Dáil Éireann Debate, Tuesday - 23 May 2017
342. Deputy Niamh Smyth asked the Minister for Social Protection his plans to reinstate the State transition pension; his further plans to prevent persons forced to retire at 65 years of age having to apply for jobseeker's allowance for one year until they reach the State pensionable age of 66 years; and if he will make a statement on the matter. [24485/17]
View answerThe 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), which had been available from 65 for those who satisfied the qualifying conditions, thereby standardising State pension age for all at 66 years. This is the current State pension age. It will increase to 67 in 2021 and to 68 in 2028.
In most cases, it is hoped that workers will continue to work up to the new State pension age. Where this is not possible, there are specific measures which apply to someone claiming Jobseeker’s Benefit from a date after their 65th birthday. Where qualified, these recipients may continue to be eligible for that payment until reaching pension age.
Reversing the abolition of State pension (transition) would have a significant Exchequer cost. In 2013, the cost of the State pension (transition) was €137 million. Its abolition was not expected to save that amount of expenditure in full, as some people who were affected would alternatively claim working age payments such as Jobseeker's Benefit (albeit at a lower rate than the rate of the State pension), or may claim an Increase for a Qualified Adult in respect of their spouse’s pension. However, it is estimated that well over half of the gross cost has been saved each year as a result of this measure, and this would be expected to increase as (a) the number of 65 year olds increases, (b) the change results in a higher percentage of people working while aged 65, and (c) there have been two Budget increases in the rate of the State pension since then. It is estimated that the net saving in 2018 is likely to be in the region of €84 million, and this is expected to increase over time. The cost of reversing this decision would depend, therefore, on the effective date of such a measure, and also on any resultant changes in behaviour.
Each year more people are living to pension age and living longer in retirement. As a result of this demographic change, the number of State pension recipients is increasing year on year. This has significant implications for the future costs of State pension provision, and demographic change alone is expected to increase spending on pensions by over €220 million this year, not including the impact of rate increases.
The purpose of changes to the State pension age is to make the pension system more sustainable in the context of increasing life expectancy. This sustainability is vital, if the current workers, who fund State pension payments through their PRSI on a Pay-As-You-Go basis, are to receive a pension themselves when they reach retirement age. Rowing back on these changes, which have already been legislated for, would undermine that sustainability, to the detriment of current workers.
It should also be borne in mind that these changes are modest in the context of increasing longevity among older people, and the duration of the average pension is still expected to increase based on current trends.
There is no legally mandated retirement age in the State, and the age at which employees retire is a matter for the contract of employment between them and their employers. While such a contract may have been entered into with a retirement date of 65, in the context of the previous State pension arrangements, there is no legal impediment to the employer and employee agreeing to increase the duration of employment for one or more years, if both parties wish to do so.
I hope this clarifies the matter for the Deputy.
