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Dáil Éireann debate -
Thursday, 27 Jan 2000

Vol. 513 No. 2

Written Answers. - Pension Provisions.

John Bruton

Question:

10 Mr. J. Bruton asked the Minister for Social, Community and Family Affairs if his attention has been drawn to the fact that many approved pension schemes encourage early retirement in the sense that persons who have completed their required years for pension eligibility who continue working do not qualify for any additional pension entitlement on the basis of the extra contributions they are required to make in that period; his views on whether this is satisfactory from an equity and incentive point of view; and if he will make a statement on the matter. [1866/00]

Minister for Social, Community and Family Affairs (Mr. D. Ahern): In considering any issue relating to occupational pension schemes it must be borne in mind that such schemes are voluntary arrangements usually introduced by employers following consultation with their employees.
I should point out that a distinction needs to be made between defined benefit and defined contribution occupational pension schemes. Under defined contribution arrangements pension at retirement is determined by the accumulated value of contributions paid and the return from investment of those contributions, whereas in defined benefit schemes the pension payable is linked to salary at retirement.
I draw the Deputy's attention to research carried out by the ESRI in 1995 which indicated,inter alia, that about 60% of members of defined benefit occupational pension schemes have their pension determined by their pensionable pay in the year before retirement and the remainder have it determined on the basis of average pensionable pay in the three years preceding retirement or some other basis; and the rate at which pension benefits are built up is 1/60th of final pay for each year of service, subject to a maximum of 40/60ths of final pay.
From this, it can be seen that it is not normally in a person's interests to retire early where the rules of the occupational scheme provide for such early retirement as in general the longer a person remains in employment the higher his or her final salary will be resulting in a higher rate of occupational pension.
While I am generally satisfied that where occupational pension schemes are provided by employers they operate to the advantage of employees, I am concerned that the level of supplementary pension coverage – at 50% of those at work – is too low. The Pensions Board, in their report on the national pensions policy initiative, recommended that a target of 70% of the workforce over age 30 should have supplementary pension coverage. To achieve this target, the board recommended the introduction of a new pension savings vehicle, a personal retirement savings account. The board envisaged that this would be a low cost, easy access personal investment account designed to allow people regardless of their employment status to save for retirement in a flexible manner.
The board's proposals in this regard are currently being examined and I would hope to bring forward proposals in this context of an occupational pensions Bill, which I propose to publish later this year.
If the Deputy has a particular case in mind, I would be happy to examine this.

David Stanton

Question:

11 Mr. Stanton asked the Minister for Social, Community and Family Affairs if he will include those on retirement pension for payment of the additional six weeks on the death of a spouse or partner in the same way as those receiving old age non-contributory pension, blind person's pension or carer's allowance; and if he will make a statement on the matter. [1876/00]

There are various schemes within the social welfare system to assist families in dealing with death and funeral expenses. These include the payment of six weeks social welfare following the death of certain social welfare recipients or their spouse, the payment of a bereavement grant to insured people and their families and the payment of a funeral grant under the occupational injuries benefit.

Last February I introduced an enhanced bereavement grant of £500 in the Social Welfare Act, 1999. At that time, I indicated that these improvements were the first step in the development of new and improved after death arrangements.

In the recent budget I introduced a once-off payment of £1,000 payable to widows and widowers with dependent children who qualify for a widow or widower's contributory pension, one-parent family payment or a bereavement grant. It is estimated that this new payment will benefit over 1,500 widowed persons each year at a cost of £1.5 million.

The current practice is that following the death of a recipient of a social welfare payment, his/her spouse continues to receive payment at the same rate for 6 weeks in circumstances where both spouses had a separate entitlement provided one or both of the entitlements was a non-contributory old age pension, a blind pension or a carer's allowance or where the payment includes a payment for a qualified adult. The payment does not arise where each spouse had an independent entitlement to an insurance based contributory pension.

I now propose to introduce a number of additional measures, including the measure proposed by the Deputy, in the forthcoming Social Welfare Bill to address the position where the six weeks after death payment is not currently made or is paid at a reduced amount. These measures are as follows:

1.Where a pensioner and his/her spouse/partner are each in receipt of an old age contributory or retirement pension and if either party dies, a six weeks payment of the deceased person's pension will be made to the survivor. Under the current arrangements no after death payment is made in these cases.
2.Where a person who is in receipt of an old age non-contributory pension or blind person's pension dies and his/her spouse/partner is in receipt of an old age contributory or retirement pension, a six weeks payment of the deceased person's non-contributory pension will be paid to the survivor in addition to his/her own personal rate of contributory pension. At present, an amount equal to the qualified adult allowance only is payable.
3.Where the only dependent child of a person in receipt of one-parent family payment dies, the parent will receive the same amount of the one-parent family payment for six weeks following the death of the child. At present the parent receives only the child dependent allowance.
Approximately 3,300 people will benefit from these measures at a full year cost of approximately £1.5 million. These measures will be introduced from April 2000 and will mean that a six weeks after death payment now applies in all circumstances under the social welfare code.
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