Richard Boyd Barrett
Question:1171. Deputy Richard Boyd Barrett asked the Minister for Social Protection the estimated cost to introduce a universal State pension of €350 weekly and reduce the pension age to 65 years of age. [41243/21]
View answerTuesday, 27 July 2021
Questions (1171)
Written answers
At present, the State pension system comprises two basic components. Firstly, the State Pension (Non-Contributory) is a means-tested pension funded from taxation. Secondly, the State Pension (Contributory) is not means-tested but is based on social insurance (PRSI) contributions and paid from the Social Insurance Fund, and as such it is important to ensure that those qualifying for the State Pension (Contributory) have made a sustained contribution to the Social Insurance Fund over their working lives.
The introduction of a universal State pension paid at full rate to everyone of 65 years of age and over, regardless of their PRSI contributions or their means, would require fundamental reform of the State pension system, and perhaps to the entire model of social insurance. It would give rise to a considerable range of complex policy and operational issues. Examples of such issues include -
- the impact on customer behaviour with respect to work, work patterns, employment status, personal savings, contributions into the system in tax/PRSI, etc.;
- the interplay between the State pension system and occupational and private pensions and the scope of the State to support such arrangements;
- the applicability of such a pension to those in public service employments;
- the potential legal issues involved in different treatments of those with occupational pensions in the private and public sector and those with a mix;
- how such a system would work with existing EU pension and social security law and with international bilateral arrangements; and
- the treatment of retirees who are not resident in the State, but who have built up a contributory pension entitlement over the years that they worked here and paid PRSI.
The latest available figures from the CSO, in April 2020, estimated that 710,100 people were aged 65 and over in the state. This is an increase of 14.3% on the figures from April 2016.
Providing a €350 per week payment to this population would cost over €13.1 billion a year, including provision of a Christmas Bonus. This would represent an increase of over €4.6 billion on the amount spent by this Department on pensions in 2020 or, in percentage terms a year on year increase of 53%.
This is without any payment to those living abroad who currently receive the State pension contributory having paid into the social insurance fund during their working life and takes no account of increased costs anticipated in the future due to well known demographic issues in respect of the future pensioner population.
The Deputy is aware that the public policy and social issues in relation to funding a sustainable and adequate State pension system are complex. That is why the Programme for Government committed to the establishment of a Commission on Pensions to examine a range of issues including contributions, calculation methods, sustainability, eligibility and intergenerational fairness. That Commission has now completed its deliberations and I expect to receive its report in the near future.
I hope this clarifies the matter for the Deputy.