Dáil Éireann Debate, Tuesday - 24 June 2014
259. Deputy Michael Healy-Rae asked the Minister for Social Protection her plans to bring forward a comprehensive response to the pension crisis as measures will have to be put in place now to avoid a crisis in financing all pensions in a number of years; and if she will make a statement on the matter. [26962/14]
View answerOver the past number of years, pension provision in all its forms in Ireland has experienced considerable challenges and changes. The sustainability of the wider system is a particular concern because of the demographic issues Ireland faces, the associated increases in pension (and other age related) costs, varying investment losses and the deterioration in the public finances since the recession.
The National Pensions Framework was published in March 2010 and provided a framework for long term pension reform. It encompassed consideration of all aspects of pension reform including the State pension, supplementary occupational pensions, private pensions and public sector pensions. Development of the framework was informed by a range of views provided during the Green Paper consultation process. These reforms are designed to enhance the sustainability of the system overall and ensure that people’s income in retirement is protected.
Since the publication of the Framework, it became necessary to further consider pension reform given the economic difficulties and deterioration in the public finances. In this regard, and at my request, in 2012 the Government engaged the Organisation for Economic Co-operation and Development (OECD) to conduct an independent review of long term pensions policy in Ireland. This review was published in April 2013 and encompasses the totality of pension provision in Ireland – State, private, occupational and public sector. The issues of sustainability, adequacy, modernity and equity were central to this review. Whilst endorsing pension policy reforms undertaken to date, the report makes a number of recommendations for future reform. Its 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.
In this regard, you will be aware 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.
In relation to the State pension, recent reforms to the pension system include a gradual increase in State pension age and the abolition of the State pension (transition). In January 2014, State pension age was standardised at age 66 with the cessation of State pension transition. The State pension age will increase to 67 years in 2021 and to 68 years in 2028. These reforms were introduced in the context of changing demographics and the fact that people are living longer and healthier lives.
Reforms will continue with the current PRSI system and, as highlighted by the OECD, to strengthen the link between social insurance contributions and benefits received. In this regard, a number of significant reforms have already been introduced and further reforms are scheduled for the years ahead. From September 2012, new rate bands for State pension were introduced. These additional payment rate bands more accurately reflect the social insurance history of a person and ensure that those who contribute more during a working life benefit more in retirement than those with lesser contributions. With effect from April 2012, the number of paid contributions required to qualify for a State pension increased from 260 paid contributions to 520 paid contributions. It is also planned to introduce a “total contributions approach” to determine eligibility for a State pension. 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. The proposed date for the introduction of a move to a total contributions approach is 2020, but this may be subject to change.
Arising from changing demographics, policy reform will continue to support longer working lives and to focus on the need to provide for sustainable and adequate pensions.
