Heather Humphreys (Cavan-Monaghan, Fine Gael) | Oireachtas source

I thank the Senators for their comments. I do not propose to accept the amendment. As I said in respect of similar amendments requesting reports, legislation is not the appropriate vehicle for seeking reports. I understand why the Senator tabled the amendments, however.

As they will be aware, pension deferral will only be introduced for those who reach age 66 on or after 1 January 2024 and it is entirely voluntary. We are giving greater flexibility in order that people have more choice. They know best what suits them. This is completely voluntary. People reaching the age of 67 will not receive a deferred pension rate until 1 January 2025. A table is provided that shows how much extra a person who is 66 in January and works an extra year will get. The baseline is the State pension, which is paid at age 66. For every year longer a person works, there is an actuarial review done. The base rate for those aged 66 will go up again in January, by €12, and there is an increase for each year a person works longer. The longer you work, the more you get. Some people might want the higher pension, but many other people want to make up their contributions in order that they can get a full pension when they retire. As we know, many people might be four years short of the full State pension. If people are a year or two short, they can work those extra years to make sure they get a full pension. It is completely voluntary.

In considering the gender and equality impacts of the introduction of flexible access to the State pension system, the Pensions Commission noted that international experience was that the take-up of deferral in OECD countries tended to be very low. Potential impacts may be on the pooling of finances in households where the primary claimant defers. However, the commission noted the impacts were likely to be minimal.

In light of the fact that deferral only begins from January 2024 and it is an entirely voluntary system, any consideration of the distributional and equality impacts of the deferred pensionable age would be premature. Such analysis will be better informed following a period of at least ten years to consider how deferral operates in practice.

As regards subsection (2) of the proposed amendment, the Pensions Commission concluded its detailed analysis of the State pension system in late 2020. This included consideration of a wide range of reforms of the State pension system, including workers in hazardous or arduous occupations and those with long records, and options for a universal pension. In this regard, I do not accept that a further report on State pension reform is warranted at this time. The commission examined submissions that suggested establishing a universal State pension system. It noted that:

introducing a universal pension system (either immediately or with a transition period) would require either considerable additional revenues, or, if introduced on a cost-neutral basis, very significant diversion of funds from elsewhere. Potential consequences of introduction of such a pension include a large reduction in the current payment rate of the State Pension, substantial increases in the rate of tax deductions (on the basis that PRSI contributions would cease for State Pension benefits), or measures such as reducing tax relief on occupational and private pensions, which would impact on the take-home pay of the workers affected.

That is the view of the Pensions Commission. When announcing the Government’s response to the commission, I secured Government approval to examine a scheme to modify the current benefit payment for 65-year-olds to provide a benefit payment for people who, following a long working life of 40 years or more, are not able to remain working in their early 60s. In the meantime, people under the age of 66 who cannot work for health reasons can apply to avail of the invalidity pension and disability allowance schemes or the benefit payment for 65-year-olds.

On the issue raised by Senator Burke, those who draw down a State pension and continue to work will not have to pay PRSI. He asked about the different rates for each year. I have published them. They will be reviewed every five years in line with an actuarial review.