Dáil Éireann Debate, Wednesday - 13 July 2022
326. Deputy Mairéad Farrell asked the Minister for Social Protection the estimated first and full-year net and gross costs of reintroducing the State pension (transition) assuming a maximum personal rate of payment of €253.30, €258.30, €263.30, €268.30 and €273.30, respectively in tabular form. [38426/22]
View answerWhen the State Pension (Transition) was in place, it was a scheme allowing those who were retired to receive a transitionary payment between the ages of 65 and 66 years. The maximum personal rate was equivalent to the then maximum rate for the State Pension (Contributory). Eligibility was based on PRSI contributions and credits and payments were calculated based on the Yearly Averaging approach. PRSI Class S contributions (self-employed) were not reckonable for the State Pension (Transition).
It is important to note that the conditions and eligibility requirements for State Pension (Transition) were different to and more arduous than those applicable to the State Pension (Contributory). For example, a person had to have a minimum average of 24 contributions per annum to be eligible for State Pension (Transition) whereas an average of 10 contributions per annum is required for State Pension (Contributory) eligibility. In addition, recipients of State Pension (Transition) were not eligible for Free Travel, the Household Benefits Package (electricity, gas, TV licence) nor the Living Alone Allowance. Furthermore, the State Pension (Transition) scheme had a retirement condition whereas the State Pension (Contributory) did not.
Since the State Pension (Transition) scheme ceased with effect from 1 January 2014, very significant amendments have been made to the State Pension (Contributory) scheme, which include the introduction of the interim Total Contributions Approach and the availability of Homecaring Periods. Due to these changes, applicants for the State Pension (Contributory) are assessed under the Yearly Averaging system and the interim Total Contributions Approach and awarded on the basis of the most beneficial calculation.
While it would be possible to estimate the potential cost of reintroducing the State Pension (Transition) on the exact same legislative basis as it previously existed (which included specific rate-band structures and a yearly average method of payment calculation), it would not be possible to reintroduce it on that basis because of the changes outlined above. Therefore, introducing such a scheme would require significant design changes to the previous State Pension (Transition) to modernise it in line with the Total Contributions Approach method of payment calculation and the availability of Homecaring Periods. As no such design work has been done, it is not possible to estimate the cost as requested.
In February 2021, I introduced the "Benefit Payment for 65 year Olds" in line with the Programme for Government commitment, to provide a benefit payment for people who are aged 65 and who are required to retire, or who choose to retire, without a requirement to sign on, engage in activation measures or to be available for and genuinely seeking work. This new payment was designed specifically to bridge the gap for people who retire from employment or self-employment at 65 years of age but who do not qualify for the State Pension until age 66.
The Pensions Commission’s Report was published on 7th October 2021 and it contained almost 250 pages of analysis, consideration and recommendations. The report, Technical Sub-Committee's working papers, agendas, minutes, external presentations and submissions in response to an extensive public consultation process are available on the website, pensionscommission.gov.ie. The Commission’s work established that the current State Pension system is not sustainable into the future and that changes are needed. It has set out a wide range of recommendations, including in respect of the State Pension Age and early access, and aligning retirement ages in employment contracts with the State Pension age. In the interests both of older people and future generations of older people, the Government is considering the comprehensive and far reaching recommendations in the Pensions Commission’s Report very carefully and holistically. My officials are examining each of the recommendations and consulting across Government through the Cabinet Committee system. The views of the Joint Committee on Social Protection, Community and Rural Development and the Islands and the Commission on Taxation and Welfare will be considered as part of these deliberations. I intend bringing a recommended response and implementation plan to Government for its consideration when that work is completed.It is clear from the Commission’s work that State Pension reform is necessary and complex. It would be a strategic risk not to plan and provide for projected demographic changes, not least in terms of income adequacy for older people. The State Pension is the bedrock of the pension system in Ireland. It is extremely effective at ensuring that our pensioners do not experience poverty. This Government is committed to ensuring that this remains the case for current pensioners, those nearing State Pension age and today’s young workers including those who are only starting their careers.I trust this clarifies the matter for the Deputy.
