Social Welfare and Pensions Bill 2011 Second Stage.

Tairgim go léifear an Bille Leasa Shóisialaigh agus Pinsean 2011 an dara huair.

I move that the Social Welfare and Pensions Bill 2011 be read a second time.

Ba mhaith liom anois cur síos a dhéanamh ar chuid de phríomh ghnéithe an Bhille seo.

I would now like to outline some of the main provisions in the Bill.

“Getting people back to work” is one of the key challenges facing this country. Fundamental to addressing this challenge is getting people into the best position to take advantage of a job opportunity when it arises and also supporting them and their families while they are unemployed. Social welfare is a social contract between the citizen and the State. People are supported by the State when they are young and in education, they contribute to the social welfare system during their working lives, or are supported if they have a specific disability or need. They are supported again when older and retired.

For those who are unable to support themselves through unemployment, social welfare should be, in the popular phrase, “a hand-up, not simply a hand-out”. It is important that, as a society, we do not accept or foster a situation where a young adult does not get an opportunity to get a job and drifts on to social welfare and what should be a short-term help becomes a lifetime of support. As Minister, I want to emphasise the value of work and the value of opportunity. In every society being financially independent through employment is critically important for adults, particularly for young adults. We have been moving to a more active approach to helping people move into or back to employment. It is now time and put in place long-term structural and operational changes that consolidate these developments to ensure that social welfare is a short-term helping hand not a long-term hand-out. Our focus will be very much on the individual’s access to an opportunity to engage in employment, training or up-skilling, and responsibility to engage with such opportunities as they are provided, as well as a right to a payment.

That is why I am introducing a national internship scheme which offers qualifying people the opportunity to get valuable work experience and break the cycle where people who have found themselves unemployed as a result of the current economic situation and cannot get a job because they have no experience and cannot get experience because they cannot get a job. This scheme will be introduced from the beginning of July and will provide 5,000 work experience opportunities for jobseekers in the private, public, community and voluntary sectors. Internships will range from six to nine months and during this time participants will receive a top-up allowance of €50 per week in addition to their existing social welfare entitlement. The national internship scheme will apply to people entering the labour market after education or training and unemployed workers whose existing skills are no longer in demand.

Providing pathways to employment or re-employment is vital. The national internship scheme will help young people to get the essential first step on the employment ladder and allow them to build a relationship with prospective employers. From the perspective of employers, the scheme allows them an opportunity to train and develop potential employees at low cost and bring in new skills to enhance their workforce. The scheme is already receiving strong support from the business community and potential participants. To facilitate the introduction of the national internship scheme, the Social Welfare and Pensions Bill provides for a number of amendments to social welfare and employment legislation. The scheme will be launched on 1st July 2011 and will be known as ‘Job Bridge – The National Internship Scheme’.

Many employers have called for such a development to provide opportunities for people who are unemployed. This scheme presents an opportunity for everybody, whether in the private, public, voluntary or commercial sector, to give a chance to people who have qualified – be it a qualified apprentice, a graduate, a postgraduate or somebody who has done specific training perhaps to change his or her career, to get vital job experience to enable them present a CV to an employer. I have done a huge amount of work with a wide range of groups and bodies to ensure that this will be valuable work experience for qualified people and to ensure in particular that people who have been unable to get any work experience in the current climate will be able to do this and that this will constitute the first step for them in getting a job. The experience in many other countries shows that if people do a good internship it is often a route to permanent employment, even with the company with which they have done their internship. The scheme will provide those seeking employment with the opportunity to gain valuable work experience, maintain close links with the labour market and to enhance their skills and competencies through a quality internship opportunity, thereby improving their prospects of securing employment in the future.

Developing an environment that encourages the retention and creation of sustainable jobs goes hand-in-hand with addressing job readiness. Keeping people in work as well getting people into work through positive activation measures is essential. We also have to ensure that work does pay and that is why today’s Bill provides for an increase of €1 euro in the national minimum wage which restores it to its previous level of €8.65 an hour from 1 July. For people to stay in work there must be an incentive to do so in the form of adequate pay. Low-paid workers are most at risk of becoming unemployed and falling into poverty. Reducing the rate of the minimum wage was a cut that had the most impact on low paid workers, specifically women and young people. It imposed hardship on households at greatest risk of poverty who could least afford it. As a result of the reversal of the €1 per hour cut, workers on the minimum wage stand to gain more than €40 a week. This makes employment more attractive to people claiming jobseeker’s allowance and provides a greater incentive to find work. The restoration of the national minimum wage is a pledge made by the Labour Party during our election campaign and one I am pleased to be able to honour. This constitutes a full reversal of the 2010 cut to the national minimum wage by the previous Government of Fianna Fáil and the Green Party.

The Government is conscious of the need to regain and enhance competitiveness within the economy if we are to be able to begin to create the levels of employment required to meet the challenges posed by our very high level of unemployment. With this aim in mind, we have indicated that any adverse effects on employment which may arise through the restoration of the national minimum wage to its previous level will be mitigated through targeted reductions in the level of PRSI contributions. As a consequence, the jobs initiative announced the halving of the lower 8.5% rate of employer PRSI contribution until the end of 2013 on jobs that pay up to €356 per week. This measure is focused on employers who are struggling to maintain jobs and the incentive will help to ensure existing jobs are retained and employment levels are expanded. This measure will take effect from the start of July and we will be monitoring closely what happens as a result of the incentive, which is due to finish at the end of 2013. This is a substantial investment by the Government to support the retention of existing employment and the creation of new employments and I am hopeful that we will see improvements in the attractiveness and competitiveness of Ireland in key sectors, such as tourism. It should be noted that the existing employer PRSI exemption scheme will remain in place until the end of this year for businesses that take on workers under that scheme.

The programme for Government provides for the establishment of a new national employment and entitlements service under the management of my Department, with the objective of integrating into a single service the employment support services currently being provided by my Department and FÁS. The integration of employment services and related benefit payment services within the Department of Social Protection will provide a one-stop shop for people wishing to establish their benefit entitlements, seek employment and obtain advice about their training and work experience options. A key objective of the new service is to offer users a high level of personalised employment support and prioritise the provision of more intensive support for those most at risk of long-term unemployment. It will mean that the day a person signs on for a social welfare payment will be the day on which he or she starts on the road to find options and opportunities to return to work or enter training or education. This is critical to the reform of the system.

A number of pilot projects have begun to develop a case management approach to identify those most at risk of slipping into long-term unemployment and provide appropriately tailored responses to their needs. These projects will be completed and evaluated in the coming months, after which approaches will be developed for their roll-out nationwide as part of the national employment and entitlements service.

This bill extends the current requirements for new claimants to provide additional information for profiling purposes to existing social welfare recipients. This information is used to target supports to help people return to work, education or training. It is planned to implement enhanced activation arrangements based on a profiling system developed in conjunction with the Economic and Social Research Institute, ESRI, which will facilitate early targeted interventions for those who need them most, resulting in better outcomes and potential programme savings.

Maintaining citizens and taxpayers confidence in the fairness and effectiveness of the system is vital. This includes ensuring that every euro of contributor’s money goes to those who are legitimately entitled to claim it and who are genuinely in need of income support. There are a number of provisions in this Bill to strengthen procedures in relation to prevention, detection and deterrence of abuse and fraud of the social welfare system – extension of powers of Social Welfare Inspectors, cancellation and surrender of Public Services Cards and recovery of overpayments. Where an overpayment arises from the fraudulent claiming of a social welfare payment, the person concerned will not be able to offset any other potential social welfare benefits to which they may have been qualified during the period when the overpayment occurred, against the amount of overpayment to be recovered. I would like to emphasise that this will apply in the case of overpayments arising due to intentional defrauding of the social welfare system. It relates to claims where payment was made or continued on the basis of misrepresentation or fraud, including the wilful concealment of relevant facts.

I am introducing a number of amendments to both the State and occupational pension provisions in the Bill, the most significant of which is the phased increase in State pension age to 68 years and the implementation of Article 17 of the EU Directive on the requirement of certain pension schemes to hold additional funding reserves – the Institutions for Occupational Retirement Provision Directive or IORPS Directive.

The challenges facing the Irish pension system are significant. The population share of those aged 65 years and over is expected to more than double by 2050, from 11% to 26%. Thankfully, people are living longer and healthier lives, with average life expectancy set to rise even further to 88 years for women and 83 years for men. In contrast, the share of the working age population is projected to decline gradually from 68% to 58%. There are currently six workers for every pensioner and this ratio is expected to decrease to less than 2 to 1 by mid-century. The task of financing increasing pension expenditure will, therefore, fall to a diminishing share of the population who are at work.

Spending on public pensions, that is, social welfare pensions and public service occupational pensions, is projected to increase from approximately 5.5% of GDP in 2008 to almost 15% by 2050. Growing numbers of people want to work or may need to work beyond State pension age. People are starting their working lives later due to engaging in further education or are taking breaks from employment, perhaps to travel, rear their families or care for aging parents. Increasing the State pension age is one of the ways in which we can sustain the pensions system, maintain the value of the State pension and support people to remain in the workforce. The approach I am legislating for today is for the gradual increase of State pension age to 68 years. This will begin in 2014 with the standardisation of State pension age at 66 years. State pension age will be increased to 67 years in 2021 and to 68 years in 2028. It is worth noting that, until the early 1970s, the qualifying age for the State pension was 70 years.

The standardisation of State pension age at 66 in 2014 and the abolition of State pension transition also removes the retirement condition associated with the State pension transition, which acts as an incentive to leave the workforce and has been widely criticised as a barrier to older people remaining in employment. There is no retirement condition attached to the contributory State pension, which is currently payable from age 66.

By gradually increasing the qualifying age for State pension, people will be further encouraged to remain in employment beyond 65 years of age. The numbers currently at work drop dramatically at 65 years of age. The Quarterly National Household Survey showed that 77.2% of people aged 45-54 years were at work. This drops to 64.3% for 55-64 year-olds and to just 8.7% for people aged 65 years or older.

For the future, arrangements are being examined which would enable people to postpone receipt of a State pension and receive an actuarially increased pension at a later date. In addition, changes are also being considered which would allow people with a shortfall in their PRSI contribution record at pension age to continue to make contributions beyond State pension age, if they continue in employment or self-employment.

The continued participation of older people in the labour market must be encouraged and facilitated to meet the challenge of an ageing society. Employees and employers need to be persuaded to change their attitudes to working longer. In the workplace, employers should try to retain older employees and create working conditions which make working longer both attractive and possible for the older worker. Where this is not possible and people leave paid employment before State pension age, they may be entitled to apply for another social welfare payment until they become eligible for a State pension. Opportunities for older people to participate in education, employment and other aspects of economic and social life must be maximised.

Article 17 of the Institutions for Occupational Retirement Provision, or IORPS, directive is designed to ensure a level regulatory playing field between insurance companies and pension schemes which offer similar pension products. Insurance companies that offer pension products which guarantee pension benefits are required under their regulatory framework to maintain additional funding reserves. Such additional funding reserve requirements do not currently apply to pension schemes. The purpose of Article 17 is to ensure that pension schemes are required to meet the same funding reserves as insurance companies offering the same products.

Chapter 2 of Part 4 of the Bill makes the necessary amendments to the Pensions Act 1990 to implement Article 17 of the IORPS directive. However, it is expected that there will be few, if any, pension schemes in Ireland that function in the manner described in Article 17 of the directive.

The Bill contains a number of other changes to the Social Welfare Acts and to other enactments, some of which are simply clarifying existing legislative provisions.

I would now like to outline the main changes involved.

The occupational injury benefit scheme provides for a range of payments for people who are injured at work or who contract an occupational disease. Among the benefits available are pensions for the surviving dependants of a person who dies as a result of such an accident or disease, including pensions for surviving widows, widowers and civil partners, as well as for surviving dependent parents. However, with the development of the social welfare system over the years, the dependent parent’s pension scheme has effectively become obsolete. There are now only five people receiving this pension, with no new applications having been received since 1987. In the circumstances, section 5 discontinues the dependent parent’s pension scheme for new applicants. Existing recipients will continue to be paid for the duration of their claims.

Sections 6 and 7 provide for the necessary amendments for a phased increase in the State pension age up to 68 years by 2028, in line with the national pensions framework. This involves the discontinuance of the State pension transition, which is paid at 65 years subject to a retirement condition, from 1 January 2014. The State pension age will be increased from 66 years to 67 years from 1 January 2021 and it will be further increased to 68 years from 1 January 2028. The legislative changes being included in sections 6 and 7 also fulfil one of the commitments in the EU-IMF programme of financial support for Ireland that the previous Government agreed with the IMF.

Section 9 makes a number of amendments to the one-parent family payment to clarify the operation of the revised qualifying criteria for that payment following the change in the conditions to restrict the payment to families where the youngest child is under 14 years of age. The changes in section 9 ensure that payment of the one-parent family payment will continue up to 16 years where the domiciliary care allowance is being paid in respect of the youngest child. They also ensure that the general qualification criteria will apply to cases where one-parent family payment is retained for limited periods under transitional measures and in the case of recent bereavements.

Section 11 amends certain means assessment provisions as a consequence of the abolition of the income levy and the health contribution. In addition, the provisions of the family income supplement scheme, which is calculated by reference to the net income of the family, are being amended to include the universal social charge in the list of deductions when determining the net income of the family.

Section 14 clarifies the provisions relating to the allocation of personal public service numbers so as to allow parents and guardians to apply for PPS numbers for children under 18 years and to allow personal representatives to apply for PPS numbers on behalf of people who are unable to act, for example, because of a disability. Section 15 strengthens the provisions relating to the use of public services cards by providing for the cancellation and surrender of these cards where evidence becomes available that they are being misused. It will also be an offence to fail to surrender a public services card, without reasonable excuse, when requested to do so.

Section 16 makes a number of amendments to the social welfare code in order to facilitate the introduction of the national internship scheme. Provisions that deemed participants on the proposed skills development and internship programme not to be employees for the purposes of labour legislation generally, are extended to recipients of this new scheme. The provisions deeming participants on the new internship scheme not to be employees will not apply in the case of the Tax Acts.

Sections 17 provides that where a person is required to repay an overpayment of any social welfare payment, the amount of that overpayment may be deferred, suspended, reduced or cancelled subject to the conditions and circumstances that are specified in regulations.

Section 18 provides that where an overpayment arises from the fraudulent claiming of a social welfare payment, the person concerned will not be able to offset any other potential social welfare benefits to which they may have been qualified during the period when the overpayment occurred, against the amount of overpayment to be recovered.

Section 20 extends the list of bodies that are authorised to use the personal public service number for the purposes of carrying out transactions with members of the public to include the Probate Office and the Sustainable Energy Authority of Ireland.

Section 21 amends the Comhairle Act 2000 so as to apply to the Citizens Information Board the standard provisions disqualifying people who have been nominated for or elected to the Oireachtas, the European Parliament or to a local authority from membership of State boards and agencies. This section also applies these standard disqualifications to staff members of the Citizens Information Board. These changes will apply to the Citizens Information Board in the case of anyone who is nominated for or elected to the Oireachtas, the European Parliament or to a local authority on or after 1 July 2011.

Section 24 provides that section 7 of the Official Languages Act 2003 does not apply in regard to this Act. This will enable any necessary orders and regulations that need to be made under the Bill by early July, including the order to restore the national minimum wage to its former level, to be made without having to wait for the Irish translation of the Act to be made available.

Tá mórchuid altanna sa Bhille seo agus deirtear liom nach mbeidh leagan Gaeilge ar fáil le roinnt seachtainí. Dá bhrí sin, tá sé beartaithe againn Alt fiche ceathar a chuir chun cinn chun a bheith cinnte de go n-éireoidh linn an íosphá náisiúnta a árdú ó thosach na miosa. Tá aistriúchán Gaeilge den Bhille á reachtáil faoi láthair agus beidh leagan Gaeilge den Acht ar fáil ar an idirlíon agus i gcló go gairid. Ní bheidh aon mhoill ar sin. The text of this Act will be made electronically available in each of the official languages as soon as practicable after its enactment and it will be published in hard copy in both languages as soon as possible.

Part 4 provides for the necessary changes to the Pensions Act to implement Article 17 of the EU Directive on the Activities and Supervision of Institutions for Occupational Retirement Provision. This Article applies to pension arrangements where the pension scheme and not the sponsoring employer guarantees pension benefits. It is anticipated that there are few if any scheme in Ireland where the scheme provides such a guarantee. So it is expected that the implementation of Article 17 will have little impact on existing occupational pension schemes.

The substantive elements of Article 17 of the Directive are provided for in section 35 of this Bill. Defined benefit pension schemes are required under Part 4 of the Pensions Act to maintain sufficient assets in the scheme to enable them discharge their accrued liabilities in the event of the scheme winding up. Where schemes do not satisfy this requirement, the sponsors or trustees must submit a funding proposal to the Pensions Board to restore full funding within three years. This period can be extended at the discretion of the Pensions Board.

Section 35 builds on these funding requirements to secure the additional reserves required to implement Article 17 by inserting a new Part 4B into the Pensions Act.

This new Part provides for the application of the provisions of Article 17 to regulatory own funds schemes and to regulatory own funds trust Retirement Annuity Contracts.

A regulatory own funds scheme is a pension arrangement where the scheme and not the sponsoring employer guarantees pension benefits. Similarly a regulatory own funds trust is a pension arrangement where the trust Retirement Annuity Contract guarantees the pension benefit.

The other measures contained in Chapter 2 of Part 4 make consequential amendments to the Pensions Act to embed the new Part 4B into the Pensions Act. These amendments include, for example, the exemption of regulatory own funds schemes from the requirement to submit funding proposals or to restructure scheme benefits where a scheme fails to satisfy the funding standard under Part four of the Pensions Act. The requirement to submit funding proposals and to restructure scheme benefits is set out in a new Part of the Pensions Act, which is being introduced by section 35.

In addition, Chapter 3 of Part 4 clarifies the responsibility of the Pensions Board in regard to the certification by the board of certain policies or contracts of assurance as being suitable for pension purposes. Sections 40 to 43 amend the Pensions Act to provide that such policies or contracts of assurance will now require to be certified by the Pensions Boards instead of getting the approval of the board.

While it is anticipated that this article will apply to very few, if, any, pensions schemes in Ireland, the Pensions Board will publish guidelines on the application of Article 17 in the coming weeks.

In summary, the Social Welfare and Pensions Bill 2011 provides for changes to the social welfare code, to the Pensions Act and to a number of other enactments. The measures contained in this Bill are in four categories: changes to give effect to three of the measures announced in the jobs initiative; a phased increase in the State pension age to 68 years by 2028 in line with the national pensions framework; implementation of Article 17 of Directive 2003/41/EC on the Activities and Supervision of Institutions for Occupational Retirement Provision; and a number of other changes to the social welfare code and to the Comhairle Act 2000.

This is a bill which is about providing opportunities to the unemployed and low-paid. Through it we are making work more worthwhile by the €1 increase in the national minimum wage, we are putting supports in place to help people get back to work and get work experience through the national internship scheme, and we are providing a better environment for the creation and retention of jobs through PRSI measures. We are focussing on the challenges of getting people back to work and keeping them in work.

Focal scoir / Conclusion

Molaim an Bille don Teach agus tá mé ag súil le bhur gcuid tuaraimí a chloisteáil maidir leis na míreanna atá ann.

I commend the Bill to the House and I look forward to an informed debate and to hearing your views on the measures contained in the Bill.

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