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Pension Provisions

Dáil Éireann Debate, Thursday - 20 September 2012

Thursday, 20 September 2012

Ceisteanna (111)

Tom Fleming

Ceist:

111. Deputy Tom Fleming asked the Minister for Social Protection if she will clarify with regard to recent cuts which financially seriously affect new claimants for contributory old age pensions and the State transition pension and will she enable these persons affected to sign on for credited PRSI contributions, in view of the fact that many of these persons were not aware of any pending changes that took effect on the 1st September. [39840/12]

Amharc ar fhreagra

Freagraí scríofa

There are a number of significant challenges currently facing the Irish pension system. At present, there are six people of working age for every pensioner and this ratio is expected to decrease to approximately two to one by 2050. In addition, those aged over 65 will account for a greater proportion of the population while the proportion who are of working age is expected to decline. Therefore, the task of financing increasing pensions will fall to a diminishing share of the population. With increases in life expectancy, more people are living to pension age and living longer in retirement and the period for which a pension will be paid will be greater than the period for which a pension is paid at present. This has obvious and significant implications in relation to the future costs of State pension provision and for the sustainability of pension provision into the future. In addition to this, spending on social protection accounts for nearly 40% of current Government expenditure and in the context of the current fiscal crisis savings have to be found in the social welfare system.

In this regard, it should be noted that older people do not experience the levels of poverty that existed in the past. This can be clearly seen in a wide range of data such as the significant reduction in the ‘risk of poverty’ rate from 27.1% in 2004 to 9.6% in 2010. The consistent poverty rate over the same period also declined from 3.9% to 0.9%. The Government has made decisions on a number of changes to State pension provision including the changes to the rate bands which came into effect in 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. For information, the new rate bands are included in the table. 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.

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. In terms of the changes in the rate bands for determining the level of pension payment, allowing persons affected to sign on for credited PRSI contributions will not automatically guarantee an enhanced rate of pension. For those due to reach pension age in the near future this is likely to be of marginal or no value. Allowing retrospective credited contributions bridge any shortfall would remove all budget savings and could potentially give rise to significant additional costs.

An information campaign in relation to all of the changes has been underway since March 2012 and all information can be accessed at www.welfare.ie . My Department also met with the relevant representative groups and information leaflets were disseminated to all relevant groups as part of the information campaign

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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