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Pension Provisions

Dáil Éireann Debate, Wednesday - 6 June 2012

Wednesday, 6 June 2012

Ceisteanna (435)

Michael McGrath

Ceist:

427 Deputy Michael McGrath asked the Minister for Social Protection the position regarding the proposed changes to the eligibility criteria for the state contributory pension from September, 2012; if she will confirm the details of these changes; if she will specify the changes that apply to widows; and if she will make a statement on the matter. [27366/12]

Amharc ar fhreagra

Freagraí scríofa

The Government has made decisions on a number of changes to State pension provision including the changes to the rate bands which will come into effect from September 2012 for new customers:

Currently a person with an average of 20-47 PRSI contributions per year over their working life receives a weekly State pension of only €4.50 less than a person with a yearly average of 48 or more PRSI contributions. This is neither fair nor equitable. From September 2012, additional rates bands for State pension (transition) and State pension (contributory) will be introduced to more fairly reflect the attachment to the workforce by the claimant.

The maximum rate will remain unchanged and the rate payable to people with an average of between 40 and 47 contributions per year will also remain unchanged. However, those who have fewer contributions will receive a lower rate of pension. This change moves somewhat closer to the total contribution approach where those who pay more, benefit more. I have set out below, for information, the new rate bands below.

In relation to changes to the eligibility criteria for widow's, widower's and surviving civil partner's contributory pension, currently either the claimant or their late spouse or civil partner must have a minimum of 156 paid social insurance contributions paid to the date of death of the spouse/civil partner or before reaching pension age (currently, age 66) whichever is earlier.

Where the date of death of a spouse or civil partner is on or after 27th December 2013, the minimum number of paid social insurance contributions required will be increased to 260 paid contributions.

In addition, with effect from 6th April 2012, late claims for the State pension (transition), State pension (contributory), widow's, widower's or surviving partner's contributory pension will be limited to a maximum period of 6 months.

I would like to take this opportunity to again outline the context for these changes. Given the scale of the fiscal crisis and because spending on social protection accounts for nearly 40% of current Government expenditure, you will appreciate that savings have to be found in the social welfare system.

There is also an important long-term policy context for the proposed changes to State pension, including the forthcoming change to pension rate bands being introduced for new customers from September 2012, which is that the challenges facing the Irish pension system are significant.

There are currently six people of working age for every pensioner and this ratio is expected to decrease to approximately two to one by 2050. People aged 65 years and over will account for a greater proportion of the population while the proportion of working age is expected to decline. People are living longer with healthier lives and growing numbers of people want to work, or may need to work beyond State pension age. This has obvious and significant implications in relation to the future costs of State pension provision. Therefore, the task of financing increasing pensions will fall to a diminishing share of the population.

Taking all of these factors into consideration, I introduced legislation in the Social Welfare and Pensions Act, 2011 to abolish the State pension (transition) with effect from January 2014 thereby standardising pension age at 66. The State pension (contributory) age will be increased to 67 in 2021 and to 68 with effect from 2028.

In the future, a ‘total contributions approach' to State pension will be adopted to replace the current averaging system. The current proposed date for its introduction is 2020. Under this system, the level of pension paid will be directly proportionate to the number of social insurance contributions made by a person over his or her working life.

The State pension is the bedrock of the Irish pension system, and these reforms are essential to address the challenges of increasing life expectancy and to ensure its sustainability.

All information relating to the changes that I have outlined here are also available on my Department's website.

Current State Pension (Contributory) Rates of payment

Yearly average contributions

Personal Rate per week

Increase for Qualified Adult aged under 66 yearsRate per week

Increase for Qualified Adult aged over 66 yearsRate per week

48 or over

€230.30

€153.50

€206.30

20-47

€225.80

€153.50

€206.30

15-19

€172.70

€115.10

€154.70

10-14

€115.20

€76.80

€103.20

New State Pension (Contributory) Rates of payment

Yearly average contributions

Personal Rate per week

Increase for Qualified Adult aged under 66 yearsRate per week

Increase for Qualified Adult aged over 66 yearsRate per week

48 or over

€230.30

€153.50

€206.30

40-47

€225.80

€146.00

€196.00

30-39

€207.00

€139.00

€186.00

20-29

€196.00

€130.00

€175.00

15-19

€150.00

€100.00

€134.00

10-14

€92.00

€61.00

€83.00

Current State Pension (Transition) Rates of payment

Yearly average contributions

Personal Rate per week

Increase for Qualified Adult aged under 66 yearsRate per week

Increase for Qualified Adult aged over 66 yearsRate per week

48 or over

€230.30

€153.50

€206.30

24-47

€225.80

€153.50

€206.30

New State Pension (Transition) — Rates of payment

Yearly average contributions

Personal Rate per week

Increase for Qualified Adult aged under 66 yearsRate per week

Increase for Qualified Adult aged over 66 yearsRate per week

48 or over

€230.30

€153.50

€206.30

40-47

€225.80

€146.00

€196.00

30-39

€207.00

€139.00

€186.00

24-29

€196.00

€130.00

€175.00

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