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 Header Item Credit Availability (Continued)
 Header Item Pension Provisions

Wednesday, 24 April 2013

Dáil Éireann Debate
Vol. 800 No. 4

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(Speaker Continuing)

[Deputy Derek Nolan: Information on Derek Nolan Zoom on Derek Nolan] By virtue of being in mortgage arrears, one is not capable of servicing all one's debts. If the circular was written in such a fashion as to give a false interpretation to the credit unions as outlined, clarification needs to be issued by the Central Bank of Ireland to the credit unions so they have it in writing. The Minister of State is right that credit unions are coming under new scrutiny, which they have not come under before, and new regulatory frameworks, which is intimidating to them as it is different, and they are trying to abide by them.

I agree with the Minister of State that this statement was not ambiguous but was straightforward. However, if it is capable of such misinterpretation, it needs to be clarified urgently. Will the Minister of State use his office to ensure that clarity is given to the credit unions so that the instance I outlined, which happened in Galway on two occasions, does not happen again?

Deputy Brian Hayes: Information on Brian Hayes Zoom on Brian Hayes This is a useful exchange. There is a recognition in government, as there is on all sides of this House, of the importance of the credit union sector in terms of lending for the short and medium terms. It is an absolutely crucial part of the financial environment for the country. The credit union sector has come through a difficult time, as have other financial institutions, but we need to see a proper assessment and lending policy throughout the sector. However, people must also be aware of prudential risk, which arose in some cases concerning the credit union sector.

The point Deputy Nolan made was useful. We will certainly transmit his views to the Central Bank of Ireland and if further clarification is sought on this matter from the credit union sector, it would be useful. The opportunity the Deputy has afforded me to put this matter on the record, and in terms of raising it in this public way and seeking potential clarification from the Central Bank of Ireland, is useful.

Pension Provisions

Deputy Willie O'Dea: Information on Willie O'Dea Zoom on Willie O'Dea I thank the Ceann Comhairle for allowing me to raise this very important issue arising from the report on pensions the Government commissioned from the OECD. The OECD report reveals a very serious situation - a looming time bomb. As somebody said, the time bomb has been ticking for some time but the ticking is getting ever louder. I raise this issue to ascertain the Government's position on the matter, in so far as one can.

Currently, there are 5.3 people under pension age for one person over the age of 65. By the middle of the century, it is estimated that figure will decrease to two people under the age of 65 for every one person over the age of 65. The Minister will be aware that the reported highlighted that almost 50% of people between the ages of 20 and 60 have made no provision whatsoever for their pensions. The report recommended that the Government should make a definitive choice on the future structure of private pensions even if economic circumstances currently do not enable that to be put in place. The report gives a choice between a means tested pension or a basic pension for everybody. Has the Minister any views on that?

I recall when the then Government received the last report on pensions in 2010, it recommended a system of auto-enrolment where employers would pay a certain amount, the Government and taxpayers would put up a certain amount and the pensioner would contribute a certain amount. I think the proposal at the time was that everybody would be automatically put into the scheme but they would have the right to opt out.

This report takes a different view - perhaps it is right in principle - that the only way to make this sustainable is by compulsion, although I presume one starts at a very low level. It is a bit ironic that on the very day the OECD report was published, a report was published by an organisation called Amárach which stated that one in four people would be pushed into arrears with their bills if their income dropped by €50 per month. We are also aware of the much-quoted findings of the Irish League of Credit Unions that 1.8 million people have a disposable income of less than €50 per month. In those circumstances, it is utterly unrealistic to talk about compulsion at this point in time.

The report referred to the defined benefit pension schemes situation. The Minister will be aware that anything between 80% and 90% of defined benefit pension schemes are currently technically insolvent. I know it is the Government's intention in the pensions legislation, because it is has been said a number of times in this House, to change the priority in the event of the wind-up of a defined benefit scheme to make it more equitable than it is currently where the existing pensioners take everything to which they are entitled while the remainder goes to people who, in many cases, may have been contributing for decades.

There is a looming situation in Waterford Glass and the new provision the Government intends to make will not be made in time to save people who are currently paying pensions in Waterford Glass. I would like to hear the Minister's comments on that and on the recommendation in the report that defined contribution schemes should be better designed. Will the Minister facilitate a debate on the report?

Minister for Social Protection (Deputy Joan Burton): Information on Joan Burton Zoom on Joan Burton I thank the Deputy for raising this very important issue. The sustainability of our pension system is of particular concern because, as a country, we have the bonus of many more people living much longer. However, we also have many more children being born. As the Deputy pointed out, there are five people of working age to every one person of retirement age but by the middle of this century, that will have shifted to a likely figure of two people working to one person of retirement age, so it is a challenge.

In that context in April 2012, on behalf of the Government, I asked the OECD, to conduct a focused review of Ireland's pension policy, while taking economic conditions into consideration, and to provide recommendations for long-term reform. The review was published the other day and it looks at the totality of pension provision in the State in the private, occupational and public sectors. The report was informed by extensive consultation undertaken by the OECD. I point out, however, that was not costed and simply sets out the landscape of possibilities, the current situation in Ireland and how we compare with other countries.

As the Deputy will be aware, Fianna Fáil, when in government, commissioned numerous reports on pensions and at one stage it indicated that the old age pension would rise to €300 per week and that it would set out a plan for an auto-enrolment system.

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