Dáil Éireann Debate, Wednesday - 23 September 2020
137. Deputy Richard Boyd Barrett asked the Minister for Social Protection the estimated cost to introduce a universal State pension of €250 weekly and reduce the pension age to 65 years of age. [25691/20]
Amharc ar fhreagraAt present, the State pension system comprises two basic components. Firstly, the State Pension (Non-Contributory) is a means-tested pension funded from taxation. Secondly, the State Pension (Contributory) is not means-tested but is based on social insurance (PRSI) contributions and paid from the Social Insurance Fund, and as such it is important to ensure that those qualifying for the State Pension (Contributory) have made a sustained contribution to the Social Insurance Fund over their working lives.
The introduction of a universal State pension paid at full rate to everyone of 65 years of age and over, regardless of their PRSI contributions or their means, would require fundamental reform of the State pension system, and perhaps to the entire model of social insurance. It would give rise to a range of considerable policy and operational issues. Examples include -
- the impact on customer behaviour with respect to work, work patterns, employment status, personal savings, contributions into the system in tax/PRSI, etc.;
- the interplay between the State pension system and occupational and private pensions and the scope of the State to support such arrangements;
- the applicability of such a pension to those in public service employments;
- the potential legal issues involved in different treatments of those with occupational pensions in the private and public sector and those with a mix;
- how such a system would work with existing EU pension and social security law and with international bilateral arrangements; and
- the treatment of retirees who are not resident in the State, but who have built up a contributory pension entitlement over the years that they worked here and paid PRSI.
Given the various potential factors involved, estimating the costing of a universal State pension is challenging and would vary significantly depending on the specific design components. However, it is clear that the cost would be very substantial. Based on preliminary assessments, officials in my Department expect that the additional cost over the cost of the existing State pension system could be over €3 billion per annum and potentially substantially more depending on decisions with respect to some of the factors mentioned above.
Clearly, this would be very expensive and would require either considerable additional revenues, or, if introduced on a cost-neutral basis, very significant diversion of funds from elsewhere.
The Deputy is aware that the public policy and social issues in relation to funding a sustainable and adequate State pension system are complex. That is why the Programme for Government commits to the establishment of a Commission on Pensions to examine a range of issues including contributions, calculation methods, sustainability, eligibility and intergenerational fairness. The Terms of Reference for the Commission on Pensions are currently being developed and options for its membership are being considered. I will bring proposals in that regard to Government as soon as possible. Once it has concluded its deliberations, the Commission will report to Government by June of next year.
I hope this clarifies the matter for the Deputy.
