Dáil Éireann Debate, Tuesday - 20 June 2017
2005. Deputy John Brassil asked the Minister for Social Protection if she will remove the band changes introduced in 2012 in order to allow those pensions which were reduced by this change of assessment method to be assessed under the pre2012 change; and if she will make a statement on the matter. [27040/17]
Amharc ar fhreagraEach year more people are living to pension age and living longer in retirement. As a result of this demographic change, the number of State pension recipients is increasing year on year. This has significant implications for the future costs of State pension provision, and demographic change alone is expected to increase spending on pensions by over €220 million this year, not including the impact of rate increases.
The current rate bands applying to the State pension (contributory) were introduced from September 2012, replacing previous rates introduced in 2000. These rate bands more accurately reflect the social insurance contributions history of a person.
It is estimated that to revert to the previous bands would result in an annual cost at least €60 million in 2018 and this annual cost would increase by an estimated €10 million each following year as a greater number of pensioners qualify under the current rules, i.e. €70 million in 2019 etc. The main beneficiaries from such a decision would be better off pensioners who do not qualify for means-tested pension payments, and who did not make sufficient contributions into the Social Insurance Fund to qualify for a full rate contributory pension.
Prior to the introduction of the current rate bands, a person reaching retirement age with a yearly average of 47 contributions (out of a maximum of 52) qualified for the same rate of payment as someone with a yearly average of 20 contributions, despite their much more significant PRSI contribution record, and regardless of their means. A person with the maximum of 52 weeks of contributions paid every year of their working life received a weekly State pension of only €4.50 more than someone with a yearly average of 20 PRSI contributions.
Where people who were unattached to the labour market during most of their adult lives cannot qualify for a contributory pension in their own right as they have paid few or no contributions, or cannot qualify for a full rate as a result of an intermittent PRSI record, the social protection system provides alternative methods of supporting such pensioners in old age. If their spouse has a contributory pension, they may qualify for an Increase for a Qualified Adult amounting up to 90% of a full rate pension, which by default is paid directly to them. Alternatively, they may qualify for a means-tested State Pension (non-contributory), amounting up to 95% of the maximum contributory pension rate. The rate of payment does not include rent allowance, household benefits or fuel allowance, which would be additional payments where applicable.
The Actuarial Review of the Social Insurance Fund in 2012 confirmed that the Fund provides better value to female rather than male contributors. This is due to the redistributive nature of the Fund.
The National Pensions Framework (2010) proposed that a “Total Contributions Approach” (TCA) should replace the yearly average approach for new pensioners from 2020. The aim of this approach is to make the rate of contributory pension more closely match contributions made by a person. Officials of my Department are currently working on the detailed development of the TCA with a view to making proposals for consideration later in the year. This is a very significant reform with considerable legal, administrative, and technical elements in its implementation. An important element in the final design of the scheme will be the position of people who have gaps in their contribution records for various reasons, and this factor is being considered very carefully in developing this reform.
I hope this clarifies the matter for the Deputy.
