The existence of the State pension (transition) is historical and relates to the qualifying age for State pension (contributory) which, up until the early 1970s, was 70 years of age. State pension transition (known then as the Retirement Pension) was introduced at that time to bridge the gap for employees who had to retire at 65. The qualifying age for State pension (contributory) was subsequently reduced over time to 66 years, which left State pension (transition) effective for just one year. The Social Welfare and Pensions Act 2011 provided that State pension age will be increased gradually to 68 years. This began in January 2014 with the abolition of the State pension (transition) available at 65, thereby standardising State pension age for all at 66 years. State pension age will increase further to 67 in 2021 and 68 in 2028. The purpose of these changes is to make the pension system sustainable in the context of increasing life expectancy.
With increases in life expectancy, more people are living to pension age and living longer in retirement. The period for which an average pension will be paid will be greater than the period for which a pension is paid at present. The number of pensions is increasing by approximately 17,000 annually as a result of demographic change. This has obvious and significant implications in relation to the future costs of State pension provision. In 2013, despite reforms introduced in 2012, the Department had to make provision for an additional €190 million, and further increases are required year-on-year to just keep pace with this demographic change. Maintaining the rate of the State pension and other core payments is critical in relation to protecting older people from poverty.
Following on from its analysis of its award figures for State pension (transition) in 2011 and 2012 in order to establish the impact of the abolition of State pension (transition), the Department noted that only approximately 12.5 % came from employment, with over 50% coming from another social welfare payment, and the remainder coming from a combination of people already retired, paying credits or self-employed. This would indicate that a significant number of people have already left employment well in advance of pension age. It also reflects the fact that there is no statutory retirement age in Ireland. Responsibility for setting retirement age is a matter for the employer/employee relationship and the contract of employment. As a result, people can retire before or after State pension age.
While it is hoped that, where appropriate, workers will choose and be able to work to pension age and beyond if that is their choice, it is recognised that for some this is not viable and there are measures to support them in such circumstances. All short term social welfare schemes are payable to age 66. The main social welfare payment available to those who leave employment before pension age is jobseeker’s benefit. Persons aged between 65 and 66 years who qualify for a jobseeker’s benefit are generally entitled to receive payment up to the date on which they reach pensionable age (66 years). In the case of a jobseeker’s benefit recipient aged under 65 whose claim spans from one benefit year into another, a new relevant tax year requirement is not applied in the case of the jobseeker's entitlement relating to the second benefit year. A further provision states that 3 waiting days do not have to be served for jobseeker's assistance in the case of certain people aged between 65 and 66 years who have been in receipt of jobseeker's benefit within the past year. I was happy to be able to introduce new arrangements in Budget 2014 for older jobseekers, i.e., those aged 62 and over who have left work before reaching the State pension age of 66 and who wish to claim a jobseeker’s payment. With effect from 1 January 2014, fully unemployed jobseekers aged 62 or over have been placed on yearly signing and are given the option of transferring to EFT payments. Furthermore, they are not subject to mandatory activation measures or activation-related sanctions but may avail of employment support.
Social welfare supports will continue to be available to those who need it most and where a person fails to meet the qualifying conditions of an insurance based scheme, a means tested assistance payment may be available provided they satisfy the qualifying conditions.
Beyond the above measures, there are no plans to introduce a new payment, the effect of which would be to negate the decision to abolish State pension (transition) as the demographic reasons for the change remain. Doing so would contribute to the increase in the duration of the average pension, making the system unsustainable in the longer term.
