Social Welfare and Pensions Bill 2005: Committee Stage.

Tuesday, 8 March 2005

Seanad Eireann Debate
Vol. 179 No. 14

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An Leas-Chathaoirleach: Information on Paddy Burke  Zoom on Paddy Burke  I welcome the Minister for Social and Family Affairs to the House.

Section 1 agreed to.

Ms O’Meara: Information on Kathleen O'Meara  Zoom on Kathleen O'Meara  I move amendment No. 1:

[1154]

I welcome the Minister to the House to debate this important Bill. A good deal of discussion was given to the Bill in the Dáil, although my colleague, Senator Terry, has tabled specific amendments which have not been discussed in the Dáil. My own amendments arise from the Dáil discussions and I hope the Minister will broaden his view on them. I look forward to the debate on those amendments.

This amendment concerns income disregards. I read the Minister’s comments on the Committee Stage debate in the Dáil and I know he agrees that this is an extremely important area. The Minister may not be aware that it has been referred to already on the Order of Business. As public representatives we regularly find ourselves at the coalface of people’s experience of the social welfare system and their struggle to overcome the poverty trap, particularly their dependency on social welfare payments. There is an onus on us as public representatives, and particularly on the Minister, to ensure we have a system which on the one hand supports people sufficiently while, on the other hand, does not create such a level of dependency that they are unable or unwilling to break out of that dependency. A concern that would be shared across the House is that we must be careful to ensure we do everything we possibly can to put in place the supports people need to break out of social welfare dependency, and the whole issue of means testing and income disregards is crucial area. That is the reason I included it in the first amendment.

I want to examine the impact of earnings disregards. We are trying to create a system which supports people, in particular those wishing to return to work. People are concerned that returning to work will have a major impact on their social welfare benefits in particular. I am aware much work has been done on the back to work allowance, which I welcome. That has been very successful and it does support people but we still have a road to travel on this whole area.

Further consideration must be given to the impact of the earnings disregards rules in particular on low paid employment. If we are talking about people who are struggling to get back to work but if there is little or no difference between being on a social welfare payment or being at work, where is the incentive for them to do that? We must examine the impact of low pay in that regard too and employers’ responsibilities in this area, particularly in the context of a booming economy and so on. If our aim is to allow people [1155]to break out of the poverty trap, we must examine how the transition from social welfare into employment can be supported as fully as possible. There is no doubt that the differences between getting a social welfare payment and taking a job, and the impact of that on other benefits, is where we see the full impact of the income disregards.

We must do everything we can to attract people into the working environment and something people have to consider when trying to return to work, particularly women, is the cost of child care. If people are considering taking up a relatively low paid job and take into account the cost of child care, they will discover that it will not be worth their while to do so. I wonder if, like me, the Minister has been informed of this when knocking on doors in Kildare. Women on full-time incomes who are often very well paid decide, when they give birth to their second or third children, to give up work because in light of the child care costs involved, it is not worth their while to remain in employment.

People who are in receipt of social welfare payments and who are considering taking up low paid jobs must weigh up what they would earn, on one hand, and the costs relating to child care, transport to work, etc., on the other. The costs to which I refer are actually a disincentive for these people in terms of their taking up employment.

We must consider the impact of the income disregard in this area and the way in which legislation, rules, regulations, etc., can act as supports for people and make it attractive for them to enter or return to the workforce. I look forward to the Minister’s reply.

Mr. Cummins: Information on Maurice Cummins  Zoom on Maurice Cummins  I welcome the Minister and support Senator O’Meara’s amendment. Sufficient consideration has not been given to the earnings disregard in respect of those in low paid employment who are eligible to receive social welfare benefits. Senator O’Meara has outlined the anomaly that exists in very coherent terms. When one compares the earning capacity of a person in low paid employment against what he or she would receive in terms of social welfare payments and secondary benefits, it is apparent that consideration has not been given to the income disregard in the context of eligibility for such payments and benefits. We must make it attractive for people to give up social welfare payments and re-enter the workforce. I support the amendment in that regard.

Minister for Social and Family Affairs (Mr. S. Brennan): Information on Seamus Brennan  Zoom on Seamus Brennan  I thank the Senators for their contributions. They will appreciate that the technicalities involved, the procedures with which the House must comply and the wording of the amendment are such that it is not possible for me to accept it as it stands. I am aware, however, that the amendments have been tabled in order to facilitate discussion and debate.

[1156]As stated on a number of occasions, I support measures for encouraging people to return to work and education. Good disregards are important in terms of making this happen. In that context, the first €146.50 of weekly earnings plus 50% of the balance to €293 is now disregarded in respect of one-parent family payments. In budget 2005 we provided for a transitional 50% payment for six months after the €293 weekly threshold has been exceeded. That disregard is substantially greater than those that exist in other areas. As regards unemployment assistance, 40% of the net earnings from part-time work is disregarded. On disability allowance, the first €120 of earnings from rehabilitative employment is disregarded.

Retention of the rent and mortgage interest supplement and other secondary benefits is mainly done on a tapered basis. This is designed to make it easier for people to come to terms with their new circumstances. For example, the rent and mortgage supplement can be retained on a tapered basis for up to four years as follows — 75% in the first year; 50% in the second year; and 25% in the third and fourth years. The back to work allowance and family income supplement are also disregarded in terms of assessing household income for the purposes of the €317 income limit.

I agree with the Senators in terms of their argument for a more tapered retention system. We have sought to build this in to the various schemes. It has been clearly designed to encourage people back to work and back to education. Moving gradually from social security payments and other benefits to education and to work is the way to organise this. In that way, incentives will be increased. All these initiatives are designed to ensure that the sudden loss of social security payments is no longer an issue. It is critical that all of our schemes avoid the sudden loss situation and that they are tailored and tapered to be gradual. By doing that, we can encourage people to take up jobs.

On that basis, I accept the spirit of the amendment. The amendment stipulates that I report to the House on the earliest disregard applicable to certain schemes. I have no difficulty discussing it in these Houses on a regular basis. There are many opportunities to do so, such as parliamentary questions, debates and legislation.

Ms O’Meara: Information on Kathleen O'Meara  Zoom on Kathleen O'Meara  I thank the Minister for his response. I appreciate that he will come back to the House to provide us with very valuable information. Some work has been done on this area through the National Economic and Social Forum. I look forward to seeing evidence of the impact of the disregards. Does the Minister know if there is successful entry into the workforce by people on social welfare as a result of this? Is the tapering working and is there evidence that people are coming off social welfare dependency and into the workforce?

I recently met a woman in my office in Nenagh who showed me a letter she had received. It [1157]stated that she was 57 cent over the income limit for a dietary allowance. I thought that was a classic.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  I would like to see that letter.

Ms O’Meara: Information on Kathleen O'Meara  Zoom on Kathleen O'Meara  I can get the Minister a copy.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  We have rules and cut-off points, but at the same time we have to be sensible. The clearest evidence that the transition to work is having an effect is the falling unemployment figures. People are coming off unemployment and into the workforce. There is a also a constant flow of people back to education. However, I accept that we have to get a clearer measurement on that.

Amendment, by leave, withdrawn.

Ms O’Meara: Information on Kathleen O'Meara  Zoom on Kathleen O'Meara  I move amendment No. 2:

This amendment relates to the impact of the social welfare system on one parent families and on proposals to remove the restriction on the formation of a family unit, which currently applies to recipients of the lone parent allowance. It also relates to proposals to alleviate the requirement that income disregard be assessed by reference to any particular week rather than averaged over a year or other period. The amendment is quite clear, therefore, and raises a number of issues to which we must give priority. One such issue is how we can manage the matter of lone parenting. As the Minister pointed out in the Dáil, lone parents are not just single women; we are also talking about widows, widowers and other groups. The most recent debate on this area has focused on the classic definition of lone parents — usually young women, often in their teens, who have one or more children, live in local authority housing, are dependent on social welfare, unemployed and need support. I wish to concentrate my remarks on that group in particular. As a public representative, I am in constant contact with such women and am concerned by the lack of support for them.

I want to examine in particular the rent allowance system because most of the representations I receive from lone parents concern local authority housing. I fully support such women in their efforts to find accommodation because I see it as [1158]a way out of the dependency cycle in which they find themselves. I advise them, however, that they need to be in training or work but how will they go about doing so? Being in a local authority house means they are paying rent at a manageable level and are not trapped in the rent allowance cycle. I would like to hear the Minister’s response to that point. I know he is conducting a review in this area arising from the recent controversial public debate. I hope the Minister will examine ways of ensuring we support, encourage, enable and empower this group of parents to participate actively in education and the workforce for their own sakes.

I have advised young women — some of whom are not yet even 20 years of age and have one or two children — that they will still be young when their children are in secondary school. They may only be in their early thirties, so what will they do then? Are they going to sit around and do nothing? For their own sake and that of their children, they should be actively involved in education or the workforce. It is a matter of concern to us all that such lone parents are particularly at risk of repeating the cycle of dependency. In other words, their children are being raised in an environment of poverty, lone parenting and full dependency on the social welfare system. That cannot be regarded as a good thing.

Such people are generally living in local authority housing or in private accommodation that is largely supported by rent allowances. Child care is critical in breaking that dependency. The children of such lone parents live in poverty and are at high risk of remaining so. It is important, therefore, that those children receive the best quality of child care available, not just to support their parents but also to give them the best start in life. This support should be available throughout their childhood years, thus ensuring they are less likely to remain in an inevitable cycle of dependency. The State must examine what measures need to be put in place to achieve such a goal. Financial support for lone parents must remain at current levels because we cannot fail to support them. I hope we have put behind us the time when lone parents were stigmatised and received no assistance.

Now is the time to examine what real supports we can put in place. I appeal to the Minister to discuss this matter with his colleague, the Minister for Justice, Equality and Law Reform, who has responsibility for the equal opportunities child care programme. Both Ministers should examine the option of channelling funds to disadvantaged families in communities, such as some in the Nenagh area, that may not be as disadvantaged as poor areas in our major cities. We must consider how child care facilities can be used to support children and parents, as well as education and work initiatives. Such supports should be integrated and regarded as a whole. That is the only way of breaking this cycle of dependency.

[1159]It must be a matter of concern to us that young women are continually entering the social welfare system, who effectively choose to be lone parents. We cannot and must not accept such a development as inevitable, however. The amendment has been tabled in the context of the current debate on lone parents. We will not be acting responsibly unless we examine this matter closely and take it on. We must constantly review and update the support mechanisms in addition to being flexible. I would like the Minister to respond on the rent allowance issue which is the single biggest disincentive for many young women to work.

Mr. Cummins: Information on Maurice Cummins  Zoom on Maurice Cummins  I support Senator O’Meara’s amendment. It is our duty to support lone parents. That 31% of them are living in consistent poverty is all the more reason we should support them in every possible way. One must look at the Government’s poor record in this regard, although it may not have happened on the current Minister’s watch. I recall the “savage 16” cuts. Senator O’Meara referred to some of them but the cut in the back-to-education allowance was only partially reversed in budget 2005. That allowance enabled people to help themselves.

The Government was forced to reverse certain cuts, including the crèche supplement and the widow’s and lone parent’s allowances. Senator O’Meara referred to the issue of child care which comes into the equation. Last week, I commended the equal opportunities child care programme because there is no doubt that it provides capital assistance in disadvantaged areas. Social welfare services to such areas need to be integrated in order to help children and their parents. In this regard, the Minister should contact his counterpart in the Department of Justice, Equality and Law Reform to ensure such an integration of services in support of children and their parents.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  As Senators are aware, this debate has been going on for some time. I appreciate that the amendment before the House has been tabled for pro forma reasons to allow us to discuss the issue. I would have no difficulty in returning to the House to debate this subject from time to time. Indeed, I doubt if I could avoid it, given that the subject is so controversial.

Senators have raised a number of issues. Some 79,181 persons are in receipt of one parent family payments, compared to a figure of 58,000 in 1997. We are now moving increasingly to localise the administration of the lone parent’s allowance. That move is well under way which means the allowance will be dealt with locally rather than nationally and will bring lone parents more fully into the system. By getting closer to the system we will be in a position to help them on an individual basis.

As Senator O’Meara said, one-parent families do not form a homogenous group. They include widows, widowers, separated and divorced [1160]people, unmarried people and so on. It is important that we take that into account in discussing lone parents.

I have spoken publicly on many occasions about the cohabiting rule. I am determined that we will examine this matter. I do not have a solution but it is not good social policy that requires inspectors to check up on homes to ensure that fathers are not living there. Having said that, it is a lone parent’s allowance and until we find a solution we have to continue with the current system. I would like to find a solution to that.

It is generally accepted that the most effective way out of poverty for all ages is through employment. One of my main objectives is to provide lone parents with employment and to ensure they are able to return to education. A recent figure indicated that only 50% of lone parents had completed primary education. That is a cause of concern. We will have to take a long and close look at how we can provide educational opportunities for that group of lone parents.

We have to approach the debate from the point of view of not looking at lone parents as a problem. We must consider them as a national resource that is available to the workforce and to the education system, if that is their choice, rather than seeing them as a problem that has to be paid for and solved, as if signing a cheque solves the social issue when it does not.

This is a significant challenge and the solutions are not easy but the direction is clear. We must find a way to lead and provide choice in terms of back to education opportunities and work. We must also examine the issue of cohabitation in terms of what kind of society would emerge if we were to continue to stand over the current system in the way we have to at present for administrative purposes. If we look at it from the child’s point of view, it is not a social policy with which we can continue in the long term. We must find a way to deal with the matter.

I spoke already about the disregards. In the context of lone parents they are designed to encourage people to return to employment. Senator O’Meara asked me specifically about rent allowance. I am not sure if she suggested, as has been done on many occasions, that what lone parents worry about most is losing their rent allowance. It is fairly solid income——

Ms O’Meara: Information on Kathleen O'Meara  Zoom on Kathleen O'Meara  Losing the rent allowance is a disincentive to going back to work.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  This is a difficult area. Any payment made to somebody who is unemployed — one has to be unemployed to get the rent allowance — could be called a disincentive. One could incentivise anyone fairly quickly by taking away his or her payments. He or she would get up the next morning with a great incentive but that would not be fair. I do not think Senator O’Meara is suggesting we do that.

The rent allowance is available to everybody who is unemployed or needs accommodation, not [1161]just lone parents. It is a good scheme that is much appreciated by lone parents and others who need it. Senator O’Meara is correct in that if one takes a step towards employment, this can lead to a fear of losing one’s security in terms of rent allowance and other payments. The disregard has increased to €146 and €293, respectively, at the minimum and maximum levels. It could be argued that those levels should be altered. We keep them constantly under review.

The issue is clear but the solution is not that easy. What most people tell me when I call to their doors is that the solution is to allow people to keep their benefits for as long as possible while working or in education. I accept that. It is not simple to administer that, rather it is difficult because one has to reach a fine point where employment or education takes over and one will then be full-time in one system or the other, as opposed to being in both systems. What does one say to people who are in employment when they say they have a job but would like to get welfare as top-up money? The issues and the administration of the system are difficult but I am clear about the direction. I look forward to working with the Department and listening to whatever advice comes my way about how we can break out of some of these cycles.

Rent allowance may be payable where someone is employed on a part-time basis but it is totally ruled out for full-time employment. I accept what Senator O’Meara said. She suggested a similar approach to my own, which is to provide plenty of incentives but not to create disincentives in the system. We could take away the rent allowance tomorrow but I do not think either of us would suggest that as it would not help anybody.

Ms Cox: Information on Margaret Cox  Zoom on Margaret Cox  I am fearful of social welfare changes, especially in the area of lone parenting. Everybody agrees that the best place to bring up children is in the family unit. In assisting those who are unfortunate enough not to be in a family unit, we must ensure we do not discriminate against those who choose to live in a family unit. It is a major challenge to walk that fine line between the two. People in a family unit, who are happy to be there should not be at a disadvantage because of their choice. We should not come down in favour of the politically correct pro-liberal agenda that advocates that whatever anyone wants to do is wonderful.

I am lucky enough to be in a solid relationship in a family with four children. I want that relationship to be protected. That is one of the challenges facing the Minister. It is worth putting on the record that there is a fine line to be taken between supporting family units and supporting lone parents.

A comment was made about the back to education allowance. There is a particularly strong case for lone parents to be able to access this automatically. I accept that the qualifying terms were altered so that people had to be unem[1162]ployed and so on but lone parents should be able to go straight in to education. I also accept that there are many different access programmes but if I was a lone parent in the morning I would like to be able to immediately access an education course, be it at second or third level. I am almost certain it is possible to do so. The Minister should bear that in mind when considering cutbacks. It may already be on the cards.

Ms O’Meara: Information on Kathleen O'Meara  Zoom on Kathleen O'Meara  I thank the Minister for his reply and his comments on cohabiting couples, to which I did not refer. It is a difficult area. In the context of what Senator Cox said, we should support families and promote child-rearing in a family unit, whatever that might look like. We should not create a disincentive to the development of stable relationships for lone parents for their own benefit and also for the benefit of their children both emotionally and economically. It is cheaper to live together than to live apart.

The lone parent payment is directed at lone parents. Clearly if somebody is cohabiting he or she is no longer a lone parent. We need to look at this in a wider context. I posed the question earlier as to why so many young women chose to be lone parents. The Minister referred to 80,000 lone parents. I do not know what percentage this represents but I described the women I am talking about. As a society we need to consider why women choose to have children on their own, raise them on their own and remain in a dependency situation. That is a wider debate, which we are all considering. In the context of the Minister’s response and the debate we are having, I withdraw the amendment.

Amendment, by leave, withdrawn.

Ms O’Meara: Information on Kathleen O'Meara  Zoom on Kathleen O'Meara  I move amendment No. 3:

The amendment is straightforward. Will the Minister explain the Department’s thinking on the social welfare treatment of income from SSIAs?

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  I thank the Senator for proposing the amendment. She will be aware that I asked the Department to carry out an examination of the current arrangements of the assessment of capital, particularly as they apply to SSIAs, with a view to bringing forward proposals which might be included in budget 2005. On budget day, we announced that the capital disregards for means test purposes for all schemes, except supplementary welfare allowance, would be increased to €20,000, an increase of over €7,300, which is a significant jump. The enhanced disregard applies to all capital, regardless of [1163]where it is held, be it in an SSIA, credit union, post office, bank or any other financial institution. This means that a single non-contributory pensioner with no other means can have capital of up to €28,000 and still qualify for a pension at the maximum rate. This figure is doubled in the case of a pensioner couple.

These improvements will come into effect in June or in April in the case of carer’s allowance. They are designed and their main aim is to ensure social welfare means testing arrangements do not act as a disincentive to those who want to save.

When SSIAs mature, it is estimated they will be probably amount to somewhat less than €20,000. By setting the capital disregard at €20,000, we have gone a long way towards dealing with the issue. In short, if one’s only capital is an SSIA, it will be totally disregarded. On the other hand, if the SSIA is only part of one’s portfolio, it is not possible to distinguish between different savings. What could one say to somebody who has savings in a credit union, for example? One cannot tell a social welfare recipient one is disregarding the SSIA per se while including credit union savings. I thought a sensible response would be to increase the disregard by over €7,000 to €20,000, a proposal welcomed by most sides in the other House. If a person only has an SSIA, it will be totally disregarded, although not because it is a SSIA per se. However, I pitched the figure to try to ensure an SSIA would be disregarded in assessing means if it was a pensioner’s only capital. I hope this deals with the matter.

Ms O’Meara: Information on Kathleen O'Meara  Zoom on Kathleen O'Meara  I thank the Minister for his reply. The SSIA scheme was designed as an incentive to save. However, if commentaries are anything to go by, it will create an incentive to spend when it matures, which goes against the whole spirit of the scheme. The matter is hard to judge. If the limit is set too low, it would create not only an incentive to spend but in some ways a need to spend. As we are trying to encourage people to save, I ask the Minister to keep an open mind and to review the impact of the measure.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  I support the amendment and welcome the Minister’s response. I urge the Minister to keep on open mind on this issue. Some pensioners try to save whatever they can, including some of their pensions. Many live very frugally and put money by because this is a practice with which they have grown up. I hope that those who have been saving in SSIAs will not find themselves in difficulty when the accounts mature because they have been prudent throughout their lives and will not feel the need to spend. Many reach a stage where they could go over the threshold without realising they can put their pensions in jeopardy. While I welcome the increase in the capital disregard, I ask the Minister to keep an open mind, particularly if it is discovered that this will cause problems for many pensioners.

[1164]Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  I will keep the matter under review. The increase from approximately €13,000 to €20,000 is the largest ever single move in this area and should deal with the situation.

Amendment, by leave, withdrawn.

Ms O’Meara: Information on Kathleen O'Meara  Zoom on Kathleen O'Meara  I move amendment No. 4:

The amendment is self-explanatory. I wish to give the Minister an opportunity to signal what his plans might be, particularly with regard to the previous set of cuts which were the responsibility of other Ministers.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  I am interested to hear how we are to move forward to reverse the cuts introduced last year but not dealt with this year. While some cuts have been reversed, some are still outstanding which we hoped would have been addressed. How will the Minister deal with these in the short term?

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  I have made considerable changes in this area. Some 16 amendments were introduced last year. In the case of five or six amendments, depending on how one considers them, we have reverted to the previous situation. We made substantial amendments in another five or six areas and I will continue to review or discuss the remainder with the social partners, as necessary. We spent some time examining them in detail and substantial changes were made to the measures announced last year.

  4 o’clock

Changes were made in regard to lone parents, namely, the transitional payment for a one-parent family was restored and will now be available for a period of six months where a recipient’s income exceeds €293 per week. The back to education allowance scheme was amended and the qualifying period reduced from 15 months to 12 months. In addition, the cost of education allowance increased by €254 to €400 to assist in this area. I gave a commitment in the other House, which I am happy to repeat here, that between now and September, when most people will sign on for these courses, I will examine whether it is possible and practical for me to reduce the qualifying period further. The income limit for child dependency allowance was increased.

With regard to the money advice and budgeting service, one of the 16 areas referred to, a saving of €700,000 was announced last year. I have restored a similar figure to enable MABS to improve its services. It is a special, additional €700,000 to match the €700,000 that was not in its [1165]previous budget. It is not an exact reversal, though some Senators probably think it is, but a better way to do things because it allows MABS more freedom as a professional organisation to dictate.

We have made substantial changes in the crèche supplement, an area about which Senators were concerned. I have restored a figure of €2.3 million which is exactly the saving achieved by the discontinuance of the supplement. That is now being made available to ensure that vulnerable families can continue to have access to the crèche supplement, for example in cases where a social worker or public health nurse deems it necessary. I am consulting the Minister for Health and Children in terms of channelling this funding.

We have restored a figure of €2 million to improve the diet supplement arrangements in consultation with the professional institutes involved. That is a considerable amendment. Regarding rent allowance, I have abolished the six months entitlement rule which Senators were concerned about. Instead we have the requirement that applicants be bona fide tenants who experience a change of circumstances and are genuinely in need of accommodation. They will be required to demonstrate that, which is not difficult. Additionally, we have transferred €19 million to the Department of the Environment, Heritage and Local Government as an initial measure to enable local authorities to put long term housing solutions in place.

There are other measures which we have changed substantially but these are the main ones raised by Senators in previous debates, namely, crèche, rent, diet and back to education allowances. I can go through the other measures if Senators wish me to do so. The amendments have been substantially altered and are now better targeted and focused. We will continue to review the remaining items and see what changes we can make.

Ms O’Meara: Information on Kathleen O'Meara  Zoom on Kathleen O'Meara  I thank the Minister for setting out those matters. The cuts have been so substantially reversed that one can only ask why they were made in the first instance.

Amendment, by leave, withdrawn.

Section 2 agreed to.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  I move amendment No. 5:

[1166]This amendment asks the Minister to return to the House in three months’ time to report on the effectiveness of child benefit and child income support as a tool for tackling child poverty. The Minister is aware that in 2001 the Government promised to spend €1.27 billion on child benefit over three years. The Government delivered on that promise for the 2002 budget but failed to do so in 2003. It promised to deliver in the budgets for 2004 and 2005.

The Minister will say he has done well and I admit that child benefit has improved greatly over the past years. However, given that it is one benefit which genuinely helps to tackle child poverty, I would like to see the promise given to people fulfilled in full as quickly as possible, certainly by next year. I am disappointed it was not fulfilled this year. I would like to hear what the Minister has to say and how he will deal with the matter in the future.

Ms Cox: Information on Margaret Cox  Zoom on Margaret Cox  I agree with Senator Terry that, as we said before in this House, child benefit is one of the most effective methods of tackling child poverty. It must be recognised that in the past few years the Government addressed the matter appropriately. We encountered a blip because of the situation regarding incoming revenue. There are only so many things one can do when less money is coming in than was expected and one sometimes has to row back for a period of time.

On Second Stage the Minister confirmed that the Government would be back on track next year in terms of fulfilling its commitments made in the programme for Government. I commend the Minister on that and I look forward to him repeating that confirmation with regard to this amendment. If it is suggested to means test or tax what is a universal benefit, the Minister, in his role as saviour of all the women and children in the country, must refuse to give in. A line must be drawn in the sand in this regard. If possible I would like the Minister to confirm his view on this aspect.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  I thank the Senators. Child poverty is of great concern to me and to all of us. Different figures arise. There is a famous figure of 66,000 children in poverty in Ireland. The figure varies depending on whatever report one takes heed of. I have also seen substantially larger figures. Whatever the figure is, there is an issue which must be addressed.

Child benefit this year will come to about €1.9 billion. In 2000, which is not that long ago, the figure was €600 million, so that within four or five years there has been a massive investment by the taxpayer in child benefit, which helps substantially in tackling child poverty. I believe it will not on its own eradicate child poverty. That is why we have asked the National Economic and Social Council under the pending child poverty special [1167]initiative in Sustaining Progress to undertake an examination of child income arrangements with a view to considering the possibility of a second tier child related payment targeted at low income families, perhaps replacing the family income supplement, child dependent allowances and possibly the back to school, clothing and footwear allowances. During the course of this year I hope to get those proposals from the NESC.

Although I believe child benefit alone will not eradicate child poverty, it is a universal payment. In response to Senator Cox, I know of no proposals or even whispers anywhere regarding means testing or taxing it. It is a universal payment for the benefit of children across the nation and that is the way it will stay. However, the NESC work in this area continues and it is incumbent on us to find a way, when we all repeat the mantra that we must treat all the children of the nation equally, to ensure that children in poverty, arguably 66,000, are treated more equally. We must find a way to ensure additional funds get to them. If that offends the constitutionalists among us, so be it. I would unapologetically try to face them down on that.

The universality of child benefit is an important principle and will remain so, but we must find a way of getting additional income to those 66,000 children, or whatever the figure is, by means of some kind of second tier child benefit payment which would, by definition, not be universal. No doubt one will find people trying to make political capital out of this but it is one we must urgently address. I look forward to the NESC providing some proposals in the area as quickly as it can so that we can target those resources. I wish to reiterate the firm commitment given by the Minister for Finance and me that the child benefit package laid out some years ago will be completed next year.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  I will take the Minister’s word that the package will be completed next year. We will watch to ensure it is completed. I will support, or at least look favourably on, any proposal the Minister might bring forward to help children of lower-income families. The Minister will receive widespread support because we all accept that children are still living in poverty. While child benefit does not discriminate, it is given to every family regardless of their income. The child dependant allowance has not been increased although it could have been used in recent years as a vehicle to help those in the lower-income bracket. I note the Minister’s comments and look forward to any proposals that will help take thousands of children out of the poverty trap in which they find themselves. This area needs to be tackled and I will commend the Minister if he manages to do so.

[1168]Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  I thank the Senator. I will try to get the report from the National Economic and Social Council as soon as possible and will bring proposals to the Cabinet and, if necessary, before the Oireachtas.

Amendment, by leave, withdrawn.

Section 3 agreed to.

Sections 4 to 16, inclusive, agreed to.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  I move amendment No. 6:

There is a well-established practice in law that is enshrined in section 10(4) of the Petty Sessions (Ireland) Act 1851 that prosecutions must be taken within six months of an offence. Section 17 extends the period within which a prosecution may be taken and section 17(b) allows for a prosecution to be taken up to 18 months after the Minister decides he or she has enough evidence to proceed. This could be three years or ten years later, which is too open ended and if acted on, could encounter constitutional difficulties.

There must come a point where the Minister either decides he or she has sufficient evidence and proceeds or he or she does not and drops the matter. I am opposed to the idea that we allow such a broad and open measure to be enacted. The Minister will probably not agree to the section’s deletion, but as a reasonable compromise and with an eye to the Constitution, the Minister should agree to my amendment which restricts section 17(b) so it will operate for two years only, with the possibility of extending it to five years.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  We discussed this at length on Committee Stage in the Dáil. This issue concerns prosecutions, a very important part of my Department’s efforts to control fraud and abuse in social welfare schemes. Prosecutions are an important deterrent in combatting social welfare fraud. We have spoken at length about improving the lot of lone parents and others such as widows and the elderly, and of increasing child benefit. To do this, we must be absolutely firm on welfare fraud and make it clear that there is no scope or tolerance for it.

The introduction of a limit as proposed by the Senator would seriously restrict the Department [1169]from taking a prosecution in cases where the evidence came to light more than five years after the event. It does not make much sense to remove that weapon from the Department’s armoury when its single purpose is the detection of fraud. It is better to leave the weapon with the Department so that if the period in question is longer than five years, it can still be dealt with.

The restriction proposed by the Senator could have the effect of weakening the Department’s control programme which is aimed at ensuring that the payments it makes, which are funded by the taxpayer and social contributions, are only paid to those entitled to them. I am not suggesting the Senator is proposing that we be soft on this issue but I am reluctant to weaken the Department’s weaponry and options when it comes to tackling fraud. I am fully supportive of improving the income, benefits and quality of life of all the people for whom the Department has responsibility for supporting, but the price to be paid is that we are quite ruthless when it comes to fraud. The people that are being robbed are those who need the funds.

In 2004, 503 case were forwarded to the Chief State Solicitor’s office to start proceedings. A total of 282 cases were finalised in court of which ten were served with prison sentences, 26 received suspended sentences, 158 were fined, three received community service and 43 received the benefit of the Probation Act. The remaining penalties included cases which were bound to the peace or adjourned with liberty to re-enter. Interestingly, savings for January 2005 amounted to €27 million, which is 82% of our target. The Senator can see that it is a very important part of our armoury. Currently, we are attempting to ensure that electronic payments in particular are free of fraud. It is a new, developing area as more people opt to have their funds paid to their bank account and as everyone is aware, electronic funds transfer is more anonymous.

We need the freedom to go back and pursue cases over the period in question and it would not be helpful to shorten it. Apart from fraud, there are also overpayments by the Department. I wish to make it clear that in such cases we agree a methodology of repayment with the person concerned and it is not done without his or her agreement. I note the Senator’s point. However, when I looked at the issue carefully, I concluded that to weaken the Department’s tools to tackle fraud would not send a good signal.

Ms Cox: Information on Margaret Cox  Zoom on Margaret Cox  In support of the Minister, one feature of a fair and equitable social welfare system is a method to ensure that only those who should benefit from it do so and that those who try to defraud the system do not succeed. I became aware of at least two recent cases in the Galway area, which I reported, of incredible fraudulent abuse of the social welfare system. The relevant [1170]regional manager was very attentive and immediately began to deal with the cases. Given the changes in the social welfare system over the past number of years and changes in the country’s demographics, a huge black market in PPS numbers has arisen. People have been receiving PPS numbers and selling them on. This area needs attention. We have witnessed the effectiveness of the insurance companies’ campaign against insurance fraud. The social welfare system must make it clear to people that they cannot steal from it because stealing from the social welfare system is stealing from the rest of us, particularly the people who most need money. I support the efforts of the Minister and his Department to combat social welfare fraud. Over the past number of years, we have seen an improvement in that area whereby people who were not entitled to payments have been foiled, money due to the State has been reclaimed and people who have consistently offended have been treated appropriately.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  I am not advocating that anyone guilty of social welfare fraud should escape scot free. However, the period the Department of Social and Family Affairs has to pursue cases is too open-ended. Information should be available at a much earlier stage if the systems within the Department are working correctly. Leaving the period so open can lead to a build-up of cases with the Department and create unnecessary work for staff. We have heard about a number of cases of overpayments by the Department recently. I understand the Minister’s point about the need for those overpayments to be repaid and that repayments should be made after consultation with the individual concerned. That consultation did not appear to me to be present in a number of recent cases involving overpayments. I would like the Minister to assure me that no individual is put under serious pressure where an overpayment has been made. For example, a pensioner who received an overpayment might have spent the money at Christmas or felt inadvertently that he or she was getting a bonus. Individual circumstances must be taken into consideration when repayments are being made and that should be done very sensitively.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  I assure Senator Terry that I have been very impressed by the way the Department has dealt with cases of overpayment. Staff have made it clear to me that the person concerned is consulted directly or indirectly in all cases. Regarding the example of a pensioner cited by Senator Terry, that person would be consulted at some level and a suitable repayment schedule that would meet his or her individual requirements would be agreed. We will certainly continue this sensitive approach to the issue of overpayments, particularly in the very small number [1171]of cases where the overpayment was a result of a mistake by the Department. Regardless of how the overpayment came about, that sensitive approach to repaying overpayments will continue to be used.

Both Senator Terry and I are coming from the same place in our opposition to social welfare fraud. As I said earlier, I am reluctant to send out the wrong signal. In 2004, we hauled back €386 million through our anti-fraud and control measures. More than 100 people work in the control and anti-fraud section of the Department. In 2004, we took back €120 million in fraudulent unemployment payments, €110 million on fraudulent one parent family payments, €18 million in fraudulent child benefit payments and €55 million in fraudulent illness payments. More than 300,000 reviews were undertaken and from these reviews, €386 million was recovered. Imagine what €386 million could do for some of the cases with which the Department has to deal. I acknowledge that Senator Terry and the Deputies who promoted this amendment in the other House are acting in good faith in seeking a balance between the client and the Department. I want to reassure them that the balance is on the side of the individual at the moment. I would prefer not to send any signal, however inadvertently, that we were anything other than ruthless in dealing with social welfare fraud or as Senator Cox put it so well “stealing from social welfare”. This practice is just unacceptable.

Amendment, by leave, withdrawn.

Section 17 agreed to.

Sections 18 to 26, inclusive, agreed to.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  I move amendment No. 7:

I have been in Seanad Éireann for only two years but I have dealt with a good deal of legislation in that time. During that time, the pensions Act was the most difficult item of legislation to navigate. It was extremely difficult to put the amendments in context because some other part of the Act had been amended previously. This is not conducive to openness and transparency. I would ask that my amendment be accepted and that we bring forward a consolidated Act which would help people when they are trying to get information on the pensions Act. If we want to encourage people to take out pensions, and people today are [1172]much more discerning and questioning about their investments, we need to make the pensions Act clearer. There should be no gaps in the Act because it was amended elsewhere. I would ask the Minister to make the Act more user-friendly in the interests of the general public. While the pensions industry produces information booklets, they often impart the industry’s particular slant. This Bill should contain all the information needed in a user-friendly fashion. It is not user-friendly in its present state. I ask the Minister to urgently address this situation, which I think would be a simple matter.

Ms O’Meara: Information on Kathleen O'Meara  Zoom on Kathleen O'Meara  I support Senator Terry’s amendment and the sentiments she expressed. It is extremely important for people to be equipped with all necessary information about preparing for life when they become pensioners. The legislation provides an extremely important framework in that regard. I agree with Senator Terry’s assertion that it is extremely difficult to make one’s way through the pensions Act. It is urgent that a simpler way to navigate be found.

Ms Cox: Information on Margaret Cox  Zoom on Margaret Cox  I have a particular query on a matter that came to my attention recently but it may not relate to this section. We in the parish of Salthill were lucky to have a missionary sister of the Holy Rosary, the Killeshandra sisters, speak about her mission during mass. One of her points was that the missionary orders did not provide for the care of their people in old age after sending them abroad and refusing them permission to take teaching, nursing or doctoral posts. Missionary sisters and brothers serving on the missions for many years have not been able to avail of the old age pension upon returning to Ireland. This is an unexpected issue that deserves the Minister’s attention and his answer at a later date.

Priests, sisters and brothers who have spent their lives on the missions are members of a clearly identifiable group, as are the women we spoke of who were treated differently for pension purposes because they were homemakers. Do they not deserve the State’s recognition in their old age? I do not expect the Minister to be in a position to give an immediate answer but I ask him to address the issue as quickly as possible.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  Senator Terry’s amendment calls for a statutory restatement to be published within three months. The Pensions Board provides a legislation service by paying a fee, under which subscribers receive a non-statutory consolidated text of the Pensions Acts and regulations, including all amendments to date. The text of the legislation is made available in loose-leaf format, which allows it to be updated regularly. The legislation service is updated following any amendments to the Acts or regulations and is presented in two volumes. The first volume contains a consolidated text of the Pensions Acts and the [1173]second contains the regulations made under the Acts. Due to the availability of this service, a restatement of the Acts is not a priority at this time, but I will examine the issue again.

Restatements do not change the law in any way. They combine the Acts and their amendments in a more reader-friendly and up-to-date version. This has already been achieved by the informal arrangements in place for the Pensions Acts. The Pensions Board produces a range of booklets, guides and frequently asked questions for non-practitioners, explaining the legislative requirements in an accessible and user-friendly way. I have asked the Pensions Board to conduct campaigns about pensions to describe what is on offer as a more effective way of dealing with this issue in the short term. I will also ask it to augment the awareness campaign it has under way at the moment.

I agree that the area of pensions is a complicated minefield. Some are experts in it and others find it difficult territory. One must be financially literate to deal with the level of complexity involved. It is incumbent on a State authority, in this instance the Pensions Board, to explain, simplify and translate financial gobbledegook into concepts that people can understand. I will encourage the board to sustain its efforts.

Senator Cox raised the issue of missionaries’ entitlements to old age pensions. There is support in place as they may qualify for means-tested non-contributory pensions on their return to Ireland, assuming they pass the means test. I will give the Senator more information on the topic but this is the advice I have received. They would not be entitled to contributory pensions as it is not likely that they would have made contributions to the social fund.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  I am not satisfied with the Minister’s answer. He acknowledges that the Act must be updated and made more presentable and concise. If this is the case the decision must be taken to follow through. This Government stated that it believes in openness and transparency. Let us see some and get this job done. I am not asking for something that would incur a cost on the State but it is in the public interest that it be done.

On Senator Cox’s query, it is my understanding that members of religious orders, such as those who acted as nurses and teachers abroad, are not entitled to old age non-contributory pensions upon returning. Will the Minister investigate if this is the case? I visited India with the Joint Committee on Justice, Equality, Defence and Women’s Rights at the end of 2004 and met a member of the Christian Brothers. He raised this issue with me, as did two sisters. They agreed that they are not entitled to a pension when they return to Ireland. This matter must be examined. I do not wish to contradict the officials’ advice but it is an issue encountered by several Senators. [1174]If the Minister finds this to be the case, it must be addressed. These people went abroad to spread their faith and good work and only returned for their final years, but if we cannot care for them at that stage it is a very poor reflection on the State. I thank Senator Cox for raising the issue.

Amendment, by leave, withdrawn.

Section 27 agreed to.

Sections 28 and 29 agreed to.

Acting Chairman (Mr. U. Burke): Information on Ulick Burke  Zoom on Ulick Burke  Amendments Nos. 8 to 10, inclusive, are related and will be discussed together by agreement.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  I move amendment No. 8:

These amendments are intended to ensure protection for the individual pensioner. I spoke with the Minister on this issue previously and told him that many of the developments in pensions legislation seem skewed towards the industry rather than consumer protection.

The Pensions Board exists to act as guardian for the consumer. While it exists to promote the provision and extension of pensions, it must get the balance right between the provision of pensions and the extension of rights to the consumers and provider. The Minister will probably tell me the board is responsible for maintaining the balance. However, the balance is not apparent and it seems to me that the board works on behalf of the pensions industry to promote pensions. We see little coming from the board with regard to the protection of the consumer.

Amendment No. 9 seeks to insert a section that will provide a consumer protection code. This code should be drawn up by the pensions board and all pensions providers should be bound to comply with it. This is another measure to ensure the consumer is protected and that all companies within the industry live up to the code. These protection provisions should come from the pensions board because that is the reason it exists. I hope the Minister will accept these amendments and show there is concern for the consumer.

As I said recently, the Minister must be aware of the crisis in the pensions industry. The public does not have any confidence in the industry and that is the reason people are not taking out pen[1175]sions. Despite the €500,000 provided to the pensions board for a public awareness campaign over the past couple of years, people are not buying into pensions or PRSAs. People bought into the SSIAs because they knew what they were buying into and that they could take a risk with equities or take the safe option and know what they would get at the end of the day. People will not buy into the pensions industry any longer because for too long they have seen their parents’ pensions eroded to the point where they are not worth the paper they are written on by the time they come to draw them. We need to win back the support of the consumers. By offering them some protection, we may encourage them to take out pensions, but much more must be done before we can win back their general support in this regard.

Amendment No. 10 requires that all advertisements relating to pensions should carry a warning to consumers informing them of the risks involved, that benefits are not guaranteed and making them aware of the charges and fees involved. The funds of many companies are currently underfunded and they are asking their employees to move from defined benefit schemes to defined contribution schemes. As well as asking them to change, they are charging outrageous fees for doing so. This area needs to be investigated. Much of the money that goes to the pensions industry is eaten up by fees paid from the money paid by consumers into their pension funds. This is one of the reasons the pensions many people get when they retire are not worth the paper on which they are written.

I urge the Minister to ensure that pensions, like mortgages, carry a warning in their advertisements. This is not asking too much. People are encouraged by the Government to take out a pension, but they should be told of the risks associated with these occupational pension schemes, particularly schemes with defined contributions. I do not know much about pensions. The area is a minefield and most people do not understand it. The pensions industry likes to keep it that way because if we knew more about it, fewer people would buy into it. Therefore, I urge the Minister to ensure that the pensions board will ensure that all advertisements carry warnings regarding risks, fees and charges associated with pension products.

Ms O’Meara: Information on Kathleen O'Meara  Zoom on Kathleen O'Meara  I support the comments of Senator Terry, particularly with regard to the need for people to be fully supported in providing for their future retirement. I have always found it interesting that Irish people like to invest in property. If we ask them why, they often say it is for their pension. They have a greater sense of security from investment in property than from [1176]investment in pension funds. The thinking on pensions is that they cannot be relied on.

I would be interested to hear the Minister’s comments on the take up of PRSAs. How successful or unsuccessful have they been? Do we need to revisit that area?

Do people understand the provisions being made for their future? Pensions are a major issue for us, particularly considering our population balance and the demands that will be made on the State if pension provisions are not made. We acknowledge that much work has been done and that the issue is more in the open than previously. Legislation is also far stronger. Speaking for myself, I do not have the first clue about pensions. They are part of the area of mathematics, figures and financial calculations. I understand they should be carefully considered, but they are difficult to understand.

The Pensions Board must have a role in keeping people informed or at least allow them to see how they can be kept informed of where they stand. It is a concern, for example, that people who work in a private company who believe their future pension is secure often find out that it is not. I acknowledge the concerns raised by Senator Terry and look forward to the Minister’s response.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  Pensions are complex but it is critical to have them. It is incumbent on all of us to try to strip away the complexity and get to the heart of the matter. Pensions are about the income of ordinary people during their later years and about providing a sense of security that this income will be there each month. While the area of pension fund managers, investment managers, yields, bonds, equities, properties, etc., is complicated, there is also an essential simplicity involved. It is incumbent on all of us to constantly highlight this and to measure the complexity against the simple objective of ensuring security, safety and sufficient income for everybody in their later years.

Senator Terry has consistently spoken on behalf of pension fund customers and she has highlighted a wariness we should all have about the management and solvency of pension funds. I have no difficulty with that but the spirit of her amendments has been addressed. The Pensions Act 1990 established the Pensions Board. The board includes the Director of Consumer Affairs, pension industry representatives, social partners and so on and it is made up this way to achieve the consumer protection referred to by the Senator. The board is required to monitor and supervise the provisions of the Act, which provides a strong regulatory regime on behalf o the consumer.

The Act also establishes significant protections for individual members of schemes and provides generally for the regulation of occupational pen[1177]sion schemes. It also provides protection of members’ benefits through the preservation of benefits, funding standards and equal treatment requirements. That regime is in place to protect the individual.

Part 5 of the Act provides for transparency and openness through a broad disclosure regime, which is governed by detailed regulations. The Act also places onerous responsibilities on trustees to ensure occupational pension schemes are properly administered, members’ pensions rights are fully safeguarded and they and their dependants ultimately receive the pensions they have earned. The Pensions Acts are stringent in these areas and trustees are required to follow certain practices in making that happen. This legislation also contains substantial improvements. It provides that trustees must be of good repute and have relevant qualifications.

The Pensions Act 2002 provided for the appointment of a Pensions Ombudsman. That was a significant development in consumer protection. The Pensions Ombudsman investigates and adjudicates on complaints and disputes involving occupational pension schemes and PRSAs. The office is completely independent and impartial and has done a fine job to date. The Act also provided for PRSAs. Charges are capped and investments are restricted. The Pensions Board supervises the activities of providers in regard to their approved products and it monitors PRSAs. The board’s website contains a list of approved products and charges and a consumer guide to PRSAs was published by the Consumers Association of Ireland and the board to aid consumer protection.

With regard to the disclosure of charges, persons entering into pension contracts receive full disclosure of all potential and actual commissions and other charges payable by contributors. That should address the Senator’s concerns in this area. In addition, changes to charges must be notified at least two months beforehand. A significant number of consumer protection measures are in place and the Pensions Board remains vigilant in overseeing these measures. IFSRA published a draft consumer protection code and the board will monitor that closely to see if it can be improved.

I have no difficulty with the spirit of the Senator’s amendments but her concerns have been addressed in the array of legislative measures relating to responsibilities of the Pensions Board and IFSRA and the emphasis on consumer protection. They must be kept under review to ensure consumers are fully informed and protected before embarking on a pension strategy for themselves or their dependants.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  I am very disappointed the Minister has not taken the amendments on board. I do not accept that the current provisions offer consumer [1178]protection and the Minister knows this well. There is evidence that consumers are not protected and, hence, they are voting with their feet and not taking up products offered by the pensions industry.

The Minister mentioned the preservation of pensions and I acknowledge that an improvement was made in the Pensions Act 2002 but pre-1993 pensions were not preserved. They should have been taken into account. Thousands of people aged 55 and over have been drawing their pensions since before 1993 but the pensions were not preserved. These people paid into their pension schemes for years. The Minister should not mention the preservation of pensions because it has only been dealt with in recent years and the pensions of many people have not been preserved.

Pension companies were permitted to take pension holidays by the Pensions Board during good times when their funds were in surplus but that has affected the underfunding of many pension schemes nowadays. I do not know whether that is still going on but I presume it is not because most schemes are underfunded. The pension schemes of the top ten companies in Ireland are underfunded to the tune of €3 billion. I fail to understand how the Minister cannot accept that more needs to be done to protect the consumer.

  5 o’clock

Last week the Minister provided interesting statistics. He stated the Exchequer gave €2.5 billion in tax relief on occupational pension scheme contributions last year while the non-contributory cost was €2 billion. Where is the value for money in that relief? The Minister should consider what could be done with €2.5 billion. The pensions industry is not paying back in kind for this relief. The Government would be better off not providing tax relief and paying individual pensions. Perhaps this should be examined. I am far from being an economist. I am a housewife, but I know that it is bad value for money. It must be examined and addressed. I ask the Minister to do so here in a few simple measures to bring the pensions industry to order and ensure that the consumer is protected.

The figures with which the Minister provided me last week are shocking. He should not be able to stand over them and say that we will continue in this way. Neither the taxpayer nor the person with the occupational pension scheme is getting value for money. The pensions industry and the fat cats are getting fatter. We know that those in this country’s top companies will ensure that millions are put by and ring-fenced for their pensions, but who cares about the PAYE worker? The Minister should care and ensure that something is done.

I have the greatest confidence in IFSRA and would like to see it more involved in the pensions industry. I hope that it will be given the opportunity to do so. However, it does not have a great [1179]degree of responsibility for the pensions industry, which falls to the Pensions Board. I have more faith in how IFSRA is carrying out its work. It seems a very independent body which does not take sides but steers a middle way to get results for the consumer. I hope that the Minister will be able to address some of the queries that I have put to him and reconsider accepting my amendments on Report Stage.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  I wish to return to what Senator O’Meara asked about PRSAs. I agree that the take-up has been disappointing. It now stands at 46,000 — that is the number of individual contracts. For that reason, I have formally asked the Pensions Board to bring forward from 2006 to this year the review that it is required to carry out of pensions coverage and adequacy. I expect the board’s report this summer because of that situation.

The preservation for pre-1991 benefits only came into force for those who left employment after June 2002 on foot of the Pensions (Amendment) Act 2002. It was considered, for cost reasons, that this requirement would not be met retrospectively. Regarding the €2.5 billion — the figure that I gave Senator Terry last week, which refers to the gross cost of taxes paid when the pension is paid out — there are significant issues. They are being examined by the Department of Finance as part of the review of tax relief measures that the Minister for Finance, Deputy Cowen, has announced. They are also kept under review by the Pensions Board as part of general pensions strategy.

I have no doubt where I stand on pensions. I am 100% on the side of pensioners. That is as it should be as it is my responsibility. Pension funds are able to look after themselves, as are boardroom directors. However, my responsibility is to make absolutely certain that the elderly have proper pensions. Having said that, I must live in the real world. I cannot simply make that statement and then say that I do not care what happens to pension funds. They are an amalgamation of funds which are invested and depend on the performance of markets, properties and equities and the quality of management. Occupational funds need all those things to come right. There is an element of risk involved, and the Senator rightly says that companies are increasingly finding that they cannot afford the benefit type of pension, with the result that they are moving to the contributory model. That means that the risk is increasingly moving from the employer to the employee.

One can do several things, one being to say, for example, that schemes are €3 billion underfunded, depending on how one measures them. There is a funding standard. One figure is based on an going concern and one on wrap-up [1180]or closure of the scheme. What figure one arrives at depends which measure is used. I am advised that the funding standard in place is a very conservative one based on a wind-up situation. Some 57% to 60% of funds are meeting that standard, which is extremely conservative and tough. Under this legislation the remaining funds are given a period of up to ten years to meet that same standard.

Meanwhile, the Pensions Board is required to sit on these funds to ensure that, each month, it receives returns and information to convince it that they are heading in the right direction. I explained to the Senator last week that were I to move in a more sudden fashion and demand that the 60% become 100%, I would probably effect what happened in the UK, where many firms were pushed into insolvency by the requirement that major payments be made to the pension fund in circumstances where it was not immediately necessary. On the other hand, it had the effect of closing down the company, with the ultimate result that no one gained. A better way is to grant the extended period, have the Pensions Board monitor schemes, and get everyone up to a funding standard over the period so that pensions can be paid out.

Considered in that context and with that strategy, there will be no plethora of underfunded schemes. However, if one approaches it from an entirely different angle, I accept that one might arrive at that conclusion. That is not the perspective that I have chosen, since it is more sensible to adopt the strategy that we are now pursuing.

Like every other speaker last week, I can indicate the size of the tax reliefs, which are very generous. However, one must also consider where they are going. They are not all going to boardroom types, and many are taken up by ordinary people on ordinary salaries who are allowed a tax benefit because they are buying pensions. A very substantial slice of that figure is going to ordinary, middle or low-income people who choose to take out a pension rather than pay the tax, since it is a better deal for them. Before one disturbs that, one must examine carefully whom it is helping.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  It is helping only the pensions industry.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  I argue that a large proportion of that €2.5 billion is given in tax breaks to individuals against their wages and salaries so they can take out pensions. It is, therefore, given in tax relief to individuals.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  Who is benefiting from that tax relief?

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  I argue that the individual is benefiting, since he or she is not taking out a pension. By forgoing tax, the State is helping that individual pay the premium to build up a pension. [1181]Therefore, the individual will obviously gain by being in the pension scheme and in the business of building up a pension for himself or herself with State support. One could argue, if that State support were not there, that they would not take out a pension, therefore resulting in no occupational pension on retirement and nothing other than the State pension.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  The State might be better off paying them a pension.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  The figure is so large that one must be very wary of a broad-brush approach. A very substantial proportion of it is going to ordinary working people to help them build up pensions for the future. I do not doubt that an element is going where one might argue that it should not go. We should examine that area. The Minister for Finance, Deputy Cowen, is constantly reviewing all those tax reliefs.

Mr. J. Walsh: Information on Jim Walsh  Zoom on Jim Walsh  From listening to the debate, it seems to me that there is a misunderstanding or fallacy. As regards the €2.5 billion and the fact that it is benefiting the pensions industry, we are fortunate to be in the public service and part of that figure comprises pension contributions deducted from our incomes before we are taxed, which the Senator making the point may have overlooked. That applies across the public service.

Those of us working in the public service, and I have some insight in that I worked on the other side of the fence for a long time, should be mindful of the tremendous advantage we have over those in the private sector in that we enjoy pensions which are index linked and which one could not purchase in the private sector because they would be too costly. We should be mindful of that when we talk about people who are in employment. The Minister might clarify the figure but I understand fewer than 50% of people in the private sector enjoy an occupational pension. The figure is quite low. I do not believe any of those would be inclined to put their money into a pension fund if tax relief was not available. The tax relief is an inducement.

Another aspect we should take into account is the fact that the tax is not lost. It is deferred tax, similar to the way we offer depreciation in business. Ultimately, when the pension is being paid it will be subject to the full PAYE system. In the case of lump sums, and much innovative thinking has gone into improving the pension regime over the past four or five years, they are subject to tax at 23%. It is not as if the State does not get that money. It is a fallacy to believe that that €2.5 billion will accrue to the Exchequer if a decision was made in the morning by the Minister for Finance to remove tax exemption from contributions to pension funds.

[1182]An argument may be made for allowing people in business to determine their own level of salary and where millions of euro may be placed in pension funds as a tax efficient means of accruing wealth. Perhaps we could examine that issue, but statistical data would be needed to research it properly to be able to determine where the hammer should be brought down, so to speak. Looking at the demographics of the country, the thrust of the legislation has to be to encourage more individuals to subscribe to pension schemes and, in particular, to encourage employers to participate and make pension schemes available to their staff.

It is a matter of social equity that people who give their life to a company should, at the end of their days, have sufficient income to maintain themselves in retirement. Companies do not tend to have social consciences but many employers do and without this tax exemption that would not happen at all. Rather than remove incentives, the Minister should consider ways of encouraging more people to participate. As the Minister pointed out, we should examine the area in detail to determine if abuses are taking place. If this income is being siphoned off into pension funds we should examine that issue to determine the measures that need to be taken. To go the route Senator Terry suggested, however, would be folly because only a fraction of the €2.5 billion would accrue to the Exchequer. It would be a self-defeating exercise. That suggestion was made from the comfort of a public sector pension, of which I am a beneficiary also, as are the other Members here.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  I never suggested we should withdraw it. I am questioning the value for money for the State.

Acting Chairman: Information on Ulick Burke  Zoom on Ulick Burke  As it is now 5.15 p.m. I am required to put the following question in accordance with the order of the House.

Ms Cox: Information on Margaret Cox  Zoom on Margaret Cox  Is it possible to amend the order?

Acting Chairman: Information on Ulick Burke  Zoom on Ulick Burke  It is a matter for the Leader of the House.

Ms Cox: Information on Margaret Cox  Zoom on Margaret Cox  As acting leader, is it not possible, with the agreement of the House, to amend the order to extend the debate by five minutes to deal with the one remaining amendment?

Acting Chairman: Information on Ulick Burke  Zoom on Ulick Burke  Is the Senator proposing that amendment?

Ms Cox: Information on Margaret Cox  Zoom on Margaret Cox  Yes.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  I thank Senator Cox for the intervention. Can I resubmit the remaining amendment on Report Stage and can they be dealt with in full at that stage?

[1183]Acting Chairman: Information on Ulick Burke  Zoom on Ulick Burke  Yes, once they have not been reached on Committee Stage.

Ms O’Meara: Information on Kathleen O'Meara  Zoom on Kathleen O'Meara  I propose that we keep to the original agreed Order of Business.

Acting Chairman: Information on Ulick Burke  Zoom on Ulick Burke  Does the acting leader wish to withdraw her proposal?

Ms Cox: Information on Margaret Cox  Zoom on Margaret Cox  There is no proposal to amend the Order of Business.

Acting Chairman: Information on Ulick Burke  Zoom on Ulick Burke  As it is now 5.15 p.m. I am required to put the following question in accordance with the order of the House of this day: “That amendment No. 8 be negatived, that sections 30 to 39, Schedules 1 to 5, inclusive, and the Title are hereby agreed in Committee, and that the Bill is reported to the House without amendment.”

Question put and agreed to.

Sitting suspended at 5.20 p.m. and resumed at 6.15 p.m.


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