Dr. Orlaigh Quinn:

I thank the committee for the invitation to attend today’s meeting. With me is Ms Patricia Murphy, who works on the pensions policy side in the Department of Social Protection. Also here is Mr. Niall Egan. He works on the working age policy side.

First, I will give some background to the State pension age changes. My colleagues in the Department of Jobs, Enterprise and Innovation will provide further information on the employment aspects. The State pension is a key social welfare payment and accounts for some 30% of social welfare expenditure. It is the fundamental basis for the Irish pension system and it is a very valuable benefit. A number of changes have been introduced to the State pension over the last number of years, which include the changes to State pension age. From January 2014, State pension age has been standardised at 66, in 2021 it will increase to 67 years and in 2028 it will increase to 68 years of age. There is a strong underlying policy basis to these changes. They are underpinned by demographic changes and concerns regarding the sustainability of pensions. The need for State pension age increases has been set out in a number of policy documents including the Green Paper in 2007 and the national pensions framework in March 2010 and most recently the OECD Review in April 2013. The latter noted the significant challenge of funding additional pension spending as a result of population ageing. The demographic changes show very positive trends. More people are living to pension age and, when people reach pension age, they are living longer. However, that does create concerns for the future sustainability of the pension schemes. Specifically, the ratio of the working age population to pensioners will decrease from 5.3 at present to 2.3 by 2050. The number of older people will increase from 12% of the population in 2012 to an estimated 23% in 2050. In the mid-1990s, life expectancy for males was 73 and for females 78.5. Today, for those aged 65, life expectancy is approximately 82 years for men and 85 for women. That will rise to 84.1 and 87.4, respectively, in 2030. These demographics clearly show that in order for our pension system to be financially sustainable into the future, it is critical that people are able to provide for themselves in retirement.

I will focus on the change from 65 to 66 in January 2014. The State pension age was standardised at age 66 with the abolition of State pension transition. It is helpful to know the background to this scheme. The existence of the State pension transition is historical and relates to the qualifying age for the contributory State pension which, up until the early 1970s, was set at 70 years of age. The transition State pension which was then known as the retirement pension was introduced at that time to bridge the gap for employees who had to retire at 65. The qualifying age for the contributory State pension was subsequently reduced over time to 66 years, which left the transition State pension effective for just one year. The State pension transition scheme has been criticised over the years because in order to qualify for it an individual had to retire from the workplace. That acted as a barrier to people continuing in employment.

Also, in reality, the numbers availing of the transition State pension have been quite low. The Department has analysed its award figures for the transition State pension scheme in 2011 and 2012 in order to assess the impact of its abolition. The following is the position. In 2011, a total of 12,052 people were awarded the transition State pension. However, of the 12,052, only 12.3% came from employment, while 48.5% transferred from a different social welfare payment and the remainder were primarily a combination of people already retired, paying credits or were self-employed. In 2012, a total of 11,130 people were awarded the transition State pension and of these, 12.5% came from employment with 50.6% coming from another social welfare payment. Further checks were undertaken and similar trends were identified for 2006 and 2007.

That would indicate that a significant number of people have already left employment well in advance of pension age, many moving into other social welfare schemes. What is clear is that people make up their own minds depending on their individual circumstances. That is also evidenced by the fact that effective retirement age – the age at which people actually retire - in Ireland is 63.3 years. It also reflects the fact that there is no statutory retirement age in Ireland. Retirement age and pension age are two separate concepts. The age at which an individual retires is a matter for agreement within each contract of employment and the employer and employee relationship.

Having made the changes to the transition State pension I wish to focus on new arrangements for older jobseekers in terms of income supports and transitioning from work into retirement. All the Department's short-term schemes are payable to age 66. Individuals who exit the workforce prior to pension age may seek the support of either the jobseeker's benefit or the jobseeker's allowance schemes. In order to qualify for either of these payments an individual must be genuinely seeking and available for full-time employment. Both of those conditions will continue to apply to older jobseekers. In 2013 administrative changes were introduced for older workers aged 62 years to support and add to the transition measures already in place. Under existing legislation, where an individual has at least 156 paid social insurance contributions and is 65 years of age they will continue to receive jobseeker's benefit until their 66th birthday. The provision extends the duration of jobseeker's benefit for recipients who are 65 years of age.

Ordinarily, people in receipt of a jobseeker's payment must also engage with the Department's activation measures and can face sanctions if they fail to do so. On foot of the changes now introduced, the requirement to engage with the Department's activation process has been eased for jobseekers aged 62 and over. The individuals will no longer be required to engage with the Department's activation process and sanctions such as penalty rates will not be applied should they decide they do not wish to engage with the activation process. However, this group will still be able to avail voluntarily of an array of supports, which are available from the Department if they wish to return to work, training or education. In addition, special arrangements have been made so that the majority of older people in receipt of a jobseeker's payment will only have to sign on with their local office once a year and their payments will be paid directly into their bank accounts.

Changes were introduced to occupational pensions in the Social Welfare and Pensions (Miscellaneous Provisions) Act 2013 as a precaution to ensure that links between State pension and occupational pension schemes can be properly administered.

The legislation provides for a variety of situations to ensure pension scheme trustees can act appropriately in administering their scheme and will not be prevented by any conflict between the Pensions Act and scheme rules from making necessary arrangements to amend the scheme. The legislation facilitates the cessation of a bridging pension which, depending on the wording of individual pension scheme rules, could otherwise be paid indefinitely and it can also determine the correct rate of occupational pension payable in the case of an integrated pension. The legislation gives trustees discretionary amendment power to make whatever change is appropriate but ensures no scheme member will be worse off as a result of the change.

In the longer term the increases in State pension age which have also taken place in many other countries reflect the fact that the structures of our society are changing. The State must prepare to ensure it will be able to continue to sustain pension payments in the future. That means that people need to participate in the workforce for longer and contribute more towards their pension. The OECD, in its recent review of the Irish pension system, supports longer working and more flexible retirement arrangements. An interdepartmental group has been set up and is looking at the issue of working and retirement and a number of measures are under consideration. I am also aware that some employers are responding to the changes made by, in some instances, increasing the retirement age to 66 years and, in other instances, awarding one year fixed-term contracts.

I hope I have given members an overview of the pension age changes. I look forward to hearing their views and would welcome any question they may wish to ask.