Pensions are a ticking time bomb. People are living longer, with life expectancy for men currently at 76.7 years while that for women is 81.6 years
I am thankful that people are living longer, but the increased life expectancy poses a challenge that needs to be addressed, particularly given the fact that approximately 900,000 people in the country have no provision for a pension other than the State pension. In addition, the pensionable age is set to increase to 67 in 2021 and to 68 by 2028.
Most employment contracts in this country oblige people to retire at 65, so the question arises of how people will fund themselves from the time they retire until they receive the State pension. The State transition pension will be abolished from 2014 and I have met several people who are on the verge of retirement and who are very concerned about this. After a working life of 40 years they would have reasonably expected that the gap between their retirement and qualification for the State pension would be funded. Given that they will now be claiming jobseeker’s benefit, these people are fearful that they will face penalties if they do not take up training or education during this period. I am pleased that the Minister has now moved to address this issue and that she is to exempt people over 62 from facing penalty rates if they refuse to engage with the Department on offers of training or education. This is very welcome, given the lifelong contribution they have made to this country. I thank the Minister for that.
There is a further matter to be clarified. In the gap year from retirement to the State pension, people will now be claiming jobseeker’s benefit. Under the current rules this only applies for nine months, so what will happen after that period? This needs to be clarified, especially as the gap is due to increase by three years in 2021.
I also ask the Minister her views regarding the retirement age, which is almost universal across both the private and public sectors. Are there any plans to extend this retirement age in line with the plans to increase the State pension age?
Not only do we have the challenge of funding retirees during the gap period between retirement and receipt of the State pension, but we also have many defined benefit pension schemes in deficit. I welcome the fact that the Minister is introducing measures to address the ongoing difficulties with defined benefit schemes. Like many Deputies in this House, I have received correspondence from former employees of Aer Lingus, particularly those who are on deferred pensions. Under the current restructuring proposals they claim that they stand to lose 57% of the pension they expected to receive when they reach retirement age. In addition, I understand that the kernel of the problem for deferred members of defined pension benefit schemes goes back to the Social Welfare and Pensions Act 2009, which removed the protection for deferred workers. In the Irish aviation superannuation scheme there are approximately 3,687 people who are on deferred pensions, who between them have long years of service. Perhaps the Minister would clarify whether the changes being introduced in this Bill will provide protection for deferred members of defined benefit schemes.
Many argue that if there is to be real pension reform, our legislation should be moving more in line with that of the UK and the USA, where work pensions are protected through legislation which requires employers to properly fund the schemes. The OECD review of the Irish pension schemes reported that the protection in Irish legislation for defined benefit members was weak, and the report also stated that the legislation “allows any sponsor to walk away from [defined benefit] pension plans, shutting them down, without creating a high priority debt on the employer.” It concurs with the views expressed by deferred Aer Lingus employees that the priority currently given to pensioners before other members if a scheme winds up creates considerable inequality among members, and this outcome is particularly harsh for those who are close to retirement. The OECD recommends that healthy plan sponsors should not be allowed to walk away from defined benefit plans unless assets cover 90% of pension liabilities.
Right across various sectors we are seeing schemes that are underfunded, and this has been exacerbated by the economic collapse. It is a big problem because, as I understand it, only approximately 40% of schemes are fully funded, although up to 85,000 people are paying into defined benefit schemes. I would appreciate if the Minister could clarify her proposals to ensure equity for all members who have contributed to a defined benefit scheme.
Addressing unemployment remains the single biggest challenge for the Government and I welcome the priority that the Minister has placed on getting people back to work. These include the JobsPlus scheme, JobBridge, the various community employment and Tús initiatives, the youth guarantee scheme and the roll-out of the one-stop-shop Intreo offices for employment supports. I commend the Minister on her work and the fact that she has been able to save money even in these difficult times.