Dessie Ellis
Question:251 Deputy Dessie Ellis asked the Minister for Social Protection the measures she is undertaking to ensure she can afford to pay the State pension. [30823/11]
View answerTuesday, 25 October 2011
Questions (235, 236)
Dessie Ellis
Question:273 Deputy Dessie Ellis asked the Minister for Social Protection the measures she is undertaking to ensure she can afford to pay the State pension into the future. [31015/11]
View answerWritten answers
I propose to take Questions Nos. 251 and 273 together.
The challenges facing the Irish pension system are significant. The fundamental principle is that people need to participate in the workforce for longer and they need to contribute more towards their pensions if they are to achieve the income they expect or would like to have in retirement.
The population share of those aged 65 and over is expected to more than double between now and 2050, from 11% to 26%. People are living longer and healthier lives with average life expectancy set to rise even further in the future, up to 88 years for women and 83.9 for men. In contrast, the share of the working age population is projected to decline gradually from 68% to 58%. There are currently six people of working age for every pensioner and this ratio is expected to decrease to less than two to one by mid-century. These changes are taking place and therefore, the task of financing increasing pension spending will fall to a diminishing share of the population who are at work. Spending on public pensions that is, social welfare pensions and public service occupational pensions, is projected to increase from approximately 5 % of GDP in 2008, to almost 15% by 2050.
Therefore, as announced in the National Pensions Framework and as provided for in recent legislation State pension age will be increased gradually to 68 years. This will begin in 2014 with the standardisation of State pension age at 66. State pension age will be increased to 67 years in 2021 and to 68 in 2028. It is worth noting that, until the early 1970s, the qualifying age for SPC was 70 years of age. The recent legislative changes in this regard also fulfil one of the commitments in the EU/IMF Programme of Financial Support for Ireland.
By gradually increasing the qualifying age for State pension people will be further encouraged to remain in employment beyond 65 years of age and the option of deferring beyond pension age is currently being explored by my Department. The numbers currently at work drop dramatically at 65 years of age. The Quarterly National Household Survey Q4 2010 showed that 77.2% % of people aged 45-54 years were at work. This drops to 64.3% for 55-64 year-olds and to just 8.7% % for people aged 65 years or older.
As provided for in legislation since 1997, the minimum paid requirement for State pension (contributory) will increase to 520 next year. Changes outlined in the National Pensions Framework include a ‘total contributions' approach from 2020 to replace the current averaging system. This means that from 2020 a person will require 30 years' contributions and credits to qualify for maximum pension with 10 years' contributions required for a minimum pension. This system will be fairer as the level of pension payment will be proportionate to a person's working career e.g. a person with 25 years contributions will receive 25/30ths of a pension. Sustainable public finances are a prerequisite for maintaining an adequate system of social protection as well as achieving future economic stability and growth. The appropriate level of overall expenditure by my Department in the years ahead will be considered in the context of Budget 2012 and subsequent Budgets.