Social Welfare & Pensions (Miscellaneous Provisions) Bill 2013


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SOCIAL WELFARE AND PENSIONS (MISCELLANEOUS PROVISIONS) BILL 2013

SECOND STAGE SPEECH

DAIL ÉIREANN

BY THE

MINISTER FOR SOCIAL PROTECTION

JOAN BURTON T.D.

30th May 2013

                                                                                                                

I move that the Social Welfare and Pensions Miscellaneous Provisions Bill 2013 be read a second time.

As Minister for Social Protection in arguably the most challenging economic period this country has ever faced, I have operated on simple and enduring principles: welfare must be there for those who need it; and we must do everything we can to help people back to work.

In short, welfare must be both a safety net and a springboard.

To that end, my focus has been on transforming the Department from the passive benefits provider of old to one that is actively assisting people back to work, training or education.

In this legislation, I am continuing those necessary and important structural reforms of the social welfare system.

The Department of Social Protection accounts for €4 in every €10 spent each day by the Government.

As a result, the Department has had to play its part in the effort to get the deficit under control.

But while making savings in social welfare expenditure has been forced upon us, the reductions have been targeted with the objective of making the system fairer, focussed and fit for purpose.

FAIRNESS

Let me start with fairness.
There are many families in Ireland who depend solely on social welfare to provide for all of their needs.

That is why in successive budgets we have protected core welfare payment rates.

In a time of unprecedented crisis, we are standing by those who are most vulnerable.

International research proves it.

Compared to other EU countries, Ireland's system of social transfers is the most effective in reducing poverty.

So protecting core rates makes absolute sense from a social justice perspective.

But it also makes sense economically: at a time when consumer confidence remains depressed, and people remain reluctant to spend, the €20.3 billion social welfare budget is a crucial injection of cash into the economy.

As I have said recently in several forums, the EU needs to shift its approach from austerity-only if the Union is to recover – and thankfully, I believe that message is now beginning to seep through.

What does that mean in an Irish context?

Because we are still in a bailout, we have little choice but to observe the conditions of the troika until we are again able to fund ourselves on the financial markets at reasonable rates.

That means a further correction in the forthcoming Budget, with the ratio of taxation measures and expenditure savings still to be determined.

Again, my Department will be expected to play its part.

But I return to my earlier points about the crucial importance of protecting the most vulnerable; and the value of the welfare spend as a Keynesian automatic stabiliser.

Our challenge is to create the room for an economic and social dividend, while respecting the need to meet deficit targets and exit the bailout.

The proceeds of the promissory note deal must be put to the most effective use, to invest in jobs and give people hope.

The reality is that job creation is the single most effective way of reducing social welfare expenditure.

PATHWAYS TO WORK

This year, as part of our Pathways to Work strategy, my Department will spend over €1 billion on work, training and education places that will benefit approximately 85,000 people. Also under Pathways, we are continuing to rollout our Intreo activation service for jobseekers.

The crucial need for the Pathways strategy is highlighted by ESRI research on jobless households.

The research showed that, during the height of the boom between 2004 and 2007, the share of households defined as jobless shockingly recorded a double-digit increase to reach 15 per cent.

By stark contrast, the average across the euro zone in 2007 was just below 10 per cent.

That this was allowed happen during a period of such prosperity is the single most shocking thing about the figures.

This Government has greater ambition for those citizens who are unfortunate enough to be unemployed.

It views each and every individual on the Live Register or otherwise distant from the labour market as an untapped resource and a future employee who will participate in the rebuilding of this country.

That ambition is why we are moving from a passive to an active welfare state.

COMBATTING FRAUD

In addition to deep-rooted reforms, I have prioritised efforts to combat social welfare fraud.

Since becoming Minister, I have travelled to numerous local offices throughout the country and spoken to the frontline staff who deal with and support customers on a daily basis.

The overwhelming message they have given me is that social welfare fraud is not a victimless crime, and that those who defraud the system do so at the expense of the vast majority of genuine customers who rely on social welfare income supports.

I want to thank those staff for their honest feedback, their invaluable insights and the work they do on a daily basis.

STABILISING SOCIAL INSURANCE

This Bill will give legislative effect to a number of important amendments to the social welfare code in relation to PRSI, Jobseekers' payments, and the prevention of fraud. It will also make amendments to the pensions code in relation to occupational pension provision.

In his Budget statement last December, the Minister for Finance announced a number of measures to broaden the income base for PRSI in order to ensure the stability of the Social Insurance Fund.

This is so that the Fund can continue to pay pensions for those who are retired or widowed and for short-term benefits for those who become ill or unemployed.

One of these PRSI base-broadening measures, provided for in this Bill, extends liability for PRSI contributions in 2013 to certain civil and public sector workers who pay modified rates of PRSI contributions and who also have income from a trade or profession.

They will now be liable to a PRSI contribution of 4% on any income arising from a trade or profession.

JOBSEEKER'S TRANSITION

In recent years, reforms have been made to the One-Parent Family scheme The strongest protection against poverty is decent, secure and fairly paid work.

And the idea that the welfare system must be a springboard is especially true when it comes to lone parents.

Although full-time work may not be feasible for parents of very young children, we believe that supporting parents to participate in the labour market once their children have reached an appropriate age will improve their own economic and social circumstances.

In the long-term, it will be best for them and for their families.

The reforms introduced in Budgets 2011, 2012, and 2013 recognise parental choice with regard to the care of young children while, at the same time, having an expectation that parents will not remain outside of the workforce indefinitely.

Last year, I said that I would proceed with the measures to reduce the age limit to seven years only if a credible commitment on the delivery of a robust and comprehensive system of childcare was forthcoming.

Let me be frank: although I was very pleased to secure an additional €14 million in the Budget to fund an extra 6,000 afterschool childcare places this year, the comprehensive system we need is not yet in place. 

Therefore, I am now proposing reforms to the Jobseeker's Allowance scheme to ease the transition of former recipients of One-Parent Family Payment with young children to the scheme.

Jobseeker's Transition will be a targeted version of the Jobseeker's Allowance scheme, which provides means-tested financial assistance and activation supports. 

Recipients of Jobseeker's Transition will be required to engage fully with the Department's activation process.

Crucially, however, they will be exempted for a transitional period from the full conditionality of the Jobseeker's Allowance scheme, specifically the criteria that jobseekers must be available for and genuinely seeking full-time work.

This will allow the lone parents in question to seek part-time work rather than full-time work if this better suits their family circumstances.

They will also be able to access existing childcare supports to enable them to engage in education and training programmes.

The transitional period will last, provided the individual continues to satisfy entitlement conditions for One-Parent Family Payment other than the relevant age, until their youngest child reaches 14 years of age.

FAMILY INCOME SUPPLEMENT

In addition, I will be amending the Family Income Supplement (FIS) Scheme so that former One-Parent Family Payment recipients in receipt of FIS will have it increased in light of the termination of their One-Parent Family Payment due to the age of the youngest child.

Once Family Income Supplement is awarded, it is normally paid for a 52-week period and is not affected by any changes in circumstances in this period, such as a change in weekly income. 

I will be introducing regulations shortly to enable entitlement to Family Income Supplement to be reassessed during the 52-week period to take account of such a loss of the One-Parent Family Payment. 

These reforms recognise the difficulty of parenting alone and will enable lone parents with children of primary school age to qualify for a jobseeker's payment.

They represent a compassionate, supportive and effective approach to helping lone parents transition to work and provide for their families' long-term best interests.

 

RETAINED FIREFIGHTERS

I am introducing changes in relation to Jobseeker's Benefit and Jobseeker's Allowance to allow for persons working as retained fire-fighters to be exempted from certain conditions to enable them access these schemes.

Since 1972, the social welfare system has essentially subsidised the State's cost of providing a nationwide part-time fire service.

 

But no legislative base was ever provided to support this position, which led to uncertainty and difficulty for individual firefighters.

I am now bringing clarity to this situation in recognition of the social good of the work of retained fire fighters.

A retained firefighter who is on call will be deemed to satisfy the availability conditionality.

This will mean that retained firefighters will no longer be disallowed on the grounds of availability for the days they are on call.

However, they will still have to satisfy the genuinely seeking work and availability conditionality for the days they are not on call.


These changes recognise the vital service that these workers provide to local communities.

PUBLIC SERVICES CARD:

I previously mentioned the issue of welfare fraud.

My view on this is simple: Such fraud undermines confidence in the entire system and is unfair to genuine claimants and the taxpayers who fund the system in the knowledge that it is there for them when they need it.

Welfare fraud is a serious crime and the Department is doing everything it can to crack down on people who abuse the system.


We have begun the phased introduction of the public services card with key security features, including a photograph and signature, which will be used to authenticate identity of individuals, thus helping to reduce fraud and error in the social welfare system.

By close of business today, we will have issued over 230,000 cards.

Under the existing legislative provisions, there is a mandatory requirement for new applicants to allow for his or her photograph and signature to be captured and reproduced in electronic format for purposes of a PPSN allocation, Public Services Card and claims for social welfare benefits.

I will be proposing a change to provide for the introduction of a condition for existing recipients of social welfare payment that the person must satisfy the Department as to his or her identity including allowing for electronic capture of photograph and signature.

PENSIONS

I am introducing a number of changes to occupational pension provision in this Bill.

These changes give effect to the recommendations of the Critical Review undertaken on the Pensions Board and the Pensions Ombudsman as part of the Public Service Reform Plan. 

I am also introducing a number of other amendments to the Pensions Act to:

  • give powers to the Pensions Board to wind-up a pension scheme in certain circumstances;         
  • provide for the disclosure of information on a proposal by the Pensions Board to restructure scheme benefits and to provide for an appeal to the High Court on a point of law against a direction by the Pensions Board to restructure a defined benefit pension scheme;
  • provide the Pensions Board with a right of appeal to the High Court to seek compliance with adirective to either restructure scheme benefits or a direction to wind-up a scheme.
  • change the fines regime that applies to Personal Retirement Savings Accounts
  • amend the terms of office of the Pensions Ombudsman.

The changes I am bringing forward today will strengthen governance and regulation of occupational pensions and give consumers greater input into pensions policy.

They will reform the governance structure of the Pensions Board by distinguishing between the operational oversight and the policy advisory functions.

The Pensions Board will be renamed the Pensions Authority to ensure public awareness and clarity of its role and functions and distinguish it from the policy advisory activities.

The Chief Executive of the Pensions Authority will be known as the Pensions Regulator.

I am introducing changes to the Pensions Act to give the Pensions Board power to wind-up a scheme in certain circumstances.

I am very aware of the serious funding challenge facing pension schemes.

It is expected that most defined benefit schemes will be in a position to meet the funding requirement by end-2023.

However, the trustees/employer of some schemes may decide not to adopt or not to comply with the requirement of the Funding Standard, and in such cases the Board may have to direct the trustees to either restructure scheme benefits or wind-up the scheme.

The power to wind-up is considered a measure of last resort.

 

PRIORITY ORDER

There was an expectation that I would be bringing forward in this Bill changes to the manner in which assets are distributed on the wind-up of a pension scheme.

This is a very complex and sensitive issue and one which requires careful consideration before any change is made to the current provision.

My officials have engaged with representatives of stakeholders and have also engaged external consultants to advise on the matter.

In light of the recent decision by the European Court of Justice in the Waterford Crystal case, the Government recognises the need for a comprehensive policy and legislative response that addresses the range of issues involved.

In addition, it is considered necessary to await the submissions of funding proposals from pension scheme trustees as these will give a more comprehensive and in-depth picture of the funding position of defined benefit pension schemes.

AMENDMENTS

I will be tabling two amendments to the Bill at Committee Stage to allow for the expansion of the penalty rates regime for Jobseeker's Allowance, Jobseeker's Benefit and Supplementary Welfare Allowance and a measure to enhance powers in the area of overpayments recovery.

MAIN PROVISIONS

I will now outline the main provisions of the Bill.

Section 1 provides for the short title, collective citations, construction and any necessary commencements.

Part 2 — Amendments to Social Welfare Acts

Section 2 defines a number of common terms used in this part of the Bill, including the term “the Principal Act'' to mean the Social Welfare Consolidation Act 2005.

Section 3 replaces references to training which is provided or approved by FÁS that are contained in the Social Welfare Consolidation Act in the light of the new structural arrangements for the provision of State training that are being provided for in the Education and Training Boards Act and the Education and Training Bill 2013 which is currently progressing through the Oireachtas.

Section 4 amends the definition of a "special contributor" which is used for the purposes of the Special Collection system operated by the Department of Social Protection for the collection of certain PRSI contributions.  This amendment is required as a consequence of the provisions contained in section 9 of the Social Welfare and Pensions Act 2012, which amended the arrangements relating to the mechanism for the payment of PRSI contributions on share gains./p>

Section 5 corrects an error in the wording of section 23(5) of the Social Welfare Consolidation Act 2005, which relates to elections by a wife who is self-employed to have her PRSI liabilities charged and collected against her husband. Section 5 deletes an erroneous reference to civil partner which is contained in subsection (5) of section 23 and inserts a separate provision to provide for similar elections made by one civil partner in a civil partnership.

Section 6 extends liability for PRSI contributions to modified rate PRSI contributors, that is, PRSI Class B, C and D contributors, who also have income from a trade or profession. This PRSI contribution will be at the rate of 4% of relevant emoluments and income, but will not count towards determining entitlement to social insurance benefits. Section 6 also provides for a number of consequential amendments to the Social Welfare Consolidation Act 2005 arising from the introduction of this new contribution, including refunds of such contributions which are paid in error, the exchange of information between the Revenue Commissioners and the Minister for Social Protection in relation to such contributions and the payment of income arising from these contributions into the Social Insurance Fund

Section 7 provides for a number of amendments to the Social Welfare Consolidation Act 2005 to take account of the provisions of the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010, including an extension of the provisions for refunds of PRSI in respect of payments made under a maintenance arrangement to include maintenance arrangements which are for the benefit of a party to a civil partnership or a cohabitant.

Section 8 amends the conditions of entitlement applying to the Partial Capacity Benefit scheme to enable decisions relating to whether or not a claimant has a restriction on his or her capacity for work and the level of that restriction to be appealed to the Social Welfare Appeals Office.

Section 9 provides for changes to the Jobseeker's Benefit and Jobseeker's Allowance schemes to exempt persons who are working as retained fire-fighters from certain conditionality due to the nature of that employment.

Section 10 provides for amendments to the Jobseeker's Allowance scheme to cater for the transition of persons to that scheme who no longer qualify for One-Parent Family Payment due to their youngest child reaching specified age thresholds. Former recipients of One-Parent Family Payment will be exempt from a number of the conditions applying to the Jobseeker's Allowance scheme for a transitional period up until their youngest child reaches 14 years of age. People who qualify for Jobseeker's Allowance during this transitional period will be subject to the normal activation processes and will be required to engage proactively with such processes in order to retain their payment

.

Section 11 extends the identity authentication requirements that currently apply to new applicants for a social welfare payment, a Personal Public Service Number or a Public Services Card to existing recipients of social welfare payments. Under these requirements a person will be disqualified from continuing to receive a social welfare payment where he or she fails to satisfy the Minister as to his or her identity.

Section 12 provides that a working director with a shareholding of 50% or more in a company will not be regarded as being insurable as an employed contributor in that company. Company directors holding 50% or more of the shareholding of a company are not normally regarded as falling within a normal employer/employee relationship and are therefore, deemed not to be employed under a contract of service and liable for PRSI Class A contributions (as an employee). Instead, such company directors are deemed to be employed under a contract for services and to be liable for PRSI Class S contributions (as a self-employed person).

Section 13 clarifies the operation of the income disregard which is used for the purposes of the Rent and Mortgage Interest Supplement schemes to ensure that this income disregard only applies to income arising from prescribed employment and training, Family Income Supplement and maintenance payments, but does not apply to any other means that the person may have, such as pensions, investment income etc

.

Section 14 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 and for sharing personal information and exchanging relevant data for the purposes of carrying out those transactions. The new bodies being included are the Insolvency Service of Ireland, Quality and Qualifications Ireland, and Payment Service Providers who have been authorised by the Revenue Commissioners to collect the Local Property Tax.

Section 15, together with the Schedule to the Bill, provides for a range of amendments to the Social Welfare Consolidation Act 2005 to delete or update obsolete references to a number of schemes that are contained in the Act, delete or update obsolete references to provisions contained in non-social welfare legislation, and correct a range of minor typographical errors.

Part 3 — Amendments to Civil Registration Act 2004

Section 16 provides for amendments to the Civil Registration Act 2004, to allow for the provision of index information from the registers of births, deaths, marriages and civil partnerships to the Department of Arts, Heritage and the Gaeltacht in order to facilitate access to this index information. Index information in relation to adoptions and stillbirths is excluded.

Part 4 – Amendment to the Pensions Act.

Section 17  defines the term the “Principal Act”, which is used for the purposes of Part 4 of the Bill, as meaning the Pensions Act 1990.

Section 18 inserts a definition of the Pensions Council which is being provided for in the new section 26B of the Pensions Act 1990.  This section also amends the definition of employer used in that Act to allow for a separate definition of employer used in the new section 50B.

The Pensions Act was amended in 2009 to allow for payroll evidence to be admissible to prove an offence and to increase the term of imprisonment for conviction on indictment for an offence of failure to remit pension contributions to an occupational pension scheme to deal with a very large scale problem in the construction sector at that time. Section 19 to 21 apply this offences regime to Personal Retirement Savings Accounts.

Sections 22, 23, 24, 25 and 30 provide for structural changes to the Pensions Board by giving effect to the recommendations of the Critical Review undertaken on the Pensions Board. This Critical Review was undertaken as part of the Public Service Reform Plan. 

A Steering Group chaired by Mr Richard Hinz of the World Bank, comprising senior representatives of the affected institutions, the Pensions Board, the Central Bank, the Office of the Pensions Ombudsman, the Financial Services Ombudsman and the Departments of Social Protection, Public Expenditure and Reform and Finance was established to undertake a review of the proposed amalgamations.  The Steering Group did not propose to integrate the regulatory function of the Pensions Board with the Central Bank at this time.  However, the report of the Steering Group recommends governance changes to the structure of the Pensions Board to distinguish between the oversight function and the policy advice function and provide for a broader, more consumer-focused representation within the policy advice function.

These changes, which are contained in this Bill, provide for:

  • reform of the governance structure of the Pensions Board by distinguishing between the operational oversight and the policy advisory functions, and
  • the replacement of the current 17-person paid Board with two separate bodies, as follows:
    • The Pensions Authority, which will replace the present Pensions Board,  will provide operational oversight and will comprise an independent chair and two ex officio members of government bodies, and
    • A Pensions Council which will provide policy advice to the Minister for Social Protection on pension matters on request from the Minister for Social Protection or on its own initiative.

The Pensions Council will be made up of:

  • a chairman,
  • a representative of the Minister for Social Protection,
  • the Pensions Regulator,
  • a representative of the Central Bank,
  • a representative of the Department for Public Expenditure and Reform,

and up to 8 other members, each of whom the Minister for Social Protection considers to have the relevant skills, specialist knowledge, experience or expertise to enable them to carry out their functions under the Pensions Act.

Guidelines will be developed to provide for a broader more consumer-based representation on the Pensions Council and the positions on the Council will be advertised under the Public Appointments Service. 

The members of the Pensions Council will be unpaid and savings of approximately €100,000 will be generated by the replacement of the paid Board members with unpaid representatives.

The Pensions Board will be renamed the Pensions Authority to ensure public awareness and clarity of its role and functions and distinguish it from the policy advisory activities. 

The Chief Executive of the Pensions Authority will be known as the Pensions Regulator.

These sections will be the subject of a commencement order and will come into effect later this year.

Section 26 amends section 50 of the Pensions Act 1990 to provide for the disclosure of information where the Board proposes to issue a direction to restructure scheme benefits and for an appeal to the High Court by such persons as may be prescribed on a point of law on a direction from the Pensions Board to restructure a pension scheme.

Section 27 inserts a new section 50B in the Pensions Act 1990 to provide the Pensions Board with the power to wind-up a pension scheme in circumstances where a scheme is underfunded and the trustees and employer are not in a position to adopt a funding proposal, or where the trustee of a scheme fails to comply with a section 50 direction to restructure scheme benefits.

Section 28 inserts a new section 50C in the Pensions Act 1990 to provide the Pensions Board with the power to apply to the High Court to seek an order requiring a person to comply with a direction to wind-up a pension scheme or to restructure scheme benefits.

A Critical Review of the Office of the Pensions Ombudsman was also carried out as part of the work of the Steering Group chaired by Mr Richard Hinz of the World Bank.  It is expected that the recommendation of this review of the Office of the Pensions Ombudsman will be included in a future Bill.

 

In the meantime, and in order to facilitate any future proposal to merge the Office of the Pensions Ombudsman with the Office of the Financial Services Ombudsman, section 29 extends the age on which the Pensions Ombudsman must vacate that office from 67 to 70 years and allows for the appointment of the Pensions Ombudsman for a period of up to 6 years, rather than a set term of 6 years. 

CONCLUSION:

This Government continues to invest heavily in social protection for its citizens in spite of the economic circumstances we find ourselves in.

I believe that is only right and just.

However, I am also ensuring that the money we do spend on social protection is spent on those in genuine need, and in a positive way that encourages and helps people to return to work.

 

This is not a one-way street.

The obligations of the State must also be balanced by the responsibilities of citizens.

Seeing people who are capable of working languish on welfare is not something we should ever support.

Hence my strong political bias towards work and the policies to promote it, like a commitment to full employment, activation, investment and skills training.

This Bill is another positive step on the road towards an active, supportive and engaged social protection system.

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.

 

ENDS

Last modified:30/05/2013