Ms Corona Joyce:

On behalf of Age Action, I thank the committee for the invitation to speak with it today. I will focus my remarks this morning on the issue of the State pension and specifically changes that occurred and which have been proposed since the publication of the committee’s report in July 2017. An increasing number of older people are experiencing fear about retirement due to worries about income adequacy. Less than half of those aged between 20 and 65 have a private pension. Three out of four private sector workers have no pension apart from the contributory State pension. A fair State pension enables older people to age with dignity and independence, keeping them out of poverty.

A substantial percentage of older people are reliant on the State pension for the majority of their income. For those over 65, more than three-quarters of their income is made up of public transfers. Latest CSO SILC figures show a largely unchanged at risk of poverty and consistent poverty rates for the over-65s and that one in five people aged over 65 who lives alone experience deprivation. The at risk of poverty rate stands at €12,358. A full State pension is slightly above this figure and stands at €12,651. A State pension for those with an average of 39 or fewer contributions is below the at risk of poverty rate.

While the State pension remained largely unchanged in times of austerity during the recession, vital secondary income supports for older people were devastated. Between 2009 and 2015 an older person on the State pension and household benefits package lost over €13 each week. Some of the cuts to secondary income supports have been partially restored and we are very grateful for that but a lot more progress is needed, particularly for those in receipt of the fuel allowance. There has been a 200% to 300% increase in prescription charges. There have been new taxes on water and property and rising energy and medicine costs. These new taxes, charges and rising prices in recent years can have a greater impact on older people who are living on a fixed income.

A key issue we are seeking to have addressed this year is the change introduced in September 2012 to the eligibility criteria for the contributory State pension. An extension of band rates and minimum qualifying contributions saw the top rate for the contributory State pension left alone but it became harder to qualify for it and easier to qualify for the lower payment rates. While those with a full PRSI contribution record and entitled to a full pension were unaffected, many of those with a reduced record lost out. Research commissioned by Age Action on this issue and discussed here previously shows that this change, combined with the averaging rule used to calculate contributions, is punishing women who took time out to care for their children or for other reasons.

Of the 36,000 - now estimated to be more than 50,000 - initially affected by these changes between September 2012 and June 2016, more than 62% were women. They will continue to be affected in the years to come, receiving smaller pro rataincreases in the pension. In the October budget, Age Action is asking the committee to support two specific proposals. First is an increase in the top rate of the State contributory pension of €5 per week and, second, to reverse the 2012 cut to the State pension.

We welcomed the announcement in January 2018 by the Department that those affected by the 2012 changes would be offered the option of reassessment under the total contributions approach, TCA, including a home-caring credit of up to 20 years. At the time of announcement, it was noted that the TCA 2012 system will address anomalies from the yearly averaging scheme. Age Action welcomes the genuine efforts made by the Minister and the Department to resolve the pension cuts imposed by the 2012 changes and the averaging system. In particular, the new home-caring credit will have a real impact on people’s lives and enable many more people to avail of a contributory State pension while also recognising the valuable contribution they have made to Irish society.

The announcement of the TCA 2012 scheme saw a commitment to target the benefit at those who had periods caring without undermining the contributory nature of the pension scheme. However, thousands of people, both men and women, lost out because of the 2012 changes and will not benefit from the announced initiatives.

Among this group are people who worked in countries without bilateral agreements and the self-employed, who were not required to pay PRSI contributions before 1998. Changes in 2012 saw an increase in the minimum level of contributions required for a State pension from 260 to 520. This change meant that many people are now excluded from the contributory pension and in some cases this happened overnight. We continue to be contacted by those affected by the 2012 changes who are angry there is no backdating of lost pensions to 2012.

Much uncertainty exists regarding implementation of the total contributions approach. Callers to our information line frequently express confusion as to how the new system will operate and whether there is an onus on them to contact the Department. We understand that the drafting of legislation is under way, with letters to those affected expected in the autumn and payments expected to begin early in the first quarter of 2019, to be backdated to March 2018.

We urge that the burden of proof for those applying for home caring credit is light, recognising that it may be difficult for people to obtain documentary proof going back over 30 years. We welcome the commitment we recently received from the Minister, Deputy Regina Doherty, that this will be the case.

Promotion of the scheme in clear and accessible language should be a priority to alert those affected and offer a degree of security and certainty to those awaiting correspondence. The wider implications of the total contributions approach and, in particular, back payment from March 2018 remain unclear, specifically the ramifications under the fair deal scheme. Clarity is also needed on the reassessment inclusion of those not having the minimum 520 contributions.

Age Action believes reversal of the 2012 changes is the simplest and most straightforward way to deal with the loss of income inflicted on tens of thousands of pensioners. However, we recognise a simple reversal of these changes would not benefit people who took time out from work to provide care at home or those affected by the remaining anomalies mentioned earlier. Therefore, we are calling for a reversal of the 2012 changes that also includes concession of the extra 20 years of homemaker and carer contributions, along with a ten-year contribution for reasons other than these. A reversal of the 2012 changes would also do away with the requirement to put in place a new system to assess people throughout the State at the stated 40 years of the total contributions approach. Reversal to a pre-2012 pension calculation would negate the necessity to write to the estimated 50,000 people, await their response and process applications.

Consultation is under way on the overall total contributions approach due to be implemented in 2020. The final look and implementation of the total contributions approach remains undecided. There is no guarantee the final total contributions approach will be as proposed, or even introduced at all but this is how the cohort of the people in question will be treated. Instead of assessing them using a new system that may or may not be implemented in its current proposed form, Age Action suggests it is more sensible to reverse the 2012 changes, as the Dáil voted for last year, and simply restore the income of those who have lost out.

We would not like to see a new set of anomalies created under the total contributions approach. A requirement for 40 years of contributions to get a full State pension would mean people with fewer contributions could be worse off than they are today. For example, today somebody with 50% of the required number of average contributions gets 85% of the State pension. Under the new system this will fall to 50% of the State pension rate. We urge particular consideration of the situation of those due to retire in the coming years who entered the system under one set of rules and may be disproportionately disadvantaged by changes introduced just before they retire. How the self-employed will be dealt with under the system remains unclear, as does any possibility of purchasing additional credits.

To date, Ireland has been unusual in setting the pension rate in the budget every year without using any particular formula. We welcome the commitment in the roadmap for pension reform to benchmark the State pension to 34% of average earnings, with future increases to depend on the consumer price index or average wages. To ensure those reliant on the State pension would not fall into poverty, the national pensions framework committed to sustaining the value of the State pension at 35% of average weekly earnings. We recommend a roadmap to get to 35% to reach this commitment. CSO figures for the first quarter of 2018 indicate that average weekly earnings are €742.19. This would indicate a State pension of €259.77, which is substantially higher than the current rate. Taking current figures, this would provide older people with an additional €846 per year.

Indexing of current and future pension rates will facilitate proper planning. It will provide peace of mind for older workers and, crucially, it will depoliticise the budget process. Clarity is also needed on any implication for the non-contributory State pension arising from indexing the contributory State pension and whether any protection for the non-contributory State pension will be applied.

Departmental figures show the State pension system cost approximately €7.3 billion in 2017 and payments to more than 600,000 people over the age of 66 were made every week. Demographic changes alone will lead to an increase of approximately €200 million per year in the State pension. Even with the retirement age due to rise to 68 by 2028, there is a legitimate question on the sustainability of the State pension system. People are living longer, healthier and more active lives. We need to develop solutions to fund the State pension that enable people to age in dignity and to support older people who wish to continue working but who fall victim to ageism and discriminatory mandatory retirement clauses.

We welcome recent guidance on longer working lives from the WRC and the Irish Human Rights and Equality Commission. A more flexible approach to retirement age is needed in the context of living longer and increasing pension ages. If they could, many older workers would choose to continue to work. As we highlighted to the committee last July, this desire and ability to continue to work for longer varies according to sector and an individual's circumstance. We hope to see movement through the Oireachtas of both Bills on mandatory retirement. We would like to see progress on the 2017 Bill to abolish mandatory retirement clauses and for it to move to Committee Stage. Age Action's information line frequently receives calls from public sector workers who are due to retire but who wish to continue to work. The delay in the progress of the Bill is leaving people in limbo and, in some cases, is forcing them to retire against their will. A fair State pension would enable older people to age with dignity and independence, keeping them out of poverty. We look forward to working with the committee to make this a reality.