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Pension Provisions

Dáil Éireann Debate, Thursday - 7 June 2012

Thursday, 7 June 2012

Ceisteanna (82)

Pearse Doherty

Ceist:

83 Deputy Pearse Doherty asked the Minister for Social Protection if she will outline in tabular form the contributory pension that is paid to existing pension recipients based on contributions beginning with 10 contributions and incrementing contributions each time and the corresponding pension that will be paid to new entrants will be paid for the same number of contributions when the changes take effect in September 2012; and if she will make a statement on the matter. [27597/12]

Amharc ar fhreagra

Freagraí scríofa

The details requested by the Deputy relate to the State pension (contributory) and are outlined below. I have also outlined details on the State pension (transition) for the Deputy's information.

In relation to the pension reform measure being introduced in September 2012, 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. A lower pension will be payable to new applicants for State pension who have a yearly average of less than 48 PRSI contributions which better relates to their PRSI record. This measure introduces additional rates bands for State pension (transition) and State pension (contributory) to more fairly reflect the attachment to the workforce by the claimant.

The maximum rate will remain unchanged which is currently €230.30 per week. 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 outlined below where those who pay more, benefit more.

There is an important context to the proposed changes to State pension provision. 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. Therefore, the task of financing increasing pensions will fall to a diminishing share of the population. This has obvious and significant implications in relation to the future costs of State pension provision.

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 which will standardise State pension age at 66. State pension (contributory) age will be increased to 67 years 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 in order to address the challenges of increasing life expectancy and to ensure its sustainability.

Current State Pension (Contributory) Rates of payment

Yearly average contributions

Personal Rate per week

Increase for Qualified Adult aged under 66 years Rate per week

Increase for Qualified Adult aged over 66 years Rate 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 years Rate per week

Increase for Qualified Adult aged over 66 years Rate 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 years Rate per week

Increase for Qualified Adult aged over 66 years Rate 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 years Rate per week

Increase for Qualified Adult aged over 66 years Rate 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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