Dáil Éireann Debate, Wednesday - 14 November 2012
154. Deputy John Lyons asked the Minister for Social Protection if any changes will be considered to the application of the Social Welfare and Pensions Bill to take account of public servants who took early retirement prior to the changes to average yearly contribution bands but who do not turn 66 years before 2020. [50344/12]
View answerThe terms and conditions of employment for public servants, including pension rights, are outside of my remit and are a matter for my colleague, the Minister for Public Expenditure and Reform. Therefore, the Social Welfare and Pension Bill will not include any special provisions regarding public servants who took early retirement
In relation to State pension which is within my remit, as the Deputy will be aware, the State pension is a very valuable benefit and therefore, it is important to ensure that those qualifying have made a sustained contribution to the Social Insurance Fund over their working lives.
Recent changes to the rate bands payable for State Pension is one element of pension reform put in place to put State pension provision on a more sustainable footing.
Prior to the rate band changes on 1 September 2012, a person with an average of 20-47 PRSI contributions per year over their working life received a weekly State pension of only €4.50 less than a person with a yearly average of 48 or more PRSI contributions. This was not equitable. On 1 September 2012, additional rates bands for State pension (transition) and State pension (contributory) were introduced and while the maximum rate and the rate payable to people with an average of between 40 and 47 contributions per year remains unchanged, those who have fewer than 40 contributions per year will receive a lower rate of pension. The change to State pension rate bands means that pension payments will be more closely related to PRSI payments made over a working life. This ensures that those who contribute more during their working life will benefit more in retirement, thereby ensuring equity in the social welfare system. These changes apply universally for claimants with an eligibility date post 1 September 2012.
This change to rate bands moves somewhat closer to a total contribution approach, where benefits are paid in proportion to contributions made, i.e. those who pay more, benefit more. It is proposed to adopt a ‘total contributions approach’ to State pension to replace the current averaging system from 2020. This will replace the current system and remove the associated anomalies whereby those who pay less could in fact receive a higher payment. Under this system, the level of pension paid will be directly proportionate to the number of social insurance contributions made by a person over his or her working life.
If claimants have an income need they may, following a means test, qualify for a higher rate on the State pension (non-contributory).
