Thursday, 2 February 2012
Dáil Éireann Debate
We want to make the State pension more transparent and equitable, as well as affordable and sustainable. The qualifying age for State pension has been increased to age 66 from 2014, 67 in 2021 and 68 in 2028. The number of minimum paid contributions required to qualify for a State pension will increase from 260 to 520 in April 2012. This has been legislated for since 1997. Changes have been introduced in Budget 2012 to make the contribution band rates more equitable. In addition, it is also proposed to move away from the current system of averaging contributions to determine the rate of pension to a more transparent system of calculating total contributions. The proposed date for its introduction is 2020. This will mean that individuals can qualify for a maximum pension with 30 years contributions and a minimum pension with 10 years paid contributions. In conjunction with these changes, it is also planned to allow people to defer receipt of the State pension and make up shortfalls in contributions.
We want more people to save for their retirement and we want people to save more. In fact, the Programme for Government includes a commitment to progressively achieve universal coverage, with a particular focus on lower-paid workers. That is why we are currently working on the development of an auto-enrolment scheme.
The complexity of the pensions system overall is another area we will be examining. In particular, we want to make the whole system more transparent so that people can make informed decisions about their retirement planning.
Given the extreme difficulties that most defined benefit schemes have faced in recent years, and indeed that many are still facing, we must recognise that changes to the current system are required if this type of provision is to survive. Following detailed consideration of the issues involved and consultation process with stakeholders, the Government decided to introduce a number of changes with respect to defined benefit provision.
These include: the introduction of a reformed and strengthened Funding Standard; a change in the way accrued pension benefits are revalued in order to ensure equity; a change in the priority order in which funds are disbursed when a scheme winds up to allow for a better return to members who have not yet retired. In addition, the Pensions Board will be given powers to wind up schemes in certain limited circumstances. Legislation to provide for these changes will be introduced in the coming months. Initially however, the existing Funding Standard is being restored and this will give underfunded schemes 3 years in which to restore their funding levels to the current standard.
In addition, the Pensions Board has published guidelines in relation to the sovereign annuity initiative. This will enable potential providers to develop these products which will make it easier for pension schemes to invest in Ireland.
My Department is currently conducting a study of pension charges which was instigated because of concerns that pensions schemes and their members have in relation to the level of charges applied to their scheme and the lack of transparency around some of these charges. This study will provide an initial benchmark on the level of pension charges for different forms of funded supplementary pension arrangements and will provide information in relation to the transparency of pensions charges. These data have not been available to date so the study will provide valuable information to inform policy. I will report on the findings and make recommendations to Government in due course.
Our agreement with the EU and IMF includes commitments to deliver full year savings of €940 million in tax relief in the broad pension tax relief area in the period to 2014. The Minister for Finance has given a commitment to consult with stakeholders in relation to how this level of saving might be achieved.
In the Programme for Government, we have committed to capping taxpayers’ subsidies for all future pension schemes for politicians, and indeed for everybody, that deliver income in retirement of more than €60,000. This reform will have an impact on high earners whether in the public or the private sector.
The reform of public sector pensions is a key element of the wider public sector reform agenda. Last September Minister Howlin published legislation which will see the introduction of a new single pension scheme for new entrants to the public sector. This will provide a more straightforward and efficient structure for the management of public service pensions.
With regard to the pensions paid to politicians we want to ensure that no political pensions will be paid to sitting TDs. So, our Programme for Government includes a commitment to restrict the payment of pensions to politicians so that in future a member can only qualify for a pension at State pension age upon leaving public life.
We have succeeded in achieving a society where people are living longer. This is something to be welcomed but to support this we need a sustainable, fair and adequate pension system and this is something we are aiming for.
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