State Pension (Contributory) Eligibility

Thursday, 17 October 2013

Questions (49, 51)

Dessie Ellis

Question:

49. Deputy Dessie Ellis asked the Minister for Social Protection if she has conducted research assessing the impact of changes to the State pension for future pensioner poverty. [43682/13]

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51. Deputy Dessie Ellis asked the Minister for Social Protection if she will respond to the finding of the KPMG actuarial review of the Social Insurance Fund that as a consequence of changes to eligibility rules for the State pension contributory more persons retiring in 2020 will be entitled to a smaller pension and if she is concerned in view of the role played by social transfer in reducing pensioner poverty that this risks increasing pensioner poverty. [43681/13]

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Written answers

Minister for Social Protection

I propose to take Questions Nos. 49 and 51 together.

As the pension system in Ireland has developed, pensions policy has continued to evolve. In recent years there has been a particular focus on the sustainability of the State pension system because of the demographic issues that Ireland faces; the associated increases in pension and other age related costs; and the deterioration in the public finances since the recession.

Significant research has taken place with regard to pensions generally and the impact of changes in State pension. This has included a Green Paper on Pensions, various technical studies and, most recently, the OECD Review of Pensions in Ireland.

The Actuarial Review of the Social Insurance Fund provided evidence that the task of financing increased pension spending will fall to a diminishing share of the population as demographic projections indicate that the ratio of working age to pensioners will decrease from 5.3 at present to 2.3 by 2050 while the number of older people will increase from 12% of the population being over 65 in 2012 to an estimated 23% in 2050. In the medium to long term, pension related expenditure will account for an increasing proportion of Fund expenditure - rising from 57% in 2011 to 85% in 2066.

In terms of impact assessment, the Actuarial Review has assessed the future impact of State pension changes. This shows that, notwithstanding the State pension reform measures, social insurance benefits offer excellent value for money for those on the lower part of the income distribution, those with shorter contribution histories, and the self-employed. The social solidarity principle which underlies the Fund is reflected in the fact that, for those at the higher end of the income distribution, the Fund is redistributive and this group generally get back less than they pay in.

Payment of pension is now more closely linked to contributions made over a working life due to the comprehensiveness of the social insurance system, the existence of voluntary contributions, the Homemaker’s Scheme and the facility for awarding credited contributions to employees in times of unemployment or illness. All of these elements mean that, unless a person goes abroad or operates in the informal economy, s/he will have the potential to achieve a 100% insurance record.

The Deputy may wish to note that there have been significant improvements with regard to the level of pensioner poverty in Ireland in recent years. This is mainly attributed to substantial increases in the rates of State pensions over the period and other non-cash benefits. In 2004, the at risk of poverty rate for people aged 65 or over was 27.1% - higher than for other age groups and higher than the rate for the total population which was 19.4%. By 2011 the at risk of poverty rate for those aged 65 or over had dropped to 9.7% while that for the population as a whole is at 16%. In 2011, the consistent poverty rate for those over age 65 was 1.9% compared to 6.9% for the population as a whole. This compares to 3.9% in 2004 which stood at 6.6% for the population. Every effort has been made to maintain the rate of State pension at 34% of average earnings.

Even with the State pension reforms underway the role of social transfers will continue to be protected and social welfare supports will continue to be available to those most in need. It should also be borne in mind that for those with a shorter contribution history which will result in a lower rate of payment of State pension, the non-contributory pension will continue to be available to those who meet the qualifying criteria which could result in a higher rate of payment.

Question No. 50 answered with Question No. 31.

Question No. 51 answered with Question No. 49.