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State Pension (Contributory)

Dáil Éireann Debate, Wednesday - 23 October 2019

Wednesday, 23 October 2019

Questions (52, 78)

Éamon Ó Cuív

Question:

52. Deputy Éamon Ó Cuív asked the Minister for Employment Affairs and Social Protection when the new total contribution system will come into force for new applicants for the State pension (contributory); the date when eligibility for a State pension will increase from the present 66 to 67 years of age; and if she will make a statement on the matter. [43628/19]

View answer

John Curran

Question:

78. Deputy John Curran asked the Minister for Employment Affairs and Social Protection the progress being made to introduce a new total contribution pensions scheme; the next steps and the associated timeframe; and if she will make a statement on the matter. [43420/19]

View answer

Oral answers (8 contributions)

Currently, there is both a total contribution system and an averaging system in place for calculating pensions. The averaging system was to be abolished. Is the Minister going ahead with abolishing the averaging system, which in many cases is more favourable than the new system she introduced? On what date will that happen and when will the contributory pension age increase from 66 to 67? People deserve to know.

I propose to take Questions Nos. 52 and 78 together.

The introduction of the total contributions approach, TCA, for establishing the level of entitlement for all new State pension contributory claims was signalled by the then Government in the national pensions framework in 2010.

At the time it set a target date of 2020 for implementation of the new TCA approach. More recently, the roadmap for pension reform for the period 2018 to 2023, inclusive, which was launched on a very snowy day last year targeted implementation of the TCA approach from quarter three of 2020. This is subject to the necessary legislation being enacted and supporting structures and the IT system being in place.

Consultation is a very important part of the development and design of the new pension for the next generation. With this in mind, I launched a public consultation process on the design of the TCA on 28 May 2018, in which a wide variety of stakeholder groups were invited to participate. A number of workshops were also held on the day to elicit views and feedback. Shortly afterwards Members of the Oireachtas were invited to a very detailed briefing by my officials in Leinster House. The consultation process was open for over three months and the Department received almost 300 responses from individuals and organisations. The submissions outlined the views of respondents on the issues of most interest to them. Having carefully examined the outputs of the consultation process, my Department is designing the scheme and I intend to bring a proposal to the Government setting out the design in the near future. When the Government has agreed to the approach to be taken, I will initiate the work required to introduce this reform.

With reference to the State pension age, the purpose of reform in this area is to make the pension system more sustainable in the context of increasing life expectancy. If there is no change in State pension age, the proportion of a person's life spent in retirement will increase to levels where current workers will no longer be able to support current pensioners. The Social Welfare and Pensions Act 2011 provided that State pension would age be increased gradually to 68 years. The process began in January 2014 with the abolition of the State transition pension. This measure standardised State pension age for all at 66 years. It will increase to 67 years on 1 January 2021 and 68 in 2028.

The proposals brought forward by the previous Fianna Fáil-led Government spoke about a total contributions record over a period of 30 years. Following the introduction by the Minister of the 40-year requirement, many people will be worse off than they are under the current averaging system. Will the Minister confirm whether she has calculated the difference between a 30-year total contributions record and the 40-year requirement? It has changed the goal posts significantly in transferring from an averaging to a total contributions record system.

The Minister has indicated that she intends to bring the redesigned TCA to the Cabinet in the near future. I ask that as soon as that happens that it be published in order that Members of this House can have a real debate on it because there is very real and significant concern about the arrangement whereby the total number of contributions will be recorded over a working life of 40 years instead of 30. Most Members are very conscious of the anomalies that arose the last time a significant change was made in 2012 and we do not want to go down that road again. The Minister will tell us about the different credit arrangements for caring and so forth, but that is the detail we need to see and discuss. The real concern is that if we use a 40-year cycle, a significant number of people will be worse off than if they were to remain in the averaging system.

I can certainly confirm that the proposal issued in the very early days of 2010 by the Fianna Fáil-led Government was a for period of 30 years. What I cannot confirm is Deputy Curran's assumption of what the design will look like because it has not yet been approved by the Cabinet. Therefore, it has not been announced and certainly not sanctioned. Therefore, I respectfully ask the Deputies to wait until I obtain Government approval for the design. I will be hotfooted on the day to make sure I will publish it. I will very much value Deputy Curran's input thereafter.

Will the Minister confirm, regarding the reviews of those who were disadvantaged by the change made in 2012, that she is working on a 40-year instead of a 30-year cycle? Will the persons in question be entitled to a further review if she introduces a 40-year cycle? Will she also confirm that the percentage of people who benefited from a change following a review was about 30% and that most of them have not benefited by an equal amount when compared to what they lost following the change introduced by the previous Minister?

The Minister has rightly said that in 2010 the expectation was in respect of a working life of 30 years. The reason there is concern is that in the interim arrangement for the TCA as it applies to those affected by the anomaly resulting from the change made in 2012 she is using a 40-year period. I acknowledge that she has not published the document and not brought it to the Cabinet, but, equally, she can see why there is concern in that regard. It is because of what she has done. In advance of addressing the anomalies arising from the change made in 2012 the expectation would have been that more people would benefit. Have lessons been learned that are now influencing how the new TCA will be formulated?

The TCA in 2012 and 2020 will bear no resemblance to each other. I again ask for the Deputies' patience and indulgence. When I bring the design to the Cabinet and as soon as that meeting is over, the Deputies will know as much as I know today. They should not fall into the trap of making the assumption that it will be exactly the same. The TCA in 2020 will bear no resemblance to the caring credits approached introduced by the previous Government. I am quite pleased with the results of the review of the cases of 92,000 people because 54% of women who were potentially maligned by the caring credits approach or the lack thereof received an increase in their payments to the full pension. All of the other women stayed on exactly the same money, while 21% of gentlemen folk received an increase. Obviously, the remaining number of men could not access caring credits. I am quite happy with the lessons learned in the review. They have certainly fed into the design of the new 2020 proposals which I hope to bring to the Cabinet in the very near future.

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