Dáil Éireann debate -
Wednesday, 11 Apr 2001

Vol. 534 No. 4

Written Answers - Pension Provisions.

Enda Kenny

Question:

176 Mr. Kenny asked the Minister for Social, Community and Family Affairs the difference between a contributory and a non-contributory pension paid at the highest rate; the reason for the little level of difference between contributory and non-contributory pensions; the way in which this value has been computed and assessed; if his attention has been drawn to some concerns and frustrations of people who may have worked in a contributory situation for 40 years or more who now find very little difference in reality between their pension in respect of contributions paid and the non-contributory pension in respect of which no contributions were paid; and if he will make a statement on the matter. [10973/01]

Minister for Social, Community and Family Affairs (Mr. D. Ahern)

As a result of changes made by the Government in the budget, from this month the maximum rate of the old age contributory and retirement pension is £106 per week. The equivalent rate for the old age non-contributory pension is £95.50 per week.

The difference in the rates is broadly in line with the recommendations of the Commission on Social Welfare which suggested a differential of 10%. The Pensions Board in its report, Securing Retirement Income, concurred with the Commission on Social Welfare's view. One of the main advantages of the contributory pension is that it is an entitlement which is not subject to a means test and which, therefore, is paid regardless of any other income, property, savings or investments a person might have.

The percentage of people receiving non-contributory old age pensions remains large but there has been a drop of nearly 23% in recipients since 1989. The contributory pension is growing in importance and now accounts for almost 63% of new pensions awarded against 50% ten years ago. This increase reflects the fact that almost all workers are now covered by social insurance, the extension of which has been a deliberate policy of successive Governments. It is also an indication of the Government's commitment to extending contributory based pensions to as many people as possible through easing the qualifying conditions and catering for special groups who marginally failed to qualify for a pension.

Richard Bruton

Question:

177 Mr. R. Bruton asked the Minister for Social, Community and Family Affairs the terms of reference for the study currently under way into switching the basis for pension payments from the average contributions into the social insurance fund since first entering insurance to the aggregate social insurance contributions since first entering insurance; the membership of the review group; and if he has set any date by which the review should be completed. [10974/01]

Minister for Social, Community and Family Affairs (Mr. D. Ahern)

The terms of reference for phase two of the review of the qualifying conditions for old age contributory and retirement pensions are as follows.

(1) Having regard to the fact that almost 90% of pensioners now receive social welfare support, directly or indirectly, consider if the existing social insurance based approach should be replaced/modified to provide a universal scheme possibly based on residency and consider options generally in this regard.

(2) Examine the issues associated with implementing a qualifying condition based on the total number of contributions paid or credited over an insured person's working life, as proposed in the phase one report. This will include determining the appropriate number of contributions, paid and credited, required for a pension, an examination of the short and long-term expenditure and financing implications involved, an examination of the administrative implications, the transitional arrangements necessary, and the implications for voluntary contributions.

(3) Review the current homemakers scheme, which will include replacing the disregard system with a credits based approach; options for backdating the scheme to an earlier date; considering what qualifying conditions for pension purposes should apply in addition to homemaker credits; an examination of the short and long-term expenditure and financing implications of these changes; an examination of the administrative implications; and the implications for voluntary contributions.

(4) Examine the current structure of contributory pension/retirement pension arrangements and in this regard (a) consider if the qualifying age for social welfare pension purposes should be raised/lowered together with associated labour market issues; and (b) develop and consider proposals and options to allow people to defer/bring forward retirement or payment of pension to enable them to receive a higher/lower actuarially based payment and/or improve on their contribution record.

(5) Regard should be taken in all the analyses at (1) to (4) of the effect of any proposals on the financing and structures of the social insurance fund in the short and long-term.

(6) Any proposals for changes to the current arrangements should be poverty proofed.

The working group comprises officials from the operational and policy areas of my Department and the Department of Finance. No specific date has been set for the working group to complete its work. However, I expect that the report will be available to me in good time for consideration in the context of budget 2002.