Dáil Éireann Debate, Wednesday - 17 January 2018
220. Deputy Bernard J. Durkan asked the Minister for Employment Affairs and Social Protection the estimated cost of restoring State pension levels to those applicable previously; and if she will make a statement on the matter. [2376/18]
View answerThe current rate bands applying to the State pension contributory were introduced from September 2012, replacing previous rates introduced in 2000. The rate bands prior to 2000 were less generous, and the improved rate bands introduced in 2000 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, which many pensioners were solely dependent on, were maintained. Instead, the rates for people who had additional means and lesser PRSI contribution records were reduced.
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 not proportionate with their level of contribution. For example, a person with only 20 years of contributions over nearly 50 years will still receive an 85% pension, whereas someone who paid into the system every week of those 50 years receives the 100% rate.
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.
I committed to examine in depth various options that may provide some relief to those who would have a higher contributory pension had the rate bands not been amended in 2012. Officials in my Department have completed a report on this matter, which I intend to bring to a cabinet committee later this week. Following that meeting, and subject to any necessary amendment or further discussions, I will then bring the report 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) from 2020, which would remove anomalies created by the current system in 1961. It is hoped to start a consultation process regarding this reform with relevant stakeholders shortly. Following this process, a proposal to Government will be submitted seeking approval of the new approach.
This reform will make the rate of contributory pension more closely match contributions made by a person. It will also have significant homemakers provisions that will assist those pensioners who spent significant periods caring for people with a caring need.
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 Deputy.
