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Pension Provisions

Dáil Éireann Debate, Tuesday - 19 June 2012

Tuesday, 19 June 2012

Ceisteanna (311)

Catherine Murphy

Ceist:

399 Deputy Catherine Murphy asked the Minister for Social Protection if she will confirm that the proposed changes to the weekly rate of contributory State pension to take effect in September 2012 will result in a substantial loss of weekly income for several recipients, in some cases of up to 13%; and if she will make a statement on the matter. [29871/12]

Amharc ar fhreagra

Freagraí scríofa

At the outset I would like to confirm that the rate band changes, which will come into effect from September 2012, will not affect existing customers. There is an important context to the proposed changes to State pension provision. Firstly, there is the fiscal context. 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.

The change to State Pension rate bands means that pension payments made, will reflect PRSI payments made over a working life. 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, 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 proportionality of 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 but it should be noted that while expectations may need to be adjusted, a rate of pension will still be payable. I have included, for information, the new rate bands below. Claimants with an income need, may, following a means test, qualify for a State pension (non-contributory). The maximum rate of the (State pension non-contributory) is €219.00 per week

This change to rate bands which I am introducing in September 2012, moves somewhat closer to a ‘total contribution approach' where those who pay more, benefit more. The ‘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.

Secondly, there is also an important long-term policy context for the proposed changes to State pension as 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. 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 is 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 Rateper 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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