The State pension is a very valuable benefit and is the bedrock of the Irish pension system. Therefore, it is important to ensure that those qualifying have made a sustained contribution to the Social Insurance Fund over their working lives. State pensions account for the single largest block of social welfare expenditure, and while expenditure on pensions is increasing by approximately €1 billion every five years because of demographic pressures, this is being successfully managed within the overall welfare budget. In 2016, €6.976 billion will be spent on pensions, which represents approx. 35% of the Department’s total current expenditure. Maintaining the rate of the State pension and other core payments is critical in protecting people from poverty.
As provided for in Budget 2012, new rate bands for State pension (contributory) were introduced. 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. Those with a yearly average of 48 or more contributions receive a 100% pension, whereas, for example, those with only a yearly average of 20 contributions may qualify for a pension at 85% of the maximum rate.
The net savings from this change would not be the same thing as the gross reduction in State pension (contributory) payments, as in some cases the person would instead qualify for a State pension (non-contributory), the maximum rate of which is 95% that of the contributory pension.
At the time this measure was introduced, the net exchequer savings arising were estimated to be in the region of €2.8 million in 2013, €5m in 2014 and €8m in 2015.