Dáil Éireann Debate, Tuesday - 16 January 2018
1618. Deputy Willie O'Dea asked the Minister for Employment Affairs and Social Protection the full-year cost of reversing the changes made in 2012 to the bands for the contributory pension; and if she will make a statement on the matter. [1224/18]
View answer1648. Deputy Michael Healy-Rae asked the Minister for Employment Affairs and Social Protection if she will address concerns with regard to pensions (details supplied); and if she will make a statement on the matter. [1370/18]
View answer1667. Deputy Seamus Healy asked the Minister for Employment Affairs and Social Protection her plans to reverse the 2012 changes to the State pension; and if she will make a statement on the matter. [1794/18]
View answerI propose to take Questions Nos. 1618, 1648 and 1667 together.
The changes made to State Pension (contributory) rate bands in Budget 2012, affected those pensioners who had a yearly average of 39 or less weekly social insurance contributions over the course of their working life.
The current rate bands were introduced from September 2012, replacing previous rates introduced in 2000. The rate bands in place between 2000 and 2012 were more generous than those in place before and after that period, and were a feature of the economic and political environment at that time.
The economic crash changed the focus and while other payments were reduced as a result, the core rates of the pension were maintained. Instead of reducing those payments, which many vulnerable pensioners were solely reliant upon, the rates paid to new pensioners who both have additional means and lesser PRSI contribution records were reduced.
It should be noted that, for a person with a yearly average of 20 contributions, the new rate of payment introduced in 2012 was still higher than the maximum rate that was in place at the start of 2006. The rate for such pensioners, while 85% of the maximum rate in place now, is higher, in real terms, than was in place at that time, even after inflation is taken into account. Given the economic context of what happened in the following years, this has been a significant achievement.
Also, it should be noted that in most if not all countries, in Europe and beyond, pension reforms have been introduced to make them more sustainable, and these will generally result in people having different payments depending upon when they reach pension age. The only way to avoid this would be to introduce the reforms for existing pensioners, and decrease the incomes some pensioners have become dependent upon.
The 2012 rate bands more closely reflect the social insurance contributions history of a person than those in place between 2000 and 2012. The current rate bands still provide pensions to people which are better than proportionate with their level of contribution. A person with only 20 years of contributions over nearly 50 years will still get an 85% pension, which compares favourably with contributory pensions in other EU countries.
It is estimated that to revert to the previous bands from January 2018 would result in an annual cost of well over €70 million extra in 2018, and this annual cost would increase by an estimated €10 to €12 million extra each following year.
My Department has examined in depth various options that would provide some relief to those who would have a higher contributory pension, had the ratebands not been amended in 2012. A report is being finalised on this matter which I intend to bring to cabinet committee shortly and subsequently to Government for consideration.
The National Pensions Framework proposed that a total contribution approach should replace the yearly average approach to the calculation of the State Pension (contributory). A discussion paper is being drafted by my Department and it is hoped to start the consultation process with relevant stakeholders including interest groups, representative bodies and the Oireachtas shortly. Following the consultation period, a proposal to Government will be submitted seeking approval of the new approach.
The main aim of Government policy on pensions is to make sure that pensions are affordable, sustainable and keep their value in the coming years. The reforms that are planned will result in a more inclusive and fairer pension system for all citizens.
I hope this clarifies the matter for the Deputies.
