Tuesday, 23 July 2019

Questions (2773, 2778, 2783)

Richard Boyd Barrett

Question:

2773. Deputy Richard Boyd Barrett asked the Minister for Employment Affairs and Social Protection the estimated full year cost of reinstating the transitionary pension. [33571/19]

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Richard Boyd Barrett

Question:

2778. Deputy Richard Boyd Barrett asked the Minister for Employment Affairs and Social Protection the estimated cost to introduce a universal State pension of €250 weekly and reduce the pension age to 65 years of age. [33576/19]

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Richard Boyd Barrett

Question:

2783. Deputy Richard Boyd Barrett asked the Minister for Employment Affairs and Social Protection the estimated full year cost of ensuring the State contributory and non-contributory pensions are available to all those that reach 65 years of age. [33656/19]

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Written answers (Question to Employment)

I propose to take Questions Nos. 2773, 2778 and 2783 together.

Increasing pension age, to moderate the increase in pension duration, is a means by which pensions can be made sustainable in the context of increasing longevity. In order to provide for sustainable pensions and to facilitate a longer working life, legislation passed in 2011 provides for an increase in the State pension age in three separate stages. In 2014, the State pension age was standardised at 66. This will be increased to 67 in 2021 and 68 in 2028. The Roadmap for Pensions Reform 2018-2023 has stated that future changes in State pension age will be decided on research into life expectancy.

As a result of this demographic trend, the number of State pension recipients is increasing year on year. This has significant implications for the future costs of State pension provision which are currently increasing by approximately €1 billion every 4 or 5 years, and more when recent rate increases are taken into account. For example, the cost of my Department's pension payments rose from €7.1 billion in 2016 to €7.75 billion in 2018, an increase of €650m (or 9.2%) in 2 years. The recent Actuarial Review of the Social Insurance Fund confirmed that this trend will continue into the future, with the ratio of workers to pensioners likely to halve by the time workers currently in their 30s reach State pension age.

This sustainability is vital, if the current workers, who fund State pension payments through their PRSI, are to receive a pension themselves when they reach retirement age. The only feasible solution which does not involve reducing pension rates to pensioners (which would result in poverty among older people), reducing other significant areas of Government expenditure (such as other payments made by by my Department, and/or Health and Education spending), or increasing charges on those currently paying for them (which would increase the rates of poverty among the current working age population), is to encourage people to stay in employment longer.

In 2013, the cost of the State pension (transition) was €137 million. However, the State pension (non-contributory) was only payable from 66 prior to this change, and so there would be an additional cost if the state pension age for that payment was also reduced to 65. While this would be difficult to cost as retirement behaviour has changed in the intervening period - in part because of the change in State pension age - it might be expected to increase the total cost of a unified state pension age of 65 at roughly €200 million or more, although it should be stressed that this is tentative estimate.

If the rate of both State pensions was to increase to €250 per week, this would be expected to have a cost in the region of €170 million per annum. If, however, the pension became available universally, at that maximum rate, both to everyone resident here (including public service pensioners, their spouses, and people in receipt of a foreign pension with no Irish PRSI record) and also to people resident outside the State who had built up an entitlement to the Irish State pension, the additional cost could be expected to be more than €2 billion, and possibly more, depending upon a number of factors.

The Deputy should note that 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.

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.

I hope this clarifies the matter for the Deputy.