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Tithe an Oireachtais An Comhchoiste um Thalmhaíocht agus Bia Tuarascáil ar Oibriú na Scéime um Luath-Scor ó Fheirmeoireacht Feabhra 2005 Houses of the Oireachtas Joint Committee on Agriculture and Food Report on the Operation of the Scheme of Early Retirement from Farming February 2005 List of MembersDeputies: Niall Blaney (FF) Johnny Brady (FF) {Chairman} John Carty (FF) Michael Collins (FF) Seymour Crawford (FG)* Martin Ferris (SF) Máire Hoctor (FF) {Vice Chairperson}** Denis Naughten (FG) *** (Convenor) Seán Ó Fearghaíl (FF) (Convenor) Mary Upton (Lab) Ollie Wilkinson (FF) Senators: Peter Callanan (FF) Noel Coonan (FG) Michael McCarthy (Lab) Eamon Scanlon (FF) Orders of ReferenceDáil Éireann on 16 October 2002 ordered:
Seanad Éireann on 17 October 2002 ordered:
REPORTON THE OPERATION OF THE SCHEME OF EARLY RETIREMENT FROM FARMINGPREPARED BY OLLIE WILKINSON, T.D.
THE JOINT OIREACHTAS COMMITTEE ON AGRICULTURE & FOOD ForewordThe Joint Committee on Agriculture and food at its meeting of 17th December 2003 agreed to appoint Deputy Ollie Wilkinson T.D., as rapporteur to carry out a review of the “Operation of the Scheme of Early Retirement from Farming” and to make recommendations thereon. At its meeting of 17 February 2005 Deputy Wilkinson presented the Report which was adopted by the Joint Committee. On behalf of the Joint Committee I would like to thank Deputy Wilkinson and commend him for the hard work which was put into the preparation of this Report. _______________ Johnny Brady T.D., Chairman 1 March 2005 IntroductionThe Joint Committee on Agriculture and Food has expressed concern on the Farm Retirement Scheme which came into operation on 7 January 1994. A second Scheme of Early Retirement from Farming commenced in November 2000. Arising from its concerns, the Joint Committee heard evidence from the Farm Retirement Group for Justice, Representatives from South Tipperary Branch of the Irish Farmers Association and officials from the Department of Agriculture and Food on the operation of the Scheme. The Joint Committee recognised that there were anomalies within the original Scheme which may not have been fully understood at the introduction of the Scheme. The Joint Committee decided that a review of the Scheme should be undertaken with a view to recommending changes. I was asked to undertake the review under the following Terms of Reference: “To review the current Farm Retirement Scheme, make recommendations for improvement and to report back to the Joint Committee by the 1st May 2004”. Before undertaking the assignment, it was necessary for me to make a declaration to the effect that I was in receipt of a pension under the Farm Retirement Scheme. I again make that declaration. A number of recommendations as set out in the following pages are also made in the Report together with examples showing how applicants may not have benefited under the Early Retirement Scheme 1 because of the manner in which the Terms and Conditions of the Scheme were constructed. AcknowledgementsI would like to thank the following organisations who have made the submissions: >Farm Retirement Group for Justice >Teagasc >ICMSA _______________________ Ollie Wilkinson T.D. 7th December 2004. Contents1994 Early Retirement Scheme – Council Regulation (EEC) No. 2079/92 - ERS1 2000 Early Retirement Scheme – Council Regulation (EC) No. 1257/99 –ERS 2 Interaction of the above Schemes with National Retirement Pensions, Forestry Premia and Taxation Regulation. Concerns regarding the above Schemes in relation to Quota and “Fischler” entitlements. Schedule of Appendices Recommendations1) Joint Management Applications>All Joint Management Applications involving married couples/partners should be treated as Joint Ownership Applications and outstanding monies paid accordingly. >The Worker’s Pension Scheme has been operated in a very limited number of cases and the Department of Agriculture and Food should furnish its views on the limitations in the Scheme. 2) Early Retirement Scheme 2000>Notwithstanding the changes effected in the Farm Retirement Scheme 2000, the pension is not index linked. This anomaly should be addressed to ensure that the ideals of the Scheme are fulfilled. >The upper income limit of 200 income units (€50,000) applying to transferors in certain circumstances should be increased significantly or dropped entirely to cater for changes in the farming sector both in terms of income and security of the retiring party. >The ‘Off-Farm’ income limit of 100 income units (€25,400) applying to transferees in the year prior to application should be dropped as it is a discouragement to suitably qualified young farmers from getting involved in agriculture. >The age limit for transferees should stay at 45 for the entire Scheme. 3) Taxation>A lease once stamped by the Revenue Commissioners with an open market valuation and full payments made by the tenant/transferee should qualify for the exemption amounts applying to non-family leases. 4) Forestry Premia>Forestry applicants should be assessed on any one of the previous 3 years spent in farming prior to application for benefit under the Early Retirement Scheme. OR >Income from Early Retirement Scheme 1 or Early Retirement Scheme 2 should be regarded as “Farming Income for the purposes of the farmer rate premium assessment”. 5) Quota and “Fischler” Entitlement>Early Retirement Scheme 1 applicants who have been given no consideration in the Single Payment Scheme nor in the various CAP changes since 1994 must have their concerns addressed under Force Majeure or by any other means deemed appropriate by the Department of Agriculture and Food to ensure such applicants are treated equitably. 6) PensionsPensions payable under the Social Welfare Acts The Farm Retirement Scheme interacts with pensions payable under the Social Welfare Acts. Deductions are made in some cases – old age pensions and invalidity pensions public service pensions but not in others – public service pensions. This anomaly should be addressed to ensure equal treatment of all recipients. Interaction between Government Departments There should be better interaction between the Department of Agriculture and Food and the Department of Social and Family Affairs to avoid overpayments when persons are in receipt of a pension under the Farm Retirement Scheme and the Old Age Pension. Where such overpayments occur due to administrative errors no such overpayments should be recouped from the recipient. 7) Leases>Payment of the Farm Retirement Scheme should be made in cases where the lessee delays signing the lease without good cause. >Where a person in receipt of a farm retirement pension having signed a lease for a number of years and where the lease is due for renewal and the pensioner fails to obtain a lessee, having exhausted all avenues available then the pensioner should continue to receive the farm retirement pension, subject to all other conditions being met. 1) 1994 Scheme of Early Retirement>Came into operation on 7/1/94. >Available to qualifying applicants who retired on or after 30/7/92. >Persons (transferors) aged between 55 and 66 were eligible to apply. >Pension payable – min. €6,507 (5 HA) to max. €12,398 (24 HA). >Farming main occupation for previous 10 years. >Cease all commercial farming activity. >Transfer or lease (min. 5 years) holding to person(s) aged 18 – 50 (transferees) with suitable education if under 25. >Transferee had to enlarge holding by 10% (min. 5 HA). Note: Not a requirement since February 2002 (once 5 years had elapsed). >Transferee had to earn 50% of income from farming and spend 50% of time farming. Note: Not a requirement since February 2002. >Information on the Scheme was available from the Terms and Conditions which included a Guidelines Booklet issued by The Department of Agriculture & Food (see No. 1 on list of attachments) and in the form of a series of public meetings held by the Department in early 1994. In my opinion, the major difficulty with the operation of this Scheme relates to the manner in which the aforementioned Terms & Conditions were constructed. I refer, in particular, to Part 11 of same and I quote: ”Agricultural holdings owned or leased may not be divided after 30/7/92 for the purpose of enabling a third party to become eligible as a transferor or to qualify for higher payments under the Scheme”. The above condition led all parties involved, including the Department of Agriculture & Food, to understand that any change in ownership after 30/7/92 would not be allowed to benefit a transferor in any way. It also led to a huge number of “Joint Management” applications under the Scheme. I refer you to No. 2 of the List of Appendices – page 10 of the Department’s submission to this Committee dated 9/7/03, where it is stated that 2,065 Joint Management applications were received. For the record, I refer you to No. 3 of the List of Appendices where the number of Joint Management applications is stated as being 2,797. It is not clear how the discrepancy in numbers has arisen. The Department has stated in its Submission to the Committee that Joint Management was a concession (see No. 40 on Page 10 of their Submission – Appendix No. 2). The reality is that the introduction of this so called “concession” and the lack of explanation about its required usage cost a very high percentage of the 2,065 or 2,797 applicants a lot of grief and a lot of money. The solution to this problem is to treat all Joint Management applications involving married couples as Joint Ownership applications and have monies repaid accordingly. This issue is referred to again in the Section of this Report dealing with National Retirement Pensions, where examples of the financial loss are given. Other issues that have caused concern with the operation of this Scheme are: >The transferee was allowed to lease lands from the transferor for a minimum period of 5 years rather than for the full term of the pension. While this caused a certain amount of administration and cost to both transferee and transferor, on balance this was not a major issue as many applicants would not have wished for a term longer than 5 years initially, particularly where they had a potential family successor who may have been too young or not qualified at the beginning of the Scheme. >Pension was not index linked. The Terms & Conditions did not state this but they should have. >Confusion arose as to what exactly the retired farmer could and could not do. Anecdotal evidence of the farmer with the “blind cow” kept as a pet and the farmer breeding greyhounds being given a “yellow card” with the threat of a “red card” continue to float about, giving the Scheme a bad name. Again, the lack of clarity in the Terms & Conditions of the Scheme was at fault here. >The worker’s pension scheme appears to have operated in a very limited number of cases (if at all). The Department should be asked to give their view on why this is the case. 2. 2000 Scheme of Early Retirement>Came into operation on 27/11/00 – revised Terms & Conditions issued on 7/5/02. >Available to qualifying applicants who retired after 1/1/00. >Persons (transferors) aged between 55 and 66 are eligible to apply. >Pension payable – min.€7,093 (5HA) to max. €13,515 (24 HA). >Farming in each of previous 10 years. >Cease all commercial farming activity. >Only land which was the subject of an IACs (Area Aid) application qualifies for pension payments. >Transfer or lease (min. 5 years and has to cover full pension period) to person(s) (transferees) aged 18 – 45 reducing to 40 in 2006. Suitably educated, if under 25 rising to 31 in 2006. >Farm and “off farm” Income Unit limits (upper and lower) apply to both transferee and transferor. >Information on the Scheme is available from the Terms & Conditions booklet issued by The Department of Agriculture & Food dated 7/5/02 (see No. 4 on List of Appendices). The information available in the Terms & Conditions is hugely better (than ERS1) and has a certainty to it that should avoid many of the difficulties that arise with ERS1. Issues that are of concern are: >Pension not index linked. This must be addressed to ensure the ideals of the Scheme are fulfilled. >Income limit of 200 Income Units (€50,800) applies to transferors who do not transfer their entire holdings. This clause appears to have been included to discourage “so called” larger land owners from leasing their holdings and opting for the Scheme. The current farming climate suggests that the limit be increased significantly or dropped entirely for two reasons: a)€50,800 can no longer be regarded as a large income. b)The full transfer of a holding can leave the transferor in a very insecure position in his/her old age. >“Off farm” income limit of 100 Income Units (€25,400) applies to transferees in the year prior to application. This must be dropped as it is discouraging suitably qualified young farmers from getting involved in agriculture. It should also be noted that there is no “off farm” income limit, while in the Scheme, so it defies logic as to why it is there prior to entering the Scheme. >The age limit for transferees should stay at 45 for the entire Scheme. It is too low at:
3) Interaction of ERS1 And ERS2 with:a)Taxation Regulations While it has an impact on more than just ERS applicants, there is an inequity in the taxation system that impacts hugely on ERS applicants with a family transferee as follows: >Person over 40 leases land to non-family member – 5 to 7 year lease – first €7,500 exempt from tax. Over 7 year lease, first €10,000 exempt from tax. >Person in above circumstances but leases land to son/daughter/son-in-law/ daughter-in-law pays tax on all income irrespective of the lease term. The obvious solution that must be implemented is that once the lease is stamped by The Revenue Commissioners with an open market valuation and full payments made by the tenant/transferee, the exemption amounts apply to all leases. The current position is anti-family and is detrimental to the smooth transition of family farms to the next generation. b)Forestry Premia One of the greatest inequities created by both Retirement Schemes is that the applicant is deemed to have ceased “farming” as defined by the Forestry Premia requirements. This means that those who wish to put their land into forestry after being in ERS1 or ERS2 cannot obtain the “farmer” rate premium which is double the non-farmer rate. The solution is as follows: (i) That the Forestry applicant be assessed on any one of the last 3 years - he/she farmed prior to applying for ERS. OR (ii)That income from ERS1 or ERS2 be regarded as “farming” income for the purposes of the farmer rate Premium assessment. It is worth noting that the Revenue Commissioners accept that a farmer continues to have that status after entering ERS for the purpose of Capital Gains Tax Retirement Relief. c)National Retirement Pensions In the 1994 Scheme, the information available from the Terms & Conditions (including the Guidelines Booklet) was as follows and I quote: Page 4, No. 7 of Terms & Conditions “In the event of the transferor or any of the persons who were jointly involved in the management of the agricultural holding at the time of application, qualifying for a National Retirement Pension, which must be applied for on reaching 66 years of age, the EC Early Retirement Pension will be reduced by this amount”. However, in the Guidelines Booklet, page 8 (o), the following is stated: “If a State pension becomes payable to a transferor, the Retirement Pension will be offset by this amount”. In attempting to understand the total confusion surrounding the issue of the EU pension being reduced by National Retirement Pensions in ERS1, it is first necessary to look at who could apply as per page 8 of the Guidelines Booklet and I quote: “- Owner, Leaseholder or a Tenant-in-Common of an agricultural holding. - Joint Owners or Joint Leaseholders of an agricultural holding. - A person involved in the Joint Management of an agricultural holding.” Given that the major difficulties have arisen in husband and wife cases, the following examples illustrate the inequities that have arisen in the operation of the 1994 Scheme. Example 1 – Owner appliesThis was quite straightforward in that any National Retirement Pension payable to the applicant (and only the applicant) was deducted from the ERS Pension at age 66. Farmer aged 58 applies as sole owner of 24 HA of land.
The total received from the two sources is equal to 10 years EU pension which was the maximum that could be got between age 58 and 68 for any one person. Example 2 - Person in Joint Management applies i.e. non-land owner.Husband aged 65, wife aged 56 – husband owns 24 HA of land in his own name as in Example 1 but wife applies, as it appears she will get full 10 years EU pension from age 56 to 66.
Again, the total income is equal to 10 years EU pension being the maximum payable under the Scheme but there are now two people involved (with two separate pensions). Example 3 – Person in joint ownership applies i.e. jointly owns land with another.Husband aged 65 – wife aged 56– husband owns 24 HA of land in his own name, exactly as per Example 2. On the same day the land is being leased/transferred to the transferee, the land is legally transferred into the joint ownership of husband & wife and the wife applies for ERS1.
It could be argued that Example 3 simply shows how the Scheme’s Terms & Conditions could have been used to best effect. However, you must then refer back to Section 1 of this report which shows clearly that the Department of Agriculture & Food put forward the view that Joint Management was a “concession” which allowed non-land owners into the Scheme. It can be clearly seen that in husband and wife cases, this was a “concession” that not alone was not required at all but in fact, cost the vast majority of Joint Management applicants a lot of money, to the point of hardship together with very strong feelings of being misled and treated in an unjust and inequitable manner. In this regard, one must also keep in mind the statement quoted in Section 1 of this report that holdings could not be “divided” after 30/7/92 to qualify for higher payment under the Scheme And The statement quoted in this Section where State pension payable to persons who were “jointly involved” in the holding would be deducted from the EU pension. Clearly, there was total confusion on all sides and it was only by accident in many cases that people applied as Joint Owners and equally it was only by accident that the Department discovered this was possible where land ownership changed after 30/7/92. The proof of this is that Joint Management was put forward by the Department at their public meetings as the only means by which non-land owners as at 30/7/92 could apply when we all know now that the vast majority of Joint Management applicants had a far better option available to them as is very clearly illustrated by Example 3. The solution to this problem is to treat all Joint Management applications, involving married couples as being Joint Ownership applications and repay all EU pension monies deducted inequitably. (See Section 1, Page 2). In complete contrast, the Terms & Conditions of the 2000 Scheme are totally transparent with regard to their interaction with National Retirement pensions and with regard to land ownership where there is a simple cut off point of 1/1/2000 and everybody knows where they stand prior to applying. In a general comment on the way the two Schemes interact with National Retirement pensions, there is a view held by some interested parties that the EU Regulations governing the Schemes did not intend to have the EU pensions reduced by pensions payable under the National Retirement Pensions Scheme - (see Appendix No. 5 – Submission to the Committee by Farm Retirement Group for Justice). There certainly appears to be an anomaly in that if, for example, a person in receipt of ERS1 or ERS2 pension was also in receipt of a superannuation pension having worked with for example, the ESB, there would be no deduction of the ESB pension from the EU pension. On the other hand, if a person in receipt of ERS1 or ERS2 pension had worked in a private sector PAYE job and was in receipt of an Old Age pension or indeed an invalidity pension (payable on the basis of PRSI contributions made), these pensions would be deducted from the EU pension. As the issue is not covered by the Terms of Reference of this Report, it will require a different forum to adjudicate on this matter. 4) Concerns regarding ERS1 and ERS2 in relation to Quota and “Fischler” entitlementsThe major areas of concern under this heading are as follows: ERS1>Quota Regulations in both milk and dry stock production have changed dramatically since the introduction of the Scheme in 1994. Applicants for ERS1 applied on the basis of one set of rules but they are finishing in the Scheme under a totally different set of rules. Example Dairy farmer – 30 HA holding with 40,000 gallon milk quota. Applied for ERS1 – 1/1/95 – leased holding including milk quota to neighbouring farmer.
On finishing the Scheme on 31/12/2004, the following could be the income position:
The applicant is suffering a potential income drop of over €20,000 per annum, having had no say whatsoever in the rule changes that have destroyed his future income potential. Clearly, the ERS1 applicants have been given no consideration in the Single Payment Scheme nor indeed in the various CAP changes since 1994. (See Appendix No. 6). This issue must now be addressed under Force Majeure (exceptional circumstances) or by any other means The Department of Agriculture deems appropriate to ensure That ERS1 applicants are treated equitably. If it is not addressed, litigation of a “Mulder” scale will surely follow: ERS 2>It appears that applicants under this Scheme are reasonably well catered for in the Single Payment Scheme. (See Appendix No. 6). >The major changes in the Milk Quota Regulations took place between October 1999 and April 2000 so applicants for ERS2 were aware of the situation prior to applying for the Scheme. APPENDICES1)Copy Terms & Conditions, including Guidelines for Scheme of Early Retirement from farming – Council Regulation (EEC) No. 2079/92 2)Department of Agriculture & Food – Submission to Joint Oireachtas Committee on Agriculture & Food dated 9/7/03. 3)Copy letter from Gerry Cassidy, Assistant Principal, Early Retirement Section to Vincent Hayes, FDC Accountants, Dungarvan, Co. Waterford. (Name of individual case has not been disclosed for reasons of confidentiality). 4)Copy Terms & Conditions for Early Retirement Scheme (ERS2) 2000 – Council Regulation (EC) No. 1257/1999. 5)Submission to the Joint Oireachtas Committee by the Farm Retirement Group for Justice – June 2003, together with follow-up letter for inclusion in this Report. 6)Copies of relevant sections from The Single Payment Scheme – An Explanatory Guide – issued by Department of Agriculture & Food – May 2004. ACKNOWLEDGEMENTSI wish to thank the following for their submissions which I hope I have done justice to in compiling this Report. Farm Retirement for Justice Teagsc ICMSA Ollie Wilkinson, T.D. 14/7/04 * Deputy Crawford replaced Deputy Tom Hayes by order of the Dáil of the 20th October 2004 ** Deputy Hoctor replaced Deputy Michael Moynihan by order of the Dáil of the 16th November 2004 *** Deputy Naughten replaced Deputy Billy Timmins as Opposition Convenor on the 20th October 2004 |
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