Tuesday, 10 December 2019

Questions (638)

Niall Collins

Question:

638. Deputy Niall Collins asked the Minister for Employment Affairs and Social Protection if she has received correspondence from a union (details supplied) regarding increases in the State pension age; the projected cost of implementing the proposals including reversing the decision to increase the State pension age in 2021 and 2028; and if she will make a statement on the matter. [51740/19]

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Written answers (Question to Employment)

The organisation in question made a submission to my Department's consultation on the introduction of the Total Contributions Approach last year which included their position on the increases to State Pension Age as legislated for in the 2011 Social Welfare and Pension Act.

The organisation concerned is also represented on the Labour Employer Economic Forum (LEEF) which was established in 2016 to bring together representatives of employers and trade unions with Government Ministers to exchange views on economic and employment issues as they affect the Labour Market and which are of mutual concern. The LEEF Pensions Sub Group meets regularly to cover matters concerning pensions.

In order to provide for sustainable pensions and to facilitate a longer working life, successive Governments have considered the sustainability challenges faced by the Pensions system as a result of changing demographics in Ireland. In 2007, Minister Cullen launched the Green Paper on Pensions, which proposed raising the Pension Age. This was followed by a major public consultation exercise. Three years later, in 2010, Minister Hanafin launched the National Pensions Framework which, following a Government decision, set out the agenda of changes in the State Pension Age in 2014, 2021 and 2028. This strategy was enacted via legislation introduced by then Minister Burton and passed in 2011 which 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 after 2035 will be based on research into life expectancy. This is in keeping with similar measures introduced by most EU and OECD countries.

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. It is the only feasible solution which does not involve reducing pension rates to pensioners (which would result in an increase in the rate of poverty among older people), or reducing other significant areas of Government expenditure (such as other payments made by my Department).

It is estimated that the gross cost to the State Pension (Contributory) of postponing the increase in State Pension Age would be approximately €430m per annum, but the net cost is closer to €217.5 million per annum. The estimates factor in secondary costs such as foregone PRSI receipts and additional Household Benefit payments. If the projected changes in 2021 and 2028 were both reversed the estimated net cost therefore, from 2028, would be €435m per annum. These figures would obviously increase every year given the changing demographics.

I hope this clarifies the matter for the Deputy.

Question No. 639 answered with Question No. 629.