Dáil Éireann Debate, Tuesday - 9 June 2015
179. Deputy Róisín Shortall asked the Tánaiste and Minister for Social Protection if she is aware of the financial impact the changes to the average contribution bands have made to persons who were approaching retirement and who were in one of the middle band categories; and the steps, if any, she proposes to take to address this. [21472/15]
View answerThe State pension (contributory) is a very valuable benefit. Therefore, with increased numbers of people living longer, it is important to ensure that those qualifying for State pension (contributory) have made a sustained contribution to the Social Insurance Fund over their working lives. As provided for in Budget 2012, from September 2012, new rate bands for State pension (contributory) were introduced. This resulted in one of bands (in respect of those with a yearly average of 20-47 contributions), being replaced with three bands (in respect of yearly averages of 40-47, 30-39, and 20-29 respectively). These additional 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.
Prior to these changes, someone with a yearly average of 47 contributions qualified for the same rate of payment (98% of the maximum rate) as someone with a yearly average of 20 contributions, despite generally their much more significant PRSI record, and regardless of their means. Given the requirement to make savings in recent years, I considered it more equitable to address this disparity than to reduce the rate of payment for all pensioners by an across the board cut in payment rates.
The effect of this change has been to reduce the personal rate paid to those with 30-39 contributions (i.e., 57-75% of the maximum) to €207 (90% of the maximum rate), and to reduce the rate paid to those with 20-29 contributions (i.e., 38-56% of the maximum) to €196 (85% of the maximum rate). The reduced rate of €196 is still higher than the maximum rate that applied in 2007.
For those with insufficient contributions to meet the requirements for a full rate State pension (contributory), they may qualify for a means tested State pension (non-contributory) which has a maximum personal rate of €219, or just over 95% of the maximum rate of the State pension (contributory). Alternatively, if a person's spouse or civil partner is in receipt of a State pension (contributory) they may instead qualify for an Increase for a Qualified Adult of up to €206.30, which is just less than 90% of the maximum personal rate of the State pension (contributory).
