Richard Boyd Barrett
Question:367. Deputy Richard Boyd Barrett asked the Minister for Social Protection the estimated full-year cost of restoring the pension age to 65 years; and if she will make a statement on the matter. [23794/23]
View answerThursday, 18 May 2023
Questions (367)
Written answers
It is important to note that the State Pension age was never 65 years of age. The State Pension (Contributory) and State Pension (Non-Contributory) were never paid at 65 years of age.
Reducing the State Pension age to 65 years would increase pension related expenditure significantly. As State Pension age has never been 65 and taking account a number of complex factors relating to demographics, qualifying criteria for State Pension (Contributory), and behaviours in relation to retirement and accessing benefits, it is not possible for my Department to provide an accurate projection of the cost of the measure suggested by the Deputy.
However, my Department had previously prepared estimates in relation to changing the pension age to 65 with effect from 1/1/2021. These estimates were prepared before the legislative changes in relation to the State Pension Age introduced in the Social Welfare Act 2020. In order to provide a more accurate and up to date estimate, a detailed analysis would need to be carried out by my Department. However, a high level and indicative estimate of the cost of introducing State Pension payments at the age of 65, based on current pension rates from 1/1/2024, is €355 million for one year only. Given current demographic changes and projections, this additional annual expenditure would obviously increase year on year.
This figure is based on a best estimate of net costs for future State Pension (Contributory) and State Pension (Non-Contributory) qualifiers but does not include estimates for any changes to household benefits, free travel or fuel allowance costs. In addition, the figure takes no account of any additional costs to public sector pensions.
As set out above, the estimate is for the year 2024 only and a more accurate estimate would set out the net present value of the future cost increase. The estimate is subject to change in the context of emerging trends and associated numbers of recipients.
Demographic projections indicate significant increases in the number of future State Pension recipients which will impact on State Pension related expenditure. Clearly, reducing the State Pension age to 65 years of age would be very expensive and would require either considerable additional revenues, or, if introduced on a cost-neutral basis, very significant diversion of funds from elsewhere.
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 chose to retire, without a requirement to sign on, engage in activation measures or 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.
I hope this clarifies the matter for the Deputy.