Social Welfare and Pensions Bill 2005

Social Welfare and Pensions Bill 2005 Second Stage Dáil Éireann Speech by the Minister for Social and Family Affairs Séamus Brennan, T.D. 16th February 2005

I move that the Social Welfare and Pensions Bill, 2005 be now read a second time.

Molaim an Bille a bheith léite don dara uair.

I am very pleased to introduce this, the second of two Bills intended to implement the €874 million social welfare package announced in Budget 2005.

This sum represents a €244 million or almost a 40% increase on the 2004 package of €630 million and brings the projected level of social welfare expenditure in 2005 to over €12.25 billion.

That represents an increase of €1 billion or almost 9% on the allocation for 2004.

This level of expenditure is the highest ever on social welfare and is indicative of the Government's priority to protect and improve the living standards of social welfare recipients.

It is a clear demonstration of this Government's commitment to addressing the needs of people with disabilities and their carers, children, the elderly, widowed persons, the unemployed, those who are parenting alone and many others who are disadvantaged, vulnerable or on the margins of society.

It continues substantial year-on-year increases under this Government in social welfare spending, representing an increase of almost 60% in four years and a doubling of that which was spent in 1997.

The budget for my Department, at more than €12 billion, is the largest spending allocation of any Government Department.

Let me spell out just what that means in real terms.

It means that for every €3 that will be spent by this Government in 2005, almost €1 will go in social welfare entitlements, benefits and supports.

An estimated 970,000 people on average are expected to claim weekly social welfare payments this year.

Overall, almost 1.5 million people, including dependents, will benefit from these payments.

That is two out of every five people in the State who are, in one way or another, receiving vital welfare supports.

Overall, since this Government took up office, Ireland has changed dramatically.

The facts speak for themselves:

• the number of people at work has increased to almost 1.9 million
• the rate of unemployment has fallen dramatically from 10% to 4.3% ­- the lowest in the EU and among the lowest in the world
• the number of low paid removed from the tax net has increased, and this year, all those on the minimum wage are taken out of the income tax net entirely
• spending on social welfare has more than doubled from €5.74 billion in 1997 to an expected €12.25 billion in 2005
• over the past decade, while gross average industrial earnings have increased by 71%, social welfare payments have improved by between 87% and 95% and by even more for larger families
• substantial improvements in the conditions for entitlement to a range of social welfare schemes and services have been implemented
• new social welfare benefits such as Farm Assist, Carer's Benefit, Widowed Parent Grant and Respite Care Grant have been introduced and enhanced, and
• the social welfare increases of Budget 2005 range from more than 7% to over 10%, while inflation this year is expected to come in at 2.5%

I could spend a long time here today quoting many more facts and figures that confirm the pivotal role my Department plays in the lives of so many people and the great strides that have been made in just a few years. But the Department of Social Affairs is about more than statistics.

The payments, benefits and supports that go directly to almost 1 million people are a weekly lifeline for many struggling to make ends meet. More often than not, my Department is the final safety net for those descending towards poverty, marginalisation and economic and social distress.

However, the Department is more than an efficient and effective administrative structure for processing, and delivering state entitlements.

My Department is above all else about people. It must be people-centered.

The response of my Department must always be to shape the welfare system to meet the individual's and family's needs. That must, and I can assure this House that it will, be the guiding principle for the way my Department does its' work.

It will continue to react and respond speedily and sympathetically to all those who reach out to the welfare lifeline. It will not be guided only by rules and regulations that may sometimes blur the real purpose.

Put simply, what I mean is that one size welfare does not fit all.

The Department is about the welfare, and the overall well being, of those who are caught in the daily struggle to make ends meet: the children at risk of poverty; the carers who look after those unable to care for themselves; older people; the unemployed; and the many, many others who must be reached out to and supported.

We are now enjoying a new wave of economic growth and this time around the rising tide must, above all else, lift those who were left behind.

I will now outline the main provisions of the Bill which amends both the Social Welfare (Consolidation) Act 1993 - the Principal Act - and the Pensions Act 1990.

I propose making the following amendments to the Social Welfare Code:

In the area of child income support, the Government's policy is to concentrate resources on enhancing the Child Benefit scheme. Child Benefit now accounts for over 66% of child income support, while in 1994 it constituted less than 30%. There are sound reasons for this policy.

Child Benefit is both neutral vis-à-vis the employment status of the child's parents, and it does not contribute to poverty traps. As a universal payment, Child Benefit is not taxable, is not assessed as means for other secondary benefits and is payable to the primary carer, usually the mother.

When account is taken of these aspects of payment, Child Benefit is a most effective child income support mechanism.

Section 3 provides for increases in the monthly rates of Child Benefit as announced in Budget 2005.

The lower rate of Benefit, payable in respect of each of the first two children, is being increased by €10 per month from €131.60 to €141.60.

The rate for the third and each subsequent child is being increased by €12 per month, bringing the rate from €165.30 to €177.30. These increases come into effect from 1st April.

With respect to Disability Benefit, payment rates are, in part, determined in relation to the level of the claimant's weekly earnings.

Currently, where a person in receipt of long term Unemployment Assistance becomes ill or unfit for work, he or she may qualify for a reduced rate Disability Benefit as a consequence of having low or no earnings during the governing contribution year.

Section 4 of the Bill provides that in such cases a person may be eligible to receive Disability Benefit at the maximum rate where he or she satisfies the qualifying conditions and has a minimum of 260 paid social insurance contributions and 39 credited contributions in the governing contribution year.

The section further provides that these customers are exempted from the requirements to have 13 (of the required 39) contributions paid and to satisfy the prescribed earnings limit.

These measures take effect from the beginning of May.

Currently, where a person in receipt of Injury Benefit suffers a second injury and establishes entitlement to Disablement Benefit, the total amount payable is restricted to 100% of the Disablement Benefit rate.

Section 5 provides for the abolition of this limit, permitting payment of Disablement Benefit together with the appropriate Injury Benefit rate and this measure is effective from 2nd May.

I am committed to the cause of carers.

I set out through the Budget to recognise and support, in a special way, the contribution carers make in society. Carers provide a valued and a valuable service. Everyone in this House, and in society in general, know of the commitments and sacrifices involved.

The package of measures that I agreed with the Minister for Finance commits additional spending of close to €35 million to enhance supports for carers and to allow more carers qualify for entitlements.

The range of measures I am proposing includes:

• an increase of €14 per week in the Carer's Allowance and the Carer's Benefit payments which is already in payment since January and which I provided for in last year's Social Welfare Act
• the annual Respite Care Grant is being increased from €835 to €1,000. A total of almost 33,000 full-time carers are expected to receive this Grant this year
• the Respite Care Grant is being extended to include all carers who are providing full-time care, subject to their not being employed for more than 10 hours per week or in receipt of an unemployment payment or signing for unemployment credits. It will result in an estimated additional 9,200 full-time carers receiving the Grant for the first time. Section 7 of the Bill provides for the implementation of all Respite Care Grant enhancements with effect from June this year
• In recognition of the particular challenges which are faced by those carers who are providing care for three or more people, the Respite Care Grant will be paid in respect of each of their care recipients

The carers package this year also expands the income limits for the Carer's Allowance by increasing the weekly means test income disregard by €20 to €270 for a single person and by €40 to €540 for a couple so that all those on average industrial incomes can qualify.

This means that a couple with two children can earn up to €30,700 and receive the maximum rate of Carer's Allowance, while the same couple can earn up to €49,200 and receive the minimum rate of Carer's Allowance, Free Travel, the Household Benefits Package of Free Schemes and the Respite Care Grant.

These improvements will result in an additional 1,000 new carers qualifying for payment and 2,400 existing carers, who are currently in receipt of a reduced payment, receiving an increase in their weekly Carer's Allowance payment.

The earnings threshold for Carer's Benefit recipients who work for up to 10 hours per week outside the home is being increased by €120 to €270 per week.

The revised earnings disregard, which will be provided for in regulations, will be effective from April.

In addition, I intend to ease somewhat the qualification conditions for entitlement to Carer's Benefit to extend entitlement to certain seasonal and atypical workers who have difficulty meeting the current employment related conditions.

Originally, it was proposed to remove these conditions but on further examination, this is not considered the best way forward as it breaks the link with employment, which was not the original intention.

The issue is complex and in making changes, I do not want to cut across any future proposals to accommodate certain patterns of care sharing that my Department is currently examining.

Therefore, I have decided to revisit Section 6 of the Bill and I propose to bring forward an amendment to this Section either at Committee or Report Stage.

I want to assure the House that my intention is to make Carer's benefit more accessible to those at work.

The measures of Budget 2005, which I have outlined, along with previous initiatives, will go some way in responding to the specific needs of carers.

There will be further opportunities to address the carers' issues.

I will continue to meet with and listen to carers in order to further develop the entitlements and supports that will best assist them in the valuable work they do.

A lot has been done but, we must also acknowledge, that there is a lot more that should, and I can assure you, will be done in recognising and rewarding carers.

With some exceptions, Disability Allowance is not generally payable to a person who is residing in an institution. Section 8 of the Bill provides for the introduction of a means-tested payment of up to €35 per week for persons currently excluded from the Disability Allowance scheme by virtue of their residence in an institution.

It is estimated that some 2,400 people with benefit from this provision, which is effective from 1st June.

Section 9 of the Bill provides that the amount of capital disregarded for means test purposes for all schemes except supplementary welfare allowance, will be increased from €12,694.38 to €20,000 - an increase of over €7,300.

This improvement is being introduced following an examination of the current arrangements for the assessment of capital and property, particularly in so far as they apply to Special Savings Investment Accounts (SSIAs).

The enhanced disregard applies to all capital regardless of where it is held, be it in an SSIA, a Credit Union, with An Post or in any other account with a bank or other financial institution.

The increased disregard will mean, for example, 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.

A single pensioner can have capital of up to €76,000 and still qualify for a minimum pension. These figures are doubled in the case of a pensioner couple.

The SSIAs were introduced in 2001 as part of an overall Government strategy to encourage a regular savings culture among the population in general.

These new measures are consistent with this strategy and are designed to ensure that social welfare means testing procedures do not act as a disincentive to claimants to become savers or to harshly penalise those who have been regular savers in the past.

The provisions take effect from early April for Carer's Allowance and from early June for the other relevant means-tested schemes.

Section 10 provides for an entitlement to Island Allowance of those in receipt of certain payments from other EU Member States that correspond to the Social Welfare payments with which the Island Allowance is normally payable. This measure takes effect with the enactment of this Bill.

Section 11 standardises the transitional arrangements that were introduced following the alignment of the income tax and calendar years in 2001 for determining entitlement to certain insurance based social welfare schemes.

The section confirms that the second last complete contribution year continues to be used to determine entitlement to the short-term benefit schemes such as Unemployment Benefit and Disability Benefit.

Sections 12 and 13 provide for the same treatment of the Community Employment Scheme for the purposes of employment under the Rural Social Scheme, which operates under the aegis of the Minister for Community, Rural and Gaeltacht Affairs, as in relation to Unemployment Benefit, Unemployment Assistance and Farm Assist.

As I mentioned at the outset, this Bill provides for a number of miscellaneous amendments to the Social Welfare Code. These amendments are contained in Sections 14 to 22 of this Bill, and they include:

• a technical amendment which provides that only one Carer's Benefit or Carer's Allowance payment will be made in any one week in respect of the full-time care of a care recipient
• the addition of the Mental Health Commission to the list of specified bodies authorised by legislation to use the Personal Public Service Number as a unique public service identifier
• the award of Bereavement Grant and the application of the six weeks' after death payment arrangements without the necessity for referral to a Deciding Officer
• an amendment to the timeframe for initiating summary prosecution proceedings in cases of fraud and abuse
• amending payment arrangements to allow Orphans' payment to be made directly to an orphan aged over 18 years where he or she is not residing with a guardian
• providing for defining in regulations the types of employment from which a portion of earnings may be disregarded in the assessment of entitlement either to Rent or Mortgage Interest Supplements
• providing that the approach to recovery of social welfare overpayments will be prescribed in regulations, and
• the alignment of the residency conditions attaching to the Homemaker's Scheme, in so far as that Scheme applies to people providing care to ill or elderly persons, with those that apply to the Carer's Allowance, Carer's Benefit and Respite Care Grant schemes

This Bill also provides for amendments to the text of certain provisions of the Principal Act in advance of the publication of the Social Welfare (Consolidation) Bill 2005 which is currently being prepared.

These include amendments to reflect the changes effected by the Health Act 2004, by providing in Section 23 and Schedule 1 for the changes consequent on the dissolution of the Health Boards and the establishment of the Health Service Executive.

Section 24 and Schedule 2 provide for the substitution of the Third Schedule to the Principal Act with a re-organised, accessible version of the text.

This Schedule contains the rules governing the calculation of means.

Section 25 and Schedule 3 provide for further amendments which are required on foot of the revised Third Schedule.

Section 26 and Schedules 4 and 5 to this Bill provide for a number of technical and textual amendments to the text of the Principal Act, which are required in advance of consolidation of the Social Welfare Acts.

I now turn to the other aspect of this Bill, occupational and supplementary pensions, which is an area I regard as one of the key challenges of my Ministry.

This is my first time to address you in relation to this aspect of my brief in the context of a Bill and so I would like to set out my views for you.

My philosophy with regard to occupational pension cover is that the State has a responsibility to encourage people to make pension provision and it also has a responsibility to step in and fill gaps where they exist.

And there are gaps.

I am concerned that only 59% of workers over age 30 have supplementary pensions given that the target is 70%; I am concerned that only 43% of women in the State have pensions; I am concerned that people in their 20s taking up jobs make no pension provision. These are the fundamental issues that I want to tackle during my tenure.

I am fully aware that pension coverage and adequacy of that cover is a multi faceted problem and there is no single solution. I know these challenges were recognised by those involved in the National Pensions Policy Initiative and I acknowledge that progress has been made under the strategy pursued since then.

However, I am concerned at the pace of change. I have therefore asked the Pensions Board to bring forward, from September 2006 to mid this year, the completion of the review of the current strategy which is required under the Pensions Act. Getting a balanced strategy is a real challenge and I will keep this House apprised of developments.

Now to the measures I am introducing today. These provide for the implementation of a major EU Directive on pensions and also measures to address the very real problems being experienced by defined benefit occupational pension schemes.

The EU Directive, EC Council Directive 2003/41/EC on the activities and supervision of Institutions for Occupational Retirement Provision (IORP), is generally referred to as the IORPs Directive. The Directive sets out a framework for the operation and supervision of occupational pension schemes in all Member States and will facilitate pan-European pension plans.

In Ireland, the Pensions Act 1990 already provides for much of that framework and requires only a small number of amendments to ensure compliance, including the insertion of a section regulating cross border activity.

However, there are three areas of change which are important to note.

The first relates to emerging opportunities for Ireland in the context of pan-European pensions under this Directive. A task force, on which my Department was represented, was established under the auspices of the IFSC Clearinghouse Group to consider how Ireland might best respond to these emerging opportunities.

That Group recommended that Ireland position itself as a domicile of choice for such pan-European pensions schemes while recognising that this is a medium term objective.

One of my over-riding concerns in transposing this Directive is to ensure that it is transposed in a way that facilitates that aim and, as late as yesterday, I had discussions with the chair of that Group as to how best we progress this agenda. In Ireland, occupational pension schemes have traditionally been trust based vehicles and, in the months following enactment of this Bill, I intend to engage with interested parties to establish whether there are other suitable pension arrangements which may facilitate those considering pan-European schemes.

For the moment, institutions establishing in Ireland will have to be on a trust basis.

The second relates to Article 18 of the Directive which deals with investment rules. Under that article, borrowing by pension schemes is prohibited other than for liquidity purposes and on a temporary basis.

Section 36 of the Bill implements this requirement.

While the Directive allows for schemes with less than one hundred members to be exempted from this requirement, I took the view that if this is a prudent rule for some schemes, it is prudent for all, an approach supported by the Pensions Board. Equally the borrowing prohibition cannot be seen in isolation from the investment rules which relate, inter alia, to a requirement to ensure assets are invested predominantly on regulated markets and are properly diversified.

The third issue relates to the requirement that those who run pension schemes must be of good repute and must possess appropriate qualifications and experience.

To deal with this aspect of the Directive, Section 34 of the Bill sets out the circumstances under which a person must not act as trustee of a scheme, such as having a conviction for dishonesty or being prohibited from acting as a director of a company.

The requirements with regard to qualifications and experience will be set out in regulations.

The Pensions Board will be empowered to make a determination as to whether a trustee satisfies these requirements and a determination that they don't have the effect of removing the person as a trustee.

The section includes appropriate appeal mechanisms.

The other aspect of the Pensions Act amendments relate to recommendations made to me by the Pensions Board on foot of a review of the Funding Standard for defined benefit schemes.

As Deputies are aware, in 2003, my predecessor Minister Coughlan introduced short term measures designed to alleviate the funding crisis in pension schemes. The review recommends retention of these provisions which it found were largely successful.

However, what has emerged clearly since these provisions were introduced is that the liability side of pension funds is also under pressure. Improved longevity and lower interest rates are just some of the trends increasing these liabilities. I have therefore provided that an extension may also be granted in relation to difficulties on the liability side and details of this measure will be specified in regulations.

I believe these measures, which are being introduced after extensive consultation, achieve the required balance between member protection and encouraging continued pension provision.

Other amendments to the Pensions Act include:

• a change to section 7A to ensure that where guidance issued by the Society of Actuaries in Ireland is specified in regulations made under that section, it may not be altered by the Society without Ministerial consent
• an amendment to section 18 to allow the Board to require certain documents or seek certain information in the context of an investigation of a scheme
• a requirement that trustee consent should always be required where early retirement is being granted in the case of a defined benefit scheme which is under-funded
• an increase, from €4,000 to €10,000, in the transfer value in respect of which a certificate comparing potential benefits from the occupational pension scheme to those from the PRSA will not be required, and
• an increase from 15 days to 30 days in the cooling off period required when taking out a PRSA contract, which is in line with the period provided for in relation to distance marketing of consumer financial services

This Social Welfare and Pensions Bill builds further on the development of social inclusion measures adopted by this Government over recent years.

It safeguards the living standards of those who rely on social welfare income and other supports and prioritises the allocation of resources in favour of those most in need.

My priority in this Bill is to make significant progress in delivering on the social welfare commitments contained in the Programme for Government, Sustaining Progress and the National Action Plan against Poverty and Social Exclusion.

Resources will be targeted on helping those most in need in order, not alone to raise their standard of living, but to ensure that everyone is a valued citizen who can make his or her own individual contribution to society regardless of his or her particular circumstances.

I commend the Bill to the House and look forward to a constructive debate.

Molaim an Bille don Teach.