elaborate on their comments on the Exchequer contributing in this regard. I think it is something that is worthwhile and something to look at.

Flexibility is really important.

In the commission's report, Ms Feehily puts forward the idea of providing a State pension to those retiring at 65 and, of course, she has added to that where they have a long contribution history and she has put in a figure of 45 years. Can she expand on why it is 45 years and whether she considered it being less? What was the rationale for suggesting that? Obviously, we have an issue with people who are engaged in manual labour. They may have started work in their late teens and by the age of 65, in some cases, they have worked for 40 or 50 years. It is an issue if we are going to ask those workers to remain on until they are 67 or 68, when they physically cannot do so. There is also going to be an impact on their health, if that is the way we are going. Will Ms Feehily comment in that regard? Will it be a transition State pension being provided at 65 or a full contributory State pension, and how would that work?

Ms Feehily speaks a lot in the report about State pensions and how they protect people from poverty. With the recent increase, the State pension will now reach the minimum standard of living, which was listed as €252 by the Vincentian Partnership for Social Justice. That is welcome. In the context of those pensioners who are qualified adults or who are on reduced pensions, is there a protection from poverty for them, and was that looked at? In regard to what is now the benefit payment of €203 at 65, did Ms Feehily look at poverty protection for such recipients in view of the fact that they are locked out of secondary benefits like the fuel allowance? There is an impact at 65 of going onto this benefit payment, which is set at the jobseeker’s rate rather than the rate of the transition State pension, which was there previously. Again, that is set well below the poverty line.

On the legislation, there are employment contracts that stipulate a retirement age of 65. Ms Feehily said the legislation that is needed would apply to existing and new employment contracts. She will probably know that legislation was unanimously passed twice in the Oireachtas in the past six or seven years with regard to banning mandatory retirement. The issue that came up the last time was that the Department of Justice said it could not be done and that we could not look retrospectively at employment contracts. Does Ms Feehily think that is feasible? I agree it is something that needs to be sorted out because people are being forced to retire at 65 due to their contracts even though they do not want to retire. Frankly, if they just had to wait a year to get the State pension, many would probably remain on at work for that year.

Page 132 of the report contains a table that relates to the expenditure projections from 2019 to 2070 in the context of keeping the State pension age at 66. On a similar question to that asked by Deputy Ó Cathasaigh, do those projections include an indexation link to 34% of earnings?

The submission that we made recommended 30 years. Ms Feehily has opted for 40 years. She might speak a little about why she believes that 40 years is agreeable or even reachable. For many people who are immigrating or coming home, there could be difficulties in that regard. We have put forward 30 years.

There are a number of references to the widow’s pension in the report. We had put forward a recommendation regarding an issue that has arisen whereby a person has to be married in order to get the widow’s pension. While I appreciate that is outside the remit here, I ask whether there was any discussion around that requirement for the widow's pension.

Mr. Duggan referenced the increases in costs and what it costs to defer the pension age increase to 67. If we did not have a mandatory retirement age as stipulated in contracts and if we allowed people to work on from 65 and accrue PRSI contributions, what would the cost be? Do we know the figure in respect of what we will save by not paying out the contributory State pension at 66 and instead paying out a benefit payment for 65-year-olds? In the context of the pension age increases that Ms Feehily has put forward, how does she see that working if we go to 67? Will there be a benefit payment in the middle for those people who still have 65 in their contract? How will that work for people in manual labour who will be expected to work up to 67?

Before I ask Ms Feehily to come in, I ask members who are participating through Microsoft Teams to turn their cameras off and on. There seems to be a technical glitch and they are not on the screens. I call Ms Feehily.

Ms Josephine Feehily

Deputy Kerrane can remind me if I leave something out as I was furiously trying to keep track of the questions. I thank the Deputy for the comprehensive way she has reviewed our work. I will answer the questions in the order I got them.

As to why we picked 45 years for the very long insurance record, it follows from 40 years. The Irish social insurance system is somewhat unusual in that people pay full PRSI once they earn €38 a week, so people start paying PRSI very young for casual employment. It is one of the reasons why the averaging system is not very fair in terms of the pension, but that is another day’s work. It is not unusual when people reach the age of 65 for them to have worked for 45 years. Given that the recommendation for a full pension was 40 years, taking account of flexible access for people who had an exceptionally long record, it seemed to us that 45 was appropriate. It was as simple as that. As I said, quite a number of people start paying it at 16, so it is not exceptional.

I would like to talk a little about the Exchequer contribution. There were couple things driving our thoughts on that. First, the original policy grounding of the Social Insurance Fund in 1952 was tripartite funding. The tripartite funding has been observed but the Exchequer bit has been on a contingency basis and, for the first umpteen years of the fund, up until the middle of the 2000s, it was always in deficit. That was designed into it. It was meant to be tripartite funding. We took the view that capturing that general community solidarity contribution by a contribution coming from general taxation, which would not be discretionary, was an important return to that tripartite funding principle which was established from the outset and maintained for the first 40 to 45 years of the fund's existence. That was the first point, which was a solidarity point. How does everybody contribute? Everybody contributes through taxation.

Second, we felt that in order for the maths to be done appropriately every year, we needed certainty around the Exchequer bit and that it should not be down to squabbles. Third, the Exchequer makes a demand-led contribution which is legislated for in regard to private pensions in the form of tax relief. It is likely to make a demand-led contribution, which will be legislated for in the form of auto-enrolment for second-tier pensions, which will not be optional, so we felt that, for the first-tier pension, it should not be optional either. That is the thinking: the original policy driver plus the way the other two tiers of pensions are treated.

The Deputy asked whether we looked at poverty in respect of the adult dependants. We are aware of the Vincentian Partnership and the various definitions. It is quite clear from those definitions that a couple together has less risk of poverty than a person living alone. We looked at it from that point of view. We also looked at it from the point of view that if we take that at-risk-of-poverty measure, the likelihood is that the adult dependant will himself or herself be entitled to a non-contributory full pension,. That was as far as we looked at it.

In terms of the poverty risk, it is important to remember that if there is a couple at that point, the non-contributory pension is an important piece of the safety net.

We did not look at the retirement benefit of €203. I am afraid it was out of scope. We did not examine any issues to do with that.

On employment contracts, we clearly were aware that there were legal issues surrounding employment contracts. There is an overarching entitlement in the European directives as well. That is why we came up with a formula that would allow but not compel. It is a property right of the people who want to go at 65 years of age and they want their entitlements at 65. In many cases, it washes into their occupational pensions. That is how we understood the risk and that is how we came up with the formula to allow but not compel, and that future contracts should be aligned with the State pension age, whatever that may be from time to time.

On 40 years' contributions as opposed to 30 years' contributions, it goes back to the point I made about people starting really young. Thirty is very short. I would point out that the 40 years' contributions that we are recommending is for a full pension and a person with 30 years' contributions could very well get a partial pension. A person who emigrated could very well end up with a partial pension from another country where he or she worked. There are European Union rights but also there is a broader social security family with reciprocal agreements, etc. The emigration piece is probably well enough catered for by the range of agreements that would allow people to get perhaps two partial pensions. We did not look at the issue to do with martial status of widows. Did I answer all the questions?

I think so. I will come back at the end, if not. I thank Ms Feehily.

I thank the witnesses for coming in and for the work they have done. I have to confess I have not yet read the 244 pages, although I will do so over Christmas, because a lot of stuff comes in all the time. There is a lot of daily work in this job and I just did not have the time with all the other commitments.

Can Ms Feehily quantify the savings the Pensions Commission estimates because people have been encouraged to work longer and, therefore, make contributions into the system for a longer period? What savings would arise because pensions would not be paid to anybody over 66 until he or she got to the new pension age? That is a crucial question that goes to the nub of a big problem that will arise if you start raising the pension age.

I confess I am over the pension age, but the kind of job I do means I do not have to lift blocks every day, I do not have to plaster ceilings and I do not have to do lots of things that I might not feel up to. I feel up to what I do. One of the big problems of this is that there is a large cohort of people who by the time they come to their mid-60s are unfit for the work for which they are trained to do. It is a phrase they use for invalidity pensions, etc., that we are all familiar with on this side of the House. When people get to a certain age, they no longer can do the work. This can involve people who have to spend long hours standing in retail, etc., and have problems. It is fair to say that for a fair number people general wear and tear - they might not be very ill in the conventional sense - means they cannot do their jobs. For example, the Army will not keep people after a certain age. An Garda Síochána does not keep people after a certain age, and it would be younger than the normal retiring age. It is because these jobs require physical agility and ability. People of 65 to 67 years of age will not be kept in the ranger unit. That is an extreme example, but this is well recognised by the State. We often allow teachers to retire early because they are burnt out after 40 years in the classroom, etc.

What do you do? What do you say to these people when they come in to you? What are we meant to say to these human beings? Should we apologise and say that they are really meant to be working until they are 67 or 68 years of age? That is the dilemma. Is it to try to encourage people to work for longer or is it a cash saving and, if so, how much?

Of course, there was a third way round this that does not seem to have been examined. I have to confess I have not read the whole report, and maybe it was examined. Did the commission examine returning to the concept of the State pension transition? The idea of the State pension transition is that if you retired and you were not earning a substantial amount of money - you could earn a very small amount - you could get the State pension but if you continued to be employed, you could not get the State pension. Was that looked at, because one of the big disappointments is that people worked? It is interesting and key that one trade union representative did not sign off on the age increase because that particular trade unionist would have been familiar with the human problem that really came to the fore in the last election, that is, all the people who cannot physically continue to work after their mid-60s and were looking forward to retiring having put in 40 years' very hard work.

The second question I have is a technical one because it is a change of policy. When total contributions were first mooted in 2008, the policy was 30 years' contributions. The 40 years' contributions came in when the carer's credits came in. What made the commission decide on 30 years' contributions versus 40 years' contributions? Even during the previous Government, when I asked the former Minister, Senator Regina Doherty, about the transition from 30 years' contributions to 40 years', the replies I got fudged the issue and stated that it only applied where you were claiming the carer's credits and that no decision had been made in terms of people who had worked or drawn credits for the 30 years. When did that morph from 30 years' contributions to 40 years' contributions as a general policy as opposed to a specific policy? It was introduced to deal with the reduction in the payments to people who did not have the full average. The commission is obviously making a firm recommendation. Was the Department providing the data working as 40 years' contributions as a given, even though to my knowledge that policy was never decided on? As I said, the only policy that was decided on was 30 years' contributions.

I agree with Ms Feehily about the self employed. Even at the very beginning, on an actuarial basis, it was way better at 4%. As the commission pointed out repeatedly, the biggest cost for social welfare is the contributory State pension and, therefore, the adds-on are not what have added the costs.

It is fair to say it is the best value, as Ms Feehily pointed out. You pay your tax and your USC, which, God knows, was only meant to be a temporary provision. It is like income tax, when Wellington introduced it the first time as a temporary expedient. It has had a long legacy after him but USC was in the same vein. It was meant to get us over a little hump. It is something we should grasp the nettle on and I agree with Ms Feehily there.

I have probably said enough. My big issue is the human issue. This increase in the age does not factor in all of those people, many of whom get out of full-time work earlier on and are on invalidity pensions or whatever and cannot reasonably be expected to work after 66 years of age. Pushing it from them is really pushing it.

Ms Josephine Feehily

I thank the Deputy. I will pass over to Ms Burke to deal with the question on costings and savings. By the way, income tax was introduced by the British Government as a temporary arrangement during the Napoleonic Wars. The issues of transition and long working lives are kind of tied in together. We did not revisit the transition pension. We received quite a lot of inputs and views that the retirement condition irritated many people in the transition pension. Back in the day, it was called the retirement pension. The idea that one retired for a year and then went back to work the following year and continued to get the same pension was regarded by many people as being slightly laughable. That point was made to us. We did discuss returning to a thing called a transition pension. We discussed whether we might recommend the reinvention of a retirement condition for an early pension but, taking account of the submissions made to us, decided that would be complicating things all over again. I take the Deputy's point that some people are able and willing to continue to work and, in fact, actively seeking to continue to work, otherwise we would not have a row about the employment contract issue. There are people who wish to keep working, while there are others who do not wish to keep working or cannot do so. In the context of any increase in the age, we recommended that at the age of 65 people with a long insurance record - they are likely to be the people the Deputy is describing who cannot continue working and are likely to have started quite young - would get a pension without any transition or retirement condition. That was our reasoning in respect of not returning to the transition pension. The Deputy asked about a policy of 30 years' contributions. We did not review policies set in the past. We looked at the size of the financial problem and figured out options for addressing that problem based on the current situation and the likely costs into the future based on the numbers today. For us, in the context of the contribution to solving the challenge and meeting the cost, we recommended spreading it across existing workers in the form of a modest contribution increase after 2030, existing and soon-to-be pensioners in the form of a slightly later pension, and existing pensioners in the form of a PRSI contribution. That was based on filling the hole that exists in the funding for pensions. We did not look back at what the numbers were in the past or what policy options were because, frankly, they were not implemented anyway so there was no value in reviewing them. We looked at the situation as it is now.

The commission seems to have fixed on 40 years' contributions. Does it have data on the percentage of people who came into a pension in the past year and have 40 years' contributions? I believe that number is smaller than our guests may think.

Ms Roma Burke

I refer to the cost savings on moving to a total contribution approach over 40 years. The Deputy is asking the question from a slightly different perspective. That may be an issue on which we can revert to the Deputy.

It is important. This is about real people with real questions. They want to know how they are affected. They are not asking what the average is or whatever. It is like telling a person to go and get a suit in the average size. It might be too long or too short if one does that. I am interested to find out how many people actually would have got it if the 40 years' contributions was deployed rather than the averaging system or the dual system now. I think there are gap year records in the context of many people's social insurance contributions.

Ms Josephine Feehily

I am pretty certain the secretariat had those data for us at one of our meetings, but I do not have them to hand.

I ask Ms Feehily to pass on those data.

Ms Josephine Feehily

We were able to establish what the typical pattern was, relative to the 40 years' contribution. I remember the secretary had that material for us at one of our meetings. It will be easy to get those data because that question was asked.

I refer to the self-employed. The Deputy noted that he agreed with me. The structure of self-employed PRSI is kind of odd, apart altogether from the fact the rate is very low. Low-paid, self-employed persons pay 10%, while low-paid workers pay nothing. It is odd. The floor is €500 if a self-employed person earns €5,000, so it is effectively a rate of 10%. PRSI for workers goes the other way. It goes up as one earns more. The PRSI percentage for the self-employed is flipped and that is kind of odd. We make that observation as well.

The decision was made to raise it from €382 to €500.

Ms Josephine Feehily

But the effect is that they are paying 10%.

It is, obviously, out of €5,000------

Ms Josephine Feehily

A person who earns €100,000 pays 4%. That is just an observation.

The flip side of it is that if one gets into that pension scheme for €500 a year at the same benefit as a PAYE employee who is earning €100,000 and pays 14% of that, or €14,000, into the fund, one is not doing too badly. It may be that the €38 figure is very low but that is-----

Ms Josephine Feehily

It is still a bargain at €500. I am simply saying that, in restructuring it, one might want to think about-----

The other argument is that if it is 4% but the person has to pay €5,000, it would be necessary to have a much higher self-employed income to qualify. Most people are happy to pay that €500.

Ms Burke wishes to come in on some of the figures.

Ms Roma Burke

The Deputy asked about the impact if we assume a higher rate of employment among older people. The first thing to say is that I am very proud that my mother and father, who were both self-employed, decided to work on beyond State pension age. I have been able to see first hand the very positive impact of that and a real work ethos. I understand that some people are not able to keep working but in the case of my parents, they are both healthy and well and actively enjoying later life. I started the summary from the technical committee setting out the cost of the State pension and how it increases over various periods. By the time we get to 2050, the cost of the State pension as a percentage of modified gross national income will be 7.9%. If we assume the rate of employment among older people, that is, those in the 55-74 age bracket, will increase by 10%, that would reduce the cost of the State pension by 0.5%, from 7.9% to 7.4%. It is a relatively significant impact on the cost of the State pension.

What is the actual saving?

Ms Roma Burke

In monetary terms, to take a back-of-the-envelope approach - Mr. Flynn can keep me right on this - GNI* at the moment is approximately €200 billion and 0.5% of that-----

No, I am asking how much cash would be saved, in today's terms, by changing the age

.

Ms Roma Burke: The Deputy asked about older people working-----

My second question was how much is being saved by changing the age, just in actual payments.

Ms Roma Burke

Is the Deputy referring to changing the State pension age?

Ms Roma Burke

In the context of changing the State pension age, it depends on whether it is incremental, in line with previously legislated changes or in line with the report-----

I am referring to the proposals of the commission.

Ms Roma Burke

In the context of the commission's recommendations, the increase in State pension age reduces the deficit from €13.35 billion in 2050 by €3.8 billion. That is a 28% reduction in the shortfall if the State pension age is increased.

It reduces it by €3 billion.

Ms Roma Burke

It will reduce it by €3.8 billion in 2050.

I thank the contributors and echo what others have said regarding the real value of this report on so many levels. It is a tremendous contribution to this debate on pensions and how we plan for the future. I will home in on the issue of the retirement age. I will declare an interest in that I have a trade union background and have worked with workers in meat factories, on construction sites and in retail. I agree with Mr. Duggan that we have to be realistic. How realistic is it to expect these workers to work until the age of 68 after a lifetime of working, bearing in mind that many of them will not have spent their entire working lives in Ireland? Many will have come in as foreign workers over the past 30 years or so. Many others, including me, will have spent a long time abroad because of our unfortunate tradition of emigration over decades. How realistic is it to expect these people, who have given a lifetime of work, to work on to the age of 68?

I again compliment the work done by the commission. I am intrigued by the four potential packages it presented. I prefer package 3 to package 4, because it does not force workers to work on to the age of 68. We all support the idea of flexible working, which is a key requirement. I am curious as to why package 3 was not chosen. I am looking at the potential increases in employer and employee PRSI. I see employee PRSI would go up by 0.2% under package 3, as opposed to no increase under package 4. The difference is between a 1.55% increase and a 1.35% increase. How do these PRSI rates compare with those of our European counterparts? My understanding is there is a significant gap between the PRSI paid by employers here and what is typically paid in Europe.

Ms Josephine Feehily

I thank the Senator for his remarks about the work. The idea of the four packages is exactly the point he homed in on. We provided options, which is what our terms of reference asked us to do. The Government is entirely free to choose any or none of them. We provided an evidence base for all of the options. Package 3 is entirely on the funding side, with no contribution from the age. The commission is a group of 11 people with a range of views and we formed the closest consensus on package 4. We felt that the age increase makes a significant contribution to solving the challenge. We also had submissions from bodies, including the Economic and Social Research Institute, ESRI, showing there was a large body of people who want to continue at work. As I said, the employment contract issue would not be arising if there were not people who wanted to continue at work. It was not as simple as everybody wanting to retire.

Package 4 emerged from a distillation of all of the inputs. By providing the option for a pension at 65, at the same time as the age is going up, we were finding a levelling in there. Package 4, on the age ground, emerged from a distillation of all of the inputs and addressing the scale of the problem, as well as a desire not to have everything falling on the funding side. The trade union people, and I am sure they would not mind me saying this, would not necessarily have wanted employee PRSI going up either.

I take Senator Gavan's point that the difference between the various packages in the incidence of PRSI is modest, but it does have an impact on the labour market and that was also on the table from various inputs to us. There was not a desire to increase PRSI at the same time as auto-enrolment is coming on, with a potential increase from both employers and employees to their personal pensions and things such as statutory sick pay imposing additional costs. There were many things in the mix in the submissions to us. However, we were particularly driven by the fact there is no fixed view that people should retire at 65 or 66. People were looking for a range and so we put the age piece into package 4 as the optimum mix of interventions to help address the deficit, noting that people with long working lives might get a pension at 65, and as an option for Government.

I take the Senator's point about people having worked in different countries. Modern social security frameworks provide for reciprocation, not just in the European Union, but beyond. People who work in different in countries can end up with two partial pensions or combined insurance records. It is not the sort of fatal hit it used to be many years ago.

There are two answers to the Senator's question on PRSI in other countries. Social security systems are not always directly comparable. In many countries, which I am sure the Senator knows from his own work, some elements of social security are provided through funds, including trade unions. Several contributions can come from a payslip, so pension, unemployment insurance and health insurance can all be quite different. Comparison is quite difficult but it is the case that we are a bit behind the curve on both the employer and employee side. How far we are behind the curve depends on who one looks at for comparisons. As if that was not complicated enough, the benefit range is also a bit different. As a general comment, the Senator is correct. We had a presentation from the OECD and when that question was put to it, the OECD pointed out we were also behind the curve on the employee side. Does that capture the Senator's questions?

It does. In terms of the potential savings of raising the pension age, I will go back to Mr. Duggan's point about being realistic. Realistically, a number of these people, if they are forced to work on to 68, will find themselves in receipt of some kind of social payment, rather than actual work. Age Action described this point very well last week in that we know once people get into their 50s and 60s, it is much harder to get another job. Is it realistic to suggest this level of savings, given the Department of Social Protection's analysis suggested that many of these people will still require an alternative form of payment?

Ms Josephine Feehily

I can only repeat that the evidence put to us was that there was a growing desire to continue working among older people and those coming up to pension age, balanced by some among whom there was no such desire. As I said, we therefore came up with a range of options. Without diverting and digging deeply into this report, I am not certain how many of the likely other benefits were netted out. A model was done for us by the secretariat of the Department which certainly took account of the better retirement benefit that was invented. Unless Mr. Flynn can help me, I would have to go digging to see how much the likelihood of benefits was factored in and that would delay the committee.

Mr. Alan Flynn

Similar to the answer to the previous question, we will have to look at the model in detail to provide an answer on that. I would not want to mislead the committee by providing a wrong figure to suggest exactly what was included. When we do costs in this area, we normally net off against alternative payments. We will check on the specific model and provide an answer to the committee afterwards.

We would appreciate that because the Economic and Social Research Institute, in its evidence to the committee last week, pointed out that where this has been done in other countries, it has not led to the dramatic savings that are being projected here.

Good morning to Ms Feehily and other members of the commission. I will be brief. I have an observation and one or two comments to make. I thank the commission for this extraordinary body of work. I am of the Deputy Ó Cuív school, in that I am familiar with the headline details but not the minutiae of the report. The background is the decision to raise the pension age to 67 in 2021 and 68 in 2028 that was made by the Government led by then Taoiseach Enda Kenny between 2011 and 2016.

A fundamentally dishonest debate was held in the midst of the most recent general election campaign, during which voodoo economics prevailed and nobody was prepared to stand up and say that more people cannot qualify for payment from the Social Insurance Fund without an increase in contributions. Some even advocated for reduced contributions. People should not have been told that more will qualify for pensions equivalent to those being paid today or increased pensions. That is a fundamentally dishonest position. There was further dishonesty from some who voted for an increase in the pension age in Northern Ireland from 65 to 66, which came into effect last year, but who, in June of this year, voted in this jurisdiction to reduce the pension age to 65 and argued that the only cost of that was €120 million to the Social Insurance Fund. Those positions are dishonest. The report is stark in its detail and what is abundantly clear is that we face a difficult challenge. The Social Insurance Fund will be in deficit to the tune of more than €3 billion, and growing, by 2030 if we do nothing.

I appreciate the fantastic piece of work that has been carried out under the stewardship of the chairperson of the commission and by all of the members of the commission. Why does Ms Feehily believe that the proposal in the commission's report, which, if I understand it correctly, is for an incremental increase in the pension age to 67 over the period to 2031, and to 68 some time thereafter on an incremental basis, will be in any way more acceptable than the lead-in time envisaged in the original legislation to raise the pension age to 67 and 68 in 2021 and 2028, respectively? These are difficult issues. We must all face up to the realities. People are living longer, which is a fantastic achievement in our lifetime, and, consequently, they are active and healthier in society for much longer. That brings challenges with it. Meeting those challenges has significant economic consequences with which we are grappling. Why does the commission believe its proposals will be more politically palatable than those that were outlined and legislated for previously? I again thank the commission. It has made a fantastic contribution to a very challenging area.

Ms Burke alluded to policy levers relating to fertility and the requirement of additional migrant workers. Is the argument around migrant workers not bogus? If we bring in more workers and have more people paying in, they will fund the pension entitlements of those who are hitting the pension age either now or in the near future. However, future pension liabilities for those workers are also being incurred. I accept we have labour shortages and requirements for non-EEA workers to fill vacancies here but that migrant worker argument is short-termism. It is unsustainable in the long term. Through their contributions, those workers are creating an entitlement to social welfare benefits, possibly including a pension entitlement.

Ms Josephine Feehily

I thank the Deputy. I will invite Ms Burke to answer the Deputy's second point in a moment. The Deputy asked a key question about the palatability of the age recommendation. We have included a couple of things which we think might help. The more transparency there is about the nature of the funding problem, the better the chance of creating an understanding across the community that this is not just a political whim or something that is being done for fun or to annoy people but is an important part of having a pension system that has certainty. The comfort of certainty, as you get older, is enormously important. We are strongly suggesting that in the lead-up to any new changes, whether they are recommended by the commission or not, more public debate take place about the underpinnings of, and the rationale for, any such decision.

In the debate that took place about the age increase at the beginning of 2020, there was a lot of focus on what I am calling the gap between 65 and 66. Many people were concerned. There are recommendations in our report that would address the gap on the employment side. There were some people who were content to stay at work but could not do so. We have recommended addressing the gap. The Government has addressed the gap with a retirement benefit for the age of 65 to 66. The gap has been addressed, or would be addressed, if our recommendation was implemented and attached to that to a fair degree. At least one of the debating points would be addressed.

We also recommended a lot of communication and the issuance to workers of statements to allow for a lot of notice. We are not recommending that the age increase begin until 2028, so there is lots of time. The statements to workers would tell them their specific situation, pension age and contribution record. It would set those out that information and explain it in good time. That should be done not only once but more than once. We recommend better communication to help understanding.

We felt that by moving a quarter at a time, we were reducing the sense of loss. Some people felt they were losing a year, relative to their predecessors the previous year. By doing it slowly and more gradually, although people still "lose", they are losing a lesser amount relative to their colleagues who retired the preceding year or the year before that. As part of the question of addressing the gap, we recommended the option to provide a pension for people with very long records at 65.

We felt we were contributing to enabling a rounder debate in the future.

At the committee's meeting last week, which I reviewed in recent days, one of the members said there are no easy decisions in this and we agree. There is only a question of which hard decisions will be made. The points I have made are about contributing to a rounder discussion and to having some answers to a discussion around the age point. The 65 age gap has been partially addressed and would be further addressed if people who wanted to stay at work could do so. We need to have much better and earlier person-specific communications. We must tell people that their pension age will be, for example, 67 and three quarters or 66 and we will shorten the sense of loss involved by doing it much more gradually and more slowly. Those were our considerations on how we might help that debate to be rounder the next time.

Ms Burke might be able to help with the question on fertility and migration.

Ms Roma Burke

That question ties in nicely with the Deputy's first question on why this might be more palatable now than the previously legislated for State pension age increases were. A couple of years ago when we saw those increases about to come through, everybody had a bit of an understanding about the problem but not everybody was fully informed, including myself. Before I became involved with the commission I thought that we did not need to worry about it, that more people would come into the country and that the average age of retirement would be maintained. Other people might have said that the State pension was getting more expensive but I thought the State would cover that cost. Everybody had a partial solution for this problem and everyone partially understood it but when the Commission on Pensions was formed, it set out to look at each of these ideas that people had, such as the possibility that migration or fertility might solve the problem. We took a systematic and evidence-based approach to examining each of those matters in isolation and to examine if they could be relied on, if they would help to solve the problem or if they would cause other problems as the Deputy has suggested. We looked at each one individually and we looked at the migration question purely in the context of a simplistic ratio, namely the number of working age people versus the number of people past the State pension age to see how we could maintain that. The Deputy is correct that if the population increases by 50% over the next 30 years there will be other significant challenges for the State in housing, healthcare, childcare and in people getting older and developing an entitlement in their own right. That would cause much wider challenges apart from just the State pension. It was important to us to examine how many people we would need if we just wanted to maintain that simple ratio. It demonstrated to us that the ideas we might have had previously, that a small increase in net inward migration might solve the problem, would not work. The process allowed us to tackle that and answer the question and now we can systematically move on to other headings that might help us tackle the challenge.

On Ms Feehily's comments on palatability, being forewarned is incredibly important. A key part of the second pillar of pension provision is telling people every year what they are saving, what they have saved to date and what they can expect at retirement if they continue what they are doing. That has been crystallised for people who are actively in employment as well as for people who might have saved for retirement but who have left their pension scheme to move to another job. Under recently introduced legislation, every year those people will get a statement that sets out their expectations and any assumptions surrounding that. It is a question of applying that approach to the first pillar of the pension system. We must give people that information so that they understand what they will get at retirement in order that they can plan and see if, for example, auto-enrolment or saving for a private pension and so on would be important and worthwhile for them. Forewarned is forearmed and action can be taken if needed and if no action is needed they know that as well if they are forewarned.

I asked one other question on the actuarial cost of reducing the pension age from 66 to 65 rather than increasing it. I do not know if the witnesses have the answer to that question. Second, I want to make an observation. I am around long enough to remember the reduction in the pension age from 70 to 66, which happened in the 1970s and was a staggered reduction every year over four years. It is a different kettle of fish to go in the opposite direction but it is worth remembering that we are revisiting an area we occupied within living memory when the retirement age was 70.

Ms Roma Burke

I would be relying on my wider understanding of pensions to work out the actuarial cost of reducing the pension age to 65. If the retirement age was brought forward the payment would be made a year earlier and so it would be in payment for longer. If it is assumed that the average male might live until 83, for example, and if he is getting pension increases along the way, the value of that pension is about 30:1. If that is brought forward a year, an extra year's payment is being added to it and all the future pension payments are also being increased so it would probably increase it by at least 10%.

With regard to Ms Feehily, the commission and all the staff who supported the commission's work, a substantial body of evidence has been produced. Regardless of what decision is taken down the road, this is significant and useful and it clearly sets out the challenges, issues and options. It starts the conversation we need to have in this country on how we address this challenge into the future. A lot of the tools are here and members have raised questions on the figures and modelling behind that. I want to publicly acknowledge that because it is significant work and I want to commend everyone who has been involved in that.

I have a number of questions. Ms Feehily's presentation mentioned the issue of class K stamps for additional income being paid by people beyond the age of 65. Within the commission report it is also acknowledged that some people beyond the age of 65 or 66 can no longer pay PRSI contributions to build up an entitlement. How does one square the circle of paying two types of contributions beyond someone's 66th birthday? Some people will pay class K contributions and others might pay class S or other stamps. Should it not be the case that if someone pays PRSI, he or she should make a contribution to his or her pension up to the threshold of 30:1, 40:1 or 45:1? People will continue to pay beyond that if the commission's report is implemented. Why is there a need to pay some stamps that do not have an entitlement built into them? Should that system be streamlined?

I want to follow up on Ms Burke's final comment on modelling and emigration and I want to come back to the other issue. The ESRI was not able to answer the question of childcare and the indigenous working population for us last week.

If we look at what is happening here at the moment in childcare, which is replication of problems we have seen right across Europe over previous generations, the cost of rearing a family and particularly the cost of childcare has a double-edged impact. One, it reduces the fertility rate in a country and is part of the contributing factor to that. The other is that it also reduces participation in the workforce, PRSI contributions and taxation. This is a double-edged effect with both a short-term and longer-term impact. What would be the benefit of actively supporting childcare and greater participation of women in the workforce and what would that impact be on the long-term prognosis as to the cost of pensions? Our witnesses may or may not be able to provide some information today and, if not, perhaps they might try to come back to us and grapple with this particular challenge because it was one that the Economic and Social Research Institute, ESRI, could not answer for us here last week.

Turning to Mr. Duggan, in his evidence he referred to the projected modelling costs of the pension and the actual cost of the pension. The projection was that not increasing the age from 66 to 67 would cost €221 million. He is now projecting that that figure will be €275 million by year-end and over €500 million in a full year. What is the jobseeker's benefit impact on that? If people retire at 66 years of age but cannot claim their State pension until they are 67 years of age, they would have an entitlement to jobseekers’ benefit which, to me, would negate much of the potential savings that are there. Can Mr. Duggan give the committee the projected cost of the jobseeker's benefit if one increases the age from 66 to 67?

It sounds strange to me that the projections are actually going up when, if one looks at the CSO analysis of the data from RIP.ie, this shows that there are 2,300 additional deaths as a direct result of Covid-19, or this is the indication that has been given. A number of people, disproportionately and sadly in respect of many older people, have died as a result of Covid-19. As a result of Covid-19, we have fewer people claiming a State pension yet Mr. Duggan’s projections are €54 million out from where it would be. How has that happened when, sadly, there are fewer people claiming the pension as a result of Covid-19? The cost projections have gone up by close to a quarter; that seems to me to be a significant error in respect of those particular calculations by the Department.

On the famous Telecom Éireann shares that were lodged in the National Pensions Reserve Fund, NPRF we all know that that fund has been raided to bail out the banks and has also been used to invest in stimulating the economy. There will be a return, however, from those investments at some stage. The Minister for Finance is telling us that the investments that were put into the banks are turning into a profit and the reality is that the National Treasury Management Agency. NTMA, will get a return on the investments that are now being put in to indigenous businesses, and so forth. Has that been modelled into this?

Has any consideration been given to the fact that the Irish Fiscal Advisory Council, IFAC, has stated that the windfalls we are gaining at the moment in corporate tax should not be put into day-to-day spending? Is there merit in ring-fencing some of that corporate tax windfall and putting it into something like the NPRF which was there to plan for the cliff edge down the road by way of costs? Our witnesses might answer some of those specific questions, and Ms Feehily might start, please.

Ms Josephine Feehily

The question for me related to class K PRSI. By way of general remark, this is not the commission’s business. PRSI needs streamlining and that is a different question.

The range of solutions in our recommendations in the commission’s report around PRSI and older people would bring some complexity and the Chairman is completely correct on that. We are recommending that those who wish to keep contributing would pay a full contribution up to age 70 if they wanted to increase their pension. We are also recommending that if they do not have enough contributions they would keep paying and then they would stop when they had enough. That would involve another subclass A, where A is already broken down into people with an income below €300, or whatever the exact figure is. There are subdivisions in class A and there would now be a new one.

The separate recommendation is about funding. This is simply a solidarity contribution where pay is the most convenient box to put that into because it exists already as a solidarity contribution in the PRSI system. The Chairman is correct in saying that we would be introducing some complexity. The alternative is to simplify everything into a single rate. It is not unusual in the history of PRSI, going back to 1979, for there to be these complexities. In fact, in preparing as part of the commission’s work, I discovered class P, which I had never heard of, which has all of about seven people in it. It is not unusual within the PRSI system for it to provide subclasses to address particular issues. We acknowledged that the complexity was already there and we may add a little bit to it but not an enormous amount.

If we could use the flexible options, in particular, for people to continue paying in order to enhance their pension or to fill out their record, we thought that it was worth the complexity. The class K piece is a straightforward funding hypothecated tax, almost.

Ms Burke will talk about the modelling in a moment but there are sections in the report about labour market interventions. Childcare is not one of them but some of the other labour market interventions are set out there, including Government policy on the labour market generally. We were mindful of it and I will allow Ms Burke to answer whether we were able to capture childcare.

Ms Roma Burke

I thank the Chairman. Childcare is the trigger for helping more women participate in the workforce. The Chairman is really asking whether the commission considered the impact of women being better facilitated to either return to the workforce or work more? Yes, that was fully and very carefully considered at our technical sub-committee level. I am a lay person on economics but I was sitting beside two very able economists and we had a discussion about participation rates within the workforce, how that increases and the role of women within that. One of the conclusions from the committee which is already built into the calculations is not what I would consider to be an optimistic calculation but one which is at the higher end of a range of assumptions. Basically, an increase in the labour force participation rate from 62% to about 66% is built into these calculations. Looking at the research and discussing it with my colleagues, we felt that there was probably limited scope for further participation given that that was a fairly challenging increase in labour force participation. That, in turn, is dependent upon childcare and other factors to help people.

We also looked at the impact of increasing education levels on people going into the workforce and staying there. There were a couple of elements to that consideration.

Ms Burke has partially answered my question about putting numbers on those elements. I am not expecting the commission to provide numbers today but it would be useful from a broader policy perspective, and for the role of this committee and the recommendations it will make to the Government, if we could have figures on education, childcare and the different elements to increasing participation in the workforce. Sadly, childcare is seen as a cost rather than as a long-term financial benefit to the economy. It is important that is part of the overall narrative and discussion.

Mr. Duggan might answer one other question. Is it feasible and practical for the existing social welfare software system to pay State contributory pensions on an incremental quarterly basis, as is being proposed by the commission? That seems to be an issue in that the quarterly incremental payment could be challenging purely because of the software system currently operating in the Department.

Mr. Tim Duggan

I will take the Chairman's last question first. To implement the pension age increase on a quarterly basis would require system changes, but it is doable. We have quite a bit of time to implement it, if the commission's recommendation is accepted and implemented by the Government. I do not think it would be a showstopper.

I do not have figures to hand regarding the benefit payment for 65-year-olds, but the yearly expenditure on that is in the region of €35 million to €40 million, based on the number of people who seem to qualify for it, or are applying for it, at this juncture.

On the €221 million likely increasing to €275 million, remember the latter is a projection rather than an actual figure and it is impossible to be definitive about projections. The best we can do is estimate based on previous understandings and likely behaviours. The Department almost always errs on the side of a conservative estimate when projecting because it does not want to overstate the nature of problems. Consequently, even though there have been, tragically, deaths from Covid, it is still the case that people are living much longer and healthier lives. That dynamic, which is changing quite rapidly and has done so over the past ten years, coupled with some budget increases, such as the living alone allowance and matters of that nature, means that our projections may have been a little out and a little conservative. Consequently, the actual costs being realised are a little higher than we expected. That is because it is incredibly difficult to predict what the numbers will be over the full year and, at the time we made the projection, we did not know of some of those budgetary increases. That explains the difference.

I accept it is impossible to be accurate, but it is also the case that EU fiscal policy forces Departments to take a conservative view in the other direction. They overestimate rather than underestimate because of the way the Estimates process now works. It does not stack up that the Department of Social Protection underestimated from a conservative perspective because that would be an irresponsible approach to fiscal management. Until flexibility was brought in under EU fiscal policy, it was not possible to get a Supplementary Estimate. That does not wash. Is Mr. Duggan saying that the main reason for the significant difference is the additional budgetary changes to entitlements that have taken place? Is it the case that since the actual cost of the State contributory pension did not increase, Mr. Duggan is including in this figure other additional costs, such as fuel allowance and other supplementary benefits? Is that where this figure is coming from?

Mr. Tim Duggan

No. I do not accept that we underestimate. We estimate. We try not to overstate those estimates. That is what I mean by conservative. I do not mean we underestimate because as the Chairman said, that would be irresponsible so we do not do that. We certainly do not deliberately underestimate. I am not saying the figure includes such things as fuel allowance. I only included those allowances that are increases on the State pension payment. Somebody who is living alone gets an increase on their payment. We call it the living alone allowance but it is, in effect, an increase on their payment. It is only those I include. I do not include fuel allowance, the housing benefits package, HBP, or payments of that nature. It is a combination of things, including the fact that more people are drawing the State pension than we may have thought because of the longevity issue.

I thank Mr. Duggan. I note that Deputy Kerrane wants to come in. I am sure Deputy Ó Cathasaigh will remind me that the carbon tax funds the living alone allowance. It is not coming directly out of the Vote for the Department of Social Protection budget. It is income that has been generated by people paying carbon taxes throughout the country.

I have a question about the table on page 132 of the commission's report. It is fine if its representatives cannot answer it now. Do the Exchequer expenditure projections in that table include the indexation link to 34% of earnings or an increase in the State pension? I want to check that. The witnesses can come back on it, as I appreciate they may not have that information.

I reiterate that I believe we will have an issue with the move to those in manual labour drawing the State pension at 67 years of age. I appreciate what the commission has put forward in asking the Government to look at the option of providing a pension at 65 to those who simply will not be able to work beyond that age. Has the commission put that forward as a recommendation to Government with those workers in manual labour jobs who will find it hard to remain on in work to 67 in mind?

The chairperson asked the question I put to Mr. Duggan earlier regarding those savings. It would be great to get something in writing on what the savings will be if we increase the State pension age and we continue to pay out a jobseeker's rate payment benefit, or whatever it is called. I will again make the point I made to Mr. Duggan regarding the figure of more than €200 million that had to be charged because we did not increase the age to 67. If we looked at removing the ages in contracts that see people forced to retire at 65, and we also allowed those who remained at work to accrue PRSI, I believe that figure would be much lower.

We need to move on getting rid of those ages stipulated in contracts that are below State pension age and allow those who want to, and are willing and able to, work on to accrue PRSI contributions. In some cases, they need to work on because they do not have the PRSI for a full State pension. In other cases, they want to work on for social reasons because, in some cases, they have nothing else. It is not always financial. I would argue that those savings are limited given that we are paying out. Will we continue to pay out when the pension age increases to 67? Will that benefit payment extend to two years once the pension age increases?

Ms Burke talked about forewarned being forearmed and that is important. I made the point last week that people of my age or a bit younger are often so busy in their lives they may not be thinking ahead to pension age. Having communication on what people's PRSI entitlements will amount to, done clearly and in a personalised way, as Ms Burke said, is key. It is also a huge factor in the idea of auto-enrolment, which we have not discussed today. As people become more aware and think in that longer term frame, auto-enrolments will become an increasingly important part of the picture.

The Chair might laugh at this, but he opened the door by talking about the changing nature of the world of work. I put this question to the ESRI last week and nobody bit, as such. We are modelling pension structures out to 2070 in this report. In the conception of the world of work that underpins this, were we looking at a business-as-usual model? With regard to childcare, for example, we know the caring economy will expand greatly as we have an older population. Will that have an impact on how we fund our pensions model? We can also look at areas around artificial intelligence and digitalisation. It is outside Ms Burke's terms of reference but is it in the terms of reference of the Commission on Taxation and Welfare. There are also climate impacts. Are we factoring this in? If we are planning the fiscal future of the State out to 2070, are we actively taking account in our modelling of those long-term disruptive forces or presuming a business-as-usual model?

Ms Josephine Feehily

First, I will address one or two of the Chair's questions to clarify. We made a deliberate decision in terms of the data to ignore the rip.ie blip, for want of a better word, because we are looking at trends over time. When we were settling our technical papers we had that conversation because our member, Seamus Coffey, was the first person to start on that particular analysis. One could not tell whether it will be a blip or be sustained or whether it will have impact. Now that we are in year two of a health emergency, some nations are starting to adjust downwards their life expectancy rates. Whether that will be a blip or a trend, we decided to ignore it.

We also had a conversation about the pension reserve fund early in our work and a number or members had a view that maybe that was another part of the funding solution. We came back after much analysis and decided that certainty was more important. That is why our funding proposals are around social insurance and the Exchequer, which is recurring. That is why we recommend the Exchequer contribution should be hardwired in. Relying on occasional payments is not a way to fund something that is recurring and growing. We discussed it but the Chair will not find it in the report because it was left out.

On Deputy Kerrane's questions, we will have to come back to her about page 132. The Department ran models for us. I do not know quite what the precise elements of the model it ran was. It is better, as Mr. Flynn said, that we get it right. There were some things included, I know that.

On the age 65 proposal, we decided that trying to define long hard-working lives was another complexity and debating point so we settled instead on years of contributions. What is arduous for one might be fun for another. I do not mean to be glib but some people like to go to work. There is interesting stuff in the report on the labour market from The Irish Longitudinal Study on Ageing, TILDA, which showed quite a number of people self-reporting that they want to remain at work. We talked about that but reckoned the definitions could be tricky.

On Deputy Ó Cathasaigh's question, we did not envision a different future. Our terms of reference, as we discussed at the beginning, were quite focused but we were clear in our own chats. It is not in the report but we were clear in talking to colleagues that this would not be the last word. It cannot be, because we are looking at sets of data and trends. While we are modelling the cost out to 2070 based on the status quo, our age recommendations top at age 68. We reckon another view would have to be taken of what the trend is then, what the world is like and what and the inputs are like on the funding side. There are issues of sustainability and climate. The impact of climate issues on the labour market is something we are only beginning to debate. While we have labour market evidence in here relating to health, education, female participation and age, we have not factored in what happens if people, having learned in the last year and a half that they can work differently, adopt a new model. The evidence was not there for us to do so.

A proposition was put to us by some submitters and in the previous work done on pensions that the pension age should be linked to life expectancy and we said we would not go that far because one would need to implement certain things, assess the new reality and form another set of proposals. Nothing is ever set in stone. We thought about whether to go beyond age 68 as an example and we decided going to 68 was enough and we would not link it to life expectancy. That is partly connected to the Deputy's question about the nature of work in the future. I do not know if that covers the various elements of the members' questions. Ms Burke wants to add something.

Deputy Marc Ó Cathasaigh took the Chair.

Ms Roma Burke

I will add a couple of things to fill in some little gaps. There have been a good few questions today on the table in page 132. On the previous page, it states:

The Commission considered it appropriate to review the wider expenditure impacts of changing the pension age rather than just considering the impact on State Pensions’ expenditure [alone], as expenditure on working age payments would increase as a result of an increased pension age.

It goes on to state:

Table 11.4 below sets out the impact of overall pension expenditure (which includes public sector pension and wider social protection payments) of changes to the State Pension age.

That might help with that question.

On Deputy Ó Cathasaigh's comments about looking to 2070, who knows what life will be like then? The further you move out, the more uncertain things become. Nobody three years ago could have predicted what has happened in the last year and a half. It goes to show that things come which are unexpected.

We were mindful of the work the technical subcommittee did. Any findings we thought would be useful to the Pensions Commission were based on looking at 2050. We felt that was a point in time that was definable and which we could see. That is what we focused on and then we said what we think happens if you go out to 2070. Even in the infographic the Pensions Commission produced, the focus is on 2050 because the further you go out, my version of the world might be different from somebody else's version by that point.

I thank the witnesses for attending and for their constructive and positive engagement. The committee will consider today's proceedings as part of our continued deliberations on the report of the Pensions Commission. Go raibh maith agaibh go léir. The joint committee will proceed in private session, and remain so until it adjourns.

The joint committee went into private session at 12 noon and adjourned at 12.04 p.m. until 9.30 a.m. on Wednesday, 24 November 2021.
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