Dáil Éireann Debate, Tuesday - 9 October 2012
339. Deputy Simon Harris asked the Minister for Social Protection the brackets of the contributory State pension that now receive a weekly payment less than that of non contributory State pension; the date on which her Department became aware of same; her views of the situation where persons contributing toward their pension receive lower payments then persons who do not; and if she will make a statement on the matter. [42889/12]
Amharc ar fhreagraThe contributory benefits of the Irish social insurance system are based on the relationship between labour force status, earnings from work, contributions made and, finally, entitlement to benefits in the event of certain specified contingencies (such as illness, unemployment or old age). Two fundamental principles apply:
- The contributory principle whereby there is a direct link between contributions paid and entitlement to a varying range of benefits and pensions that are payable as a right if and when particular contingencies arise; and
- The solidarity principle whereby contributions paid by insured persons are not actuarially linked to benefits but are instead redistributed to support contributors who are more vulnerable. It is an expression of solidarity between both earning groups and generations. The non-contributory pension falls into this category.
As the Deputy will be aware, Budget 2012 announced changes to State pension provision including new rate bands for claimants who become eligible for State pension after 1st September 2012.
Prior to the September 1st changes this year, a person with an average of between 20 and 47 PRSI contributions per year over their working life received a weekly State pension of only €4.50 less than a person with a yearly average of 48 or more PRSI contributions. This is not equitable.
The reform introduced additional rate bands for new customers who become eligible for State pension (transition) and State pension (contributory), and associated increases for qualified adults from 1st September 2012. This affects those who have smaller yearly average of social insurance contributions as they spent fewer years at work.
The maximum rate remains unchanged and the rate payable to people with an average of between 40 and 47 contributions per year also remains unchanged. However, those who have fewer than 40 contributions per year will receive a lower rate of pension. If claimants have an income need they may, following a means test, qualify for a higher rate on the State pension (non-contributory).
People who qualify for the State pension (contributory) based on either of the top two rate bands i.e. a yearly average of 48 PRSI contributions or more and a yearly average of between 40 and 47 PRSI contributions qualify for a weekly personal payment of €230.30 and €225.80 respectively, both of which are greater than the maximum rate of the State pension (non-contributory) pension which is €219.00 per week.
Similarly, those who qualified for the State pension (contributory) before 1st September based on either of the top two rate bands qualified for a personal payment of €230.30 per week and €225.80 per week. These were based on yearly average of 48 PRSI or more contributions and a yearly average of between 20 and 47 PRSI contributions respectively. The maximum personal rate of the State pension (non-contributory) is €219.00 per week and is paid to people who have a weekly means of €30 or less. The weekly rate of payment is reduced by €2.50 for every €2.50 means assessment over €30.00. The minimum personal rate payable is €4.00 per week which is paid to people whose weekly means amounts to over €242.50 and up to €245.00.
The Deputy will be aware that the State pension is a very valuable benefit and the change to State pension rate bands means that pension payments will be more closely related to PRSI payments made over a working life. This ensures that those who contribute more during their working life will benefit more in retirement, thereby ensuring equity in the social welfare system.
It is also important to note the significant long term challenges facing the Irish pension system. There are currently six people of working age for every pensioner and this ratio is expected to decrease to less than 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. While this is a welcome development it does have 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.
|
Rates of payment from January – August 2012 |
|||
|
State Pension (Contributory) |
Personal Rate |
State Pension (Non-contributory) |
Personal Rate |
|
48 cons or over |
€230.30 |
||
|
20 - 47 |
€225.80 |
||
|
15 – 19 |
€172.70 |
Weekly Means up to €30.00 |
€219.00 (maximum rate) |
|
10 – 14 |
€115.20 |
Weekly Means of over €30.00 & up to €32.50 |
€216.50 |
|
State Pension (Transition) |
State Pension (Non Contributory) |
||
|
48 cons or over |
€230.30 |
N/A |
|
|
24 – 47 |
€225.80 |
N/A |
|
|
Rates of Payment from 1st September 2012 |
|||
|
State Pension (Contributory) |
Personal Rate |
State Pension (Non-contributory) |
Personal Rate |
|
48 cons or over |
€230.30 |
||
|
40 - 47 |
€225.80 |
||
|
30 - 39 |
€207.00 |
Weekly Means up to €30.00 |
€219.00 (maximum rate) |
|
20 - 29 |
€196.00 |
Weekly Means of over €30.00 & up to €32.50 |
€216.50 |
|
15 – 19 |
€150.00 |
Weekly Means of over €32.50 & up to €35.00 |
€214.00 |
|
10 - 14 |
€92.00 |
Weekly Means of over €35.00 & up to €37.50 |
€211.50 |
|
State Pension (Transition) |
State Pension (Non Contributory) |
||
|
48 cons or over |
€230.30 |
||
|
40 – 47 |
€225.80 |
||
|
30 – 39 |
€207.00 |
Weekly Means up to €30.00 |
€219.00 (maximum rate) |
