Thursday, 12 December 2019

Ceisteanna (353, 354)

Tom Neville

Ceist:

353. Deputy Tom Neville asked the Minister for Employment Affairs and Social Protection the estimated additional cost in 2021 if the pension age remains at 66 instead of 67 years of age; and the estimated additional cost in each of the years 2022 to 2025 as a result of that decision. [52520/19]

Amharc ar fhreagra

Tom Neville

Ceist:

354. Deputy Tom Neville asked the Minister for Employment Affairs and Social Protection the estimated additional cost in 2021 if the pension age remains at 66 years of age and the contributory and non-contributory pensions also increase by €5; and the estimated additional cost in each of the years 2022 to 2025 of a further €5 increase with the pension age remaining at 66 years of age. [52521/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Employment)

I propose to take Questions Nos. 353 and 354 together.

In order to provide for sustainable pensions and to facilitate a longer working life, successive Governments have considered the sustainability challenges faced by the Pensions system as a result of changing demographics in Ireland.

In 2007, Minister Cullen launched the Green Paper on Pensions, which proposed raising the Pension Age. This was followed by a major public consultation exercise.

Three years later, in 2010, Minister Hanafin launched the National Pensions Framework which, following a Government decision, set out the agenda of changes in the State Pension Age in 2014, 2021 and 2028.

This strategy was enacted via legislation introduced by then Minister Burton and passed in 2011 which provides for an increase in the State pension age in three separate stages. In 2014, the State pension age was standardised at 66. This will be increased to 67 in 2021 and 68 in 2028. The Roadmap for Pensions Reform 2018-2023 has stated that future changes in State pension age after 2035 will be based on research into life expectancy. This is in keeping with similar measures introduced by most EU and OECD countries.

This sustainability is vital, if the current workers, who fund State pension payments through their PRSI, are to receive a pension themselves when they reach retirement age. It is the only feasible solution which does not involve reducing pension rates to pensioners (which would result in an increase in the rate of poverty among older people), or reducing other significant areas of Government expenditure (such as other payments made by my Department).

It is estimated that the gross cost to the State Pension (Contributory) of postponing the increase in State Pension Age would be approximately €430m per annum, but the net cost is closer to €217.5 million per annum, and is expected to increase. The estimates factor in secondary costs such as foregone PRSI receipts and additional Household Benefit payments.

Therefore the additional estimated net cost to the SIF of a decision to retain State Pension Age at 66 for the period 2021 - 2025 would be around €1.1 Billion.

We further estimate that an increase of €5 per week to recipients of the SPC and the SPNC would cost c. €160 million in 2021.

Given the long timeframe and prospective demographic changes it is very difficult to estimate the cumulative cost of further €5 annual increases over the period 2021 - 2025 for SPC and SPNC recipients but would certainly be in the order of €3 Billion.

I hope this clarifies the matter for the Deputy.