Dáil Éireann Debate, Wednesday - 31 May 2017
73. Deputy Richard Boyd Barrett asked the Minister for Social Protection if, in view of his interest in those who get up early in the morning, he will give a commitment to ending the pension inequality that has emerged due to cuts to the State pension in previous budgets and is experienced by many who spent many years getting up early in the morning; and if he will make a statement on the matter. [25954/17]
View answerThe overall concern in recent years has been to protect the value of weekly social welfare rates. Expenditure on pensions, at approximately €7 billion, is the largest block of expenditure in my Department, representing over 36% of overall expenditure. Due to demographic changes, my Department’s spending on older people is increasing year on year. Maintaining the rate of the State pension and other payments is critical in protecting people from poverty.
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 by approximately 17,000 annually. This has significant implications for the future costs of State pension provision which are currently increasing by approximately €1 billion every 5 years. The purpose of changes to the State pension is to make the pension system more sustainable in the context of increasing life expectancy.
Accordingly, the conditions for the State pension (contributory), which is the pension based on PRSI contributions, are reviewed on an ongoing basis. A number of significant reforms to State pensions were introduced in recent years which has allowed my Department to maintain the value of the State pension, and indeed increase it in the last two Budgets.
Where people who were unattached to the labour market during most of their adult lives cannot qualify for a contributory pension in their own right as they have paid few or no contributions, or cannot qualify for a full rate as a result of an intermittent PRSI record, the social protection system provides alternative methods of supporting such pensioners in old age. If their spouse has a contributory pension, they may qualify for an Increase for a Qualified Adult amounting up to 90% of a full rate pension, which by default is paid directly to them. Alternatively, they may qualify for a means-tested State Pension (non-contributory), amounting up to 95% of the maximum contributory pension rate. The rate of payment does not include rent allowance, household benefits or fuel allowance, which would be paid as additional payments where applicable.
Where the pensioner is widowed, there is a pension which is based on either their spouses’ PRSI record or their own, and generally at the maximum contributory pension rate.
It should be noted that the average personal payments made by my Department to men and women of this age are close to parity, with a differential of 2%, and this is reflected in CSO figures which show women over 65 are 0.3% more likely to be at risk of poverty than their male counterparts (10.8% compared to 10.5%), and men over 65 are 0.3% more likely than women of that age to be in consistent poverty (2.9% compared to 2.6%). Most people will understand that such small differentials are statistically insignificant, and when it comes to the main domestic social indicators of poverty, men and women over 65 are at parity.
It might also be noted that both of these indicators show that men and women over 65 are far less likely to be in poverty than working-age people, who are the ones funding pensions on a pay as you go basis through current PRSI deductions, as 16.9% of the general population are at risk of poverty, and 8.7% are in consistent poverty.
The National Pensions Framework (2010) proposed that a “Total Contributions Approach” (TCA) should replace the yearly average approach, for new pensioners from 2020. The aim of this approach is to make the rate of contributory pension more closely match contributions made by a person. Officials of my Department are currently working on the development of the TCA with a view to making proposals for consideration later in the year. This is a very significant reform with considerable legal, administrative, and technical elements in its implementation. An important element in the final design of the scheme will be the position of people who have gaps in their contribution records for various reasons, and this factor is being considered very carefully in developing this reform. Following completion of the Actuarial Review of the Social Insurance Fund later this year, a refined proposal will be developed. My Department will conduct a period of consultation with relevant stakeholders including interest groups, representative bodies and the Oireachtas. Following the consultation period, I will submit a proposal to Government seeking approval of the new approach.
I hope this clarifies the matter for the Deputy.
