Joan Burton
Ceist:71. Deputy Joan Burton asked the Minister for Finance his policy on pensions; his responsibilities in respect of pensions as Minister for Finance; and if he will make a statement on the matter. [4349/18]
Amharc ar fhreagraTuesday, 30 January 2018
Ceisteanna (71)
Freagraí ó Béal (6 píosaí cainte)
Is the Minister aware than only 40% of private sector workers make any provision for their retirement pensions and that many in the private sector will rely entirely on the State pension to meet their income needs when they are in retirement? Whatever happened to the proposal of the previous Government to have a supplementary pension scheme into which people would be automatically enrolled? It appears effectively to have been completely shelved.
Perhaps I will answer the two specific questions which the Deputy put to me as part of my supplementary replies. In respect of the broad question which the Deputy tabled, she will be aware that a number of State bodies have a role in the broad area of pension policy. The Minister for Employment Affairs and Social Protection is responsible for State pension policy. As Minister for Public Expenditure and Reform, my responsibilities primarily relate to public service pensions. As Minister for Finance, my Department has a role in relation to pension policy and this role has primarily related to the use of tax policy to incentivise savings. In addition, I have responsibility for overall macroeconomic policy and fiscal sustainability. In this context I am committed, along with my colleagues in government, to reforming the area of pension provision and pension savings in Ireland.
My colleague, the Minister for Employment Affairs and Social Protection, has previously announced in this House that it is her intention soon to bring forward a comprehensive five-year pensions reform programme. Officials from both of my Departments are engaged with this programme. It is very significant as it has material implications for many stakeholders. Along with proposed reforms to the existing pensions system, it is proposed to introduce a policy of automatic enrolment to increase pension coverage and to address the issue of income adequacy in retirement for those currently without supplementary pensions. The Minister, Deputy Regina Doherty, has stated that, following Government approval and publication of the reform plan, it is intended that a detailed evidence building and consultation process will be undertaken to deliver an auto-enrolment system.
The direct answers to the two questions the Deputy has put to me are, first, that I am starkly aware of the challenges that are approaching in respect of the number of our citizens who have adequate pension coverage for the future.
Regarding the proposal on auto-enrolment, the Minister, Deputy Regina Doherty, will be advancing this matter through the roadmap for overall pension reform.
I thank the Minister for his answer. I am glad that he has acknowledged, as the chief financial officer of the State, that he is the lead person on pension policy. During my time as Minister for Social Protection a vast amount of work and consultation, the results of all of which are available to him, was carried out by my Department, with the active support and interest of his own. However, the process has stalled and we seem to be about to undergo another consultation process which could delay everything by a further five years. Irish society has a changing demographic. Unless we have something like a supplementary pension option for workers to save for their retirement, many will end up on the State pension alone which will almost certainly result in their being at risk of poverty. What are the time dimensions of the proposed further consultations?
I agree with much of the Deputy's analysis. The levels of private pension coverage are not what we want them to be because many citizens face the prospect of only having the State non-contributory pension on which to depend in the future. The other major difference between them and previous generations is that an increasing number of individuals will be renting. Therefore, unlike their predecessors, they will not own financial assets like a home. This has the potential to significantly affect the income streams they will be able to access in later life.
With respect, I am not the lead Minister on pension policy. It is the Minister for Employment Affairs and Social Protection, Deputy Regina Doherty. For the reasons outlined, however, I fully support her in putting in place a framework to address this issue which I expect to be presented in a number of weeks' time when the Deputy will see that it will try to move the issue forward from the work done in the Department while she was leading it.
While I was in the Department in 2012, I commissioned Ireland's first ever study of pension charges and costs. The supplementary pension will have to be a State system because the charges, both visible and hidden, levied by private institutions have increased since the survey which I requested was conducted. People in their 30s are, we hope, moving to purchase their first home. Much of their savings will be concentrated on it. It is possible to utilise USC and, although the Minister might not agree with my recommendation, return to social partnership. In the wage and salary discussions that must take place if we are to improve workers' living standards, Government funding could be allocated to contribute to pension funds. We need to prevent a recurrence of what happened to the National Pensions Reserve Fund which basically was given to the banks.
The Deputy makes two fair points. First, if we are to set up a structure to incentivise citizens to leave more aside for the future, we must avoid a situation where the funds they will leave aside will be eroded by the fees and charges levied by those who will manage the funds. I am aware of that matter. If we are to ask people to set aside what could be a noticeable amount of their after-tax income, we will need to give them the confidence that that income will be used in the future to generate other income.
On the Deputy's second point about the potential role of the taxpayer in supporting such contributions, there could be that need. The Minister, Deputy Regina Doherty, is finalising the roadmap which she will publish soon and I am working with her on the matter. We need to reach a point at which we will not just be looking at a single contribution from a worker but also considering what contribution the employer can make and role the State might have. I am alive to that issue.