Seán Fleming
Ceist:40. Deputy Sean Fleming asked the Tánaiste and Minister for Social Protection her views on the sustainability of the social insurance fund; and if she will make a statement on the matter. [1953/15]
Amharc ar fhreagraThursday, 15 January 2015
Ceisteanna (40)
Freagraí scríofa
Social insurance contributions (PRSI) are paid into the Social Insurance Fund (SIF) which finances a broad range of benefits. The social insurance system is mandatory and insures nearly all workers and the self-employed for a range of contingencies such as old age, ill health, maternity and unemployment. The range of contingencies covered is dependent on the Class of PRSI paid.
Social insurance spending has traditionally been funded on a tripartite basis – with contributions coming from the Exchequer, employers and employees. Legally, the Exchequer is the residual financier of the Social Insurance Fund (SIF) and Exchequer contributions were the norm for over 40 years. The Revised Estimates for 2014 provided for a subvention of €690 million from voted expenditure to fund the deficit on the SIF with the Revised Estimates provision in 2015 being €180 million, a reduction of over half a billion euro.
One of my key priorities as Minister for Social Protection is to put the Social Insurance Fund on a sustainable footing. A core principle of sustainable social protection systems in advanced economies is that citizens receive benefits in proportion to their contributions.
The structural PRSI measures implemented in recent Budgets will have a positive and long-term impact on the funding of the SIF. These measures include increases in rates of contribution, the abolition of ceilings for charging PRSI, the abolition of relief from PRSI previously applied to employee pension contributions, the abolition of the PRSI-free allowance as well as the broadening of the base on which PRSI is charged through the abolition of exemptions. These revenue raising measures were accompanied by expenditure reducing measures including stricter contribution conditions for entitlement, reductions in duration of entitlement, removal of entitlement to concurrent social insurance payments, increases in pension age as well as major reductions in entitlements under the treatment benefits and redundancy payments schemes. As I have already indicated the 2015 Revised Estimate provides for the Exchequer Subvention to fall to €180 million in 2015.
The sustainability of the Social Insurance Fund is driven by:
i. Social Insurance Fund Income from PRSI receipts;
ii. Expenditure on SIF schemes – the main variables being demographic pressures relating to pensions and the Live Register.
Social Insurance Fund income peaked at over €8.1 billion in 2008. It fell to €6.7 billion by 2010. The 2015 Budget Estimate forecast that it will be €8.2 billion this year, exceeding the pre-crash value for the first time.
Arising from demographic pressures, expenditure on pensions is increasing by €200 million each year. The Live Register rose from an average of 162,000 in 2007 to over 440,000 in 2010 and 2011. It has since fallen each year and is expected to average below 390,000 in 2014.
The Actuarial Review of the Social Insurance Fund as at 31 December, 2010, highlighted the growing deficit in the Fund and the prospect that it will, in the absence of measures to address the deficit, accelerate further in the future, driven primarily by pension costs. It is estimated that almost €1 billion additional provision will be required over the next 5 years to fund increases in the numbers of recipients of the State pension (contributory) scheme.
Based on macro-economic forecasts provided by the Department of Finance, it is expected that Social Insurance Fund income will continue to rise over the period 2016 to 2018 by an amount greater than the requirement for additional pension expenditure.
Question No. 41 answered with Question No. 39.
Questions Nos. 42 and 43 withdrawn.