Tuesday, 11 June 2019

Questions (935)

Éamon Ó Cuív

Question:

935. Deputy Éamon Ó Cuív asked the Minister for Employment Affairs and Social Protection the savings made from 2013 to 2018 and the estimated full year savings in 2019 arising from changes made to the calculation of the contributory pension in 2012, in tabular form; and if she will make a statement on the matter. [24170/19]

View answer

Written answers (Question to Employment)

There were two changes to how the contributory state pension was calculated introduced in 2012.

First, in April 2012, the number of paid contributions required to qualify for a state pension (contributory) increased from 260 to 520. This change was signalled well in advance of its introduction. In 1993, "Developing the National Pension System - Final Report of the National Pensions Board” was published, and recommended that the number of paid contributions required to qualify for a contributory pension should be increased to 520 contributions, in recognition of the expansion of PRSI coverage over the decades. The enabling legislation was contained in Section 12 of the Social Welfare Act 1997, which provided for the implementation of the change in two stages, with the paid contribution requirement being standardised initially at 260 from 2002, and rising to 520 from April 2012, 15 years after its introduction in law.

Those who were affected by this change may or may not have an alternative State pension payment. Where they do not and they have made no claim for a state pension, it is not possible to state what the rate of that payment would have been, had there been no policy change.

The second change was introduced as part of Budget 2012. From September 2012, new rate bands for State pension (contributory) were introduced. These new rate bands more accurately reflect the social insurance history of a person and ensure that those who contribute more during a working life are likely to benefit more in retirement than those with less frequent contributions during working life.

Due to the interaction between these and other effects over the period from 2012, it is not possible to isolate the figures requested in tabular form. It has however been estimated that the savings to the Social Insurance Fund resulting from the change in rate bands was rising by roughly €10 million per annum, as they applied to new pensioners from September 2012, and that this would have reached some €60 to €80 million by 2018, based upon those paid in the relevant ratebands. However, the saving could be higher as some pensioners, as a result of this change, are alternatively paid State pension (non-contributory) at a higher rate than their SPC entitlement.

I hope this clarifies the position for the Deputy.