Written Answers Nos 97-102
97. Deputy Olivia Mitchell asked the Minister for Social Protection in view of the recommendation of the Report on Pension Charges in Ireland 2012 and the OECD Review of the Irish Pension System, if she plans to put in place a universal pension scheme; and if she will make a statement on the matter. [47367/13]
View answerThe overall objective of the pension system in Ireland is to provide an adequate and sustainable basic standard of living through direct State supports and to encourage people (through tax reliefs) to make supplementary pension provision so that they may have an adequate replacement income when they retire from work.
Ireland’s State pension has been successful in lifting older people out of poverty. Compared to the rest of the population, older people in Ireland have the lowest consistent poverty rate (at 1.9%) and are least likely to be at risk of poverty, pointing to the adequacy of the State pension. However, many people retiring from work will have a significant income gap if they do not have supplementary private pension provision.
Figures indicate that only half of workers aged between 20 and 69 years have a supplementary pension and this relatively low coverage is of major concern. It is a priority for the Government to increase supplementary pension coverage, particularly amongst the lower paid and those with gaps in their employment. Significant reform of our pensions systems is necessary to safeguard future sustainability and adequacy. The sustainability of the pension system is a particular concern because of the demographic challenges faced by Ireland, the associated increases in pension (and other age related) costs, and the deterioration in the public finances. This means that the task of financing future increased pension spending will fall to a diminishing share of the population as demographic projections indicate the ratio of working age to pensioners will decrease from 5.3/1 at present to 2.1/1 by 2060. Life expectancy in Ireland is also increasing: in the mid-1990s, life expectancy for males was 73 and for females 78.5. In 2041, it will be 86.5 and 88.3 respectively. Whilst this is a very welcome development, it also presents very real and obvious public policy challenges.
In April 2013, the OECD published its Review of the Irish Pension System. Whilst endorsing pension policy reforms undertaken to date, the report also makes a number of recommendations for future reform. The OECD’s key recommendation is to improve the adequacy of pensions by increasing coverage in the funded part of the pensions system through a universal mandatory or quasi-mandatory employment based pension system.
The Programme for Government includes a commitment to reforming the pension system to progressively achieve universal coverage, with particular focus on lower-paid workers. I have previously stated that a soft-mandatory approach such as that envisaged by an auto-enrolment scheme, using scale to achieve greater cost efficiencies for the member, is a very proactive way in which we can increase supplementary pension coverage, though it is recognised that introduction of such an initiative would be best supported by a more favourable economic environment than is currently the case.
International experience has shown that significant increases in coverage can be obtained from such systems. In addition, the significantly larger economies of scale have the capacity to achieve more competitive charging structures, which in turn would lead to improved returns for consumer members. As was highlighted in the Pensions Charges Report 2012, this type of arrangement could assist in resolving the difficulties inherent in the current Irish scheme structure of a proliferation of small schemes paying considerably higher charges than larger schemes, ultimately eroding the value of the pension received by the member.
Analysis of the options available is on-going in my Department and consideration of the recommendations of the OECD review will inform further developments in the area of pension policy.
98. Deputy Jack Wall asked the Minister for Social Protection when a date will be agreed for an appeal of invalidity pension payment in respect of a person (details supplied) in County Kildare; and if she will make a statement on the matter. [47381/13]
View answerThe Social Welfare Appeals Office has advised me that an appeal by the person concerned was referred to an Appeals Officer on 15 October 2013, who will make a summary decision on the appeal based on the documentary evidence presented or, if required, hold an oral hearing.
The Social Welfare Appeals Office functions independently of the Minister for Social Protection and of the Department and is responsible for determining appeals against decisions in relation to social welfare entitlements.
100. Deputy Jerry Buttimer asked the Minister for Social Protection the supports in place for persons who were formerly self-employed but now find themselves without work; if such persons qualify for any unemployed benefits; if they are registered as unemployed by her Department; and if she will make a statement on the matter. [47384/13]
View answerSelf-employed persons are liable for pay related social insurance (PRSI) at a rate of 4%, which entitles them to access long-term benefits such as State pension (contributory) and widow's, widower's or surviving civil partner's pension (contributory). However, they are not entitled to jobseeker’s benefit. This compares to employees in respect of whom a combined 14.75% rate, under full-rate PRSI Class A, is paid giving entitlement to the full range of social insurance benefits including jobseeker’s benefit.
Any person of working age who does not qualify for jobseeker’s benefit may claim means tested jobseeker’s allowance. Subject to means and other qualifying conditions, self-employed persons may claim jobseeker’s allowance if their business ceases or there is reduced demand for their services. Typically over 80% of jobseeker’s allowance claims from self-employed persons have been awarded over recent years.
Previously self-employed persons in receipt of jobseeker’s allowance have access to the full range of activation measures available through the State. Given the scale of unemployment levels, the key objective of activation policy and labour market initiatives is to offer assistance to those most in need of support in securing work and achieving financial self-sufficiency. This policy objective prioritises scarce resources to those in receipt of qualifying welfare payments. Accordingly the employment services and schemes provided by the Department are focused in the first instance on this cohort of unemployed people.
However, many services are available to the formerly self-employed who are not in receipt of a social welfare payment. Some employment services, such as assistance with job-search activities and the use of online job search tools, are available to people if they register with the Department’s employment services offices, regardless of their social welfare status.
Unemployed persons, including the previously self-employed, not in receipt of payments may also be eligible to avail of up-skilling opportunities, for example through FÁS training, but are not eligible to receive a training allowance while undertaking the course. Springboard courses are open to people who were previously self-employed, regardless of their social welfare status.
The Live Register includes part-time workers (those who work up to 3 days a week), seasonal and casual workers entitled to jobseeker's benefit or jobseeker's allowance.
101. Deputy Jerry Buttimer asked the Minister for Social Protection her plans to reform the social welfare system in order that self-employed persons may have access to necessary supports on a similar basis to persons in the PAYE system; and if she will make a statement on the matter. [47385/13]
View answerIn 2011 I established the Advisory Group on Tax and Social Welfare to meet the commitment made in the Programme for Government. The Advisory Group is charged with, inter alia, examining and reporting on issues involved in providing social insurance cover for self-employed persons in order to establish whether or not such cover is technically feasible and financially sustainable. Any proposals for change must be cost neutral.
On 6 September 2013 I published the Group’s report on the issues involved in providing social insurance cover for self-employed persons. The Group found that the current system of means tested jobseeker’s allowance payments adequately provides cover to self-employed people for the risks associated with unemployment. Consequently, the Group was not convinced that there was a need for the extension of social insurance for the self-employed to provide cover for jobseeker’s benefit.
The Group found that extending social insurance for the self-employed was warranted in cases related to long term sickness or injuries. To this end, the Group recommended that Class S benefits should be extended to provide cover for people who are permanently incapable of work because of a long-term illness or incapacity through the invalidity pension and the partial capacity benefit schemes. The Group further recommended that the extension of social insurance in this regard should be on a compulsory basis and that the rate of contribution for Class S should be increased by at least 1.5 percentage points. This is in line with the estimated level of contributions needed to provide access for the self-employed to invalidity pension contained in the 2010 Actuarial Review of the Social Insurance Fund.
In the course of the Group’s deliberations, the Group identified a range of issues associated with the subject of social insurance for the self-employed that should be addressed and have made a number of recommendations in this regard. These include, among others, the means assessment for self-employed income in terms of accessing jobseeker’s allowance payments, credited PRSI contributions, self-employed access to activation and training schemes and the role that information campaigns might play in addressing information deficits, particularly with regard to entitlements to jobseeker’s allowance.
The question as to whether the present arrangements regarding social insurance for the self-employed are appropriate has increased in prominence over recent years. I welcome the Group’s finding that the current system of means tested jobseeker’s allowance payments adequately provides cover to self-employed people for the risks associated with unemployment.
The recommendation concerning long-term sickness or injuries is an important contribution to the policy debate regarding the range of benefits the self-employed might access through their social insurance contributions. In this regard, the 2010 Actuarial Review of the Social Insurance Fund, published last year, determined that the self-employed are obtaining better value for the level of their current social insurance contributions than employees (the Actuarial Review found that the effective annual rate of contributions needed to provide the core full-rate State pension (contributory), currently available to self-employed contributors, is approximately 15%).
This finding was noted by the Advisory Group in its recommendations. Consequently, the recommendations of the Advisory Group require further consideration in conjunction with the findings of the 2010 Actuarial Review relating to the level of contributions levied on Class S contributors and the current shortfall in this regard.
My colleagues in Government and I will now carefully reflect on the findings of the Advisory Group on this issue and will further consider the recommendations contained in the report taking into account future developments in terms of the budgetary and fiscal situation.
