Martin Cullen (Waterford, Fianna Fail)

The second actuarial review of the Social Insurance Fund, which was required under section 10 of the Social Welfare (Consolidation) Act 2005, was published on 17 October 2007 in conjunction with the Green Paper on pensions. The focus of the review, which covers the period 2006-61, is the income of the Social Insurance Fund, including the accumulated surplus, the contributory pensions and benefits paid from the fund, including associated non-cash benefits, and other payments. The report examines matters from various aspects in the context of surpluses or deficits and projects the number of years for which the existing reserves can be used to keep contribution rates below break-even rates.

The findings of this review present a broadly similar picture to those of the previous review, published in 2002, and include that the fund will move from being in surplus to running a deficit in 2009; that on foot of the annual deficits from 2009, the accumulated surplus will be exhausted by 2016; and that the ratio of people of working age to people over pension age, or the pensioner support ratio is projected to fall from 5.6 to 1.81 over the period to 2061. In other words, today for every one person on a pension six people work but that ratio will fall to under 1:2 by 2061.

In the short term, the fund has sufficient resources to provide for the changes to the PRSI system and the increases in benefits committed to in the programme for Government. Decreasing contributions however, will both increase benefits and advance the time when Exchequer subvention will be required. Legislation provides that the Exchequer is the residual financier of the fund and Exchequer contributions to cover shortfalls in contributions were the norm for over 40 years. Any shortfall in the cost of benefits paid would, in the normal way, be addressed by Exchequer subvention. Other approaches to such an annual deficit would be a matter for the Government to consider in a future budgetary context. I am certain however, that whether in surplus or in deficit the Social Insurance Fund will continue to be the cornerstone of our social welfare system.

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