There are two main contributory State pension schemes – the State pension (transition) and the State pension (contributory). The State pension (transition) is paid to people aged 65 who have retired from work and who have the required number and class of social insurance contributions. State pension contributory (SPC) is paid at age 66 to those who meet the qualifying conditions.
The Social Welfare and Pensions Act, 2011 provides that State pension age will be increased gradually to 68 years. This will begin in 2014 with the abolition of the State pension (transition) thereby increasing State pension age for all to 66 years. The State pension age will be further increased to 67 years in 2021 and to 68 years in 2028. The State pension is the bedrock of the Irish pension system and these reforms are essential to address the challenges of increasing life expectancy and to ensure its sustainability. These changes apply to all fully insured employees, including some public servants.
The standardisation of State pension age at 66 and the abolition of State pension (transition) removes the retirement condition associated with State pension (transition) which acts as an incentive to leave the workforce and has been widely criticised as a barrier to older people remaining in employment. There is no retirement condition attached to the State pension (contributory) which is currently payable from age 66. Public servants (including civil servants) who are due to retire aged 65 in January 2014 will be able to draw their occupational public service pension at age 65.
The changes regarding State pension (transition) will have no impact on public servants (including civil servants) who are on modified social insurance. However, for those public servants (including civil servants) who are fully insured, their public service pensions (and contributions) are, like many occupational pension schemes, integrated (or co-ordinated) with social welfare benefits. This means the occupational pension paid is based on the assumption that the pensioner also receives the State pension (transition or contributory). Where this does not happen, a discretionary supplementary pension may be payable under the relevant public service pension scheme to bridge the gap. In this instance, a supplementary pension is only payable where the individual, through no fault of their own, does not qualify for social welfare benefit or qualifies at less than the maximum personal rate. It is therefore necessary to claim any available social welfare benefits in order to receive a supplementary pension.
Raising State pension age and the abolition of the State pension (transition) is a necessary step in ensuring the sustainability of pensions into the future. There is an important and significant policy background to these changes which is that with increases in life expectancy, more people are living to pension age and living longer in retirement. This has obvious and significant implications in relation to the future costs of State pension provision. The fundamental principle involved here 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.
