Oireachtas Joint and Select Committees

Wednesday, 2 October 2013

Joint Oireachtas Committee on Public Service Oversight and Petitions

Revised Eligibility Criteria for State Pension (Contributory): Discussion with Minister for Social Protection

4:15 pm

Photo of Joan BurtonJoan Burton (Dublin West, Labour) | Oireachtas source

From September 2012, new rate bands for State pension were introduced. These additional payment rate bands more accurately reflect the social insurance history of a person and ensure that those who contribute more during a working life, all other things being equal, benefit more in retirement than those with fewer contributions. That is the reason my comment on the non-contributory pension is important. Sometimes people might not have the contributory contributions but the Department by and large, as members know, always allows people the most favourable option, whether they are dependants or the principal retirement payment holder. Those with expectations affected by the changes in the rate bands are as follows; those with an average of 30 to 38 contributions, the difference in the rate is €18. For those with average contributions of between 20 to 29, the difference is €28.80 per week. For those with average contributions of 15 to 19, the difference is €22.70 per week. For those with average contributions of ten to 14, the difference is €23 per week. The principle is that the level of pension should reflect the PRSI contributions paid over a working life. It has to be adhered to if we are to be able to fund pensions into the future and take account of the large extra number of pensioners who are also living longer.

Long-term pension policy - this was indicated in the earlier pensions framework in 2010 and the Green Paper of 2007 - is moving towards a total contributions approach to pension, that pensions paid will be linked directly to contributions paid over a working life. It will remove the current system, which is based on the average number of contributions made. That also had severe disadvantages for certain categories of people, particularly if they started working very young, had an interrupted history and did not have credits. There is an element that some people may benefit and others may be on the losing side but overall it is probably a better system.

It was suggested the change in rate bands is targeted at those on lower incomes as they may have incomplete records. That is not quite true. It is not clear why contribution records are incomplete. If we knew the answer to this we would know a lot. We can guess. One is talking about a long period. It is the Department's policy to follow up on periods of unpaid contributions.

People raised the issue of insufficient lead in time and their expectations of the rate of pension they would receive in the future not being met. While expectations may have to be adjusted to the change, a rate of pension will still be payable. The critical factor is the need to be able to fund the totality of pensions, given the extra €190 million a year that we must pay.

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