Alex White (Dublin South, Labour) | Oireachtas source

I thank the Deputy for raising this issue, which I am taking on behalf of the Minister for Social Protection. The sustainability of the pension system is a particular concern because of the demographic challenges Ireland faces, the associated increases in pension and other age-related costs and the deterioration in the public finances. The findings of the recently published actuarial review of the social insurance fund showed that the percentage of the population aged over 65 years is projected to increase from 11% of the total population in 2010 to 15% in 2020 and to 24% in 2060, that the pensioner support ratio is projected to decline from 5.3 workers for every individual over pension age in 2010 to 3.9 workers by 2020 and to 2.1 workers by 2060 and that in the medium to long term, pension-related expenditure will account for an increasing proportion of fund expenditure - rising from 57% in 2011 to 85% in 2066. This means that in the future, the task of financing increased pension spending will fall to a diminishing share of the population.

State pension transition is paid for a maximum of 12 months and is currently available to people who retire from work on reaching age 65, provided they satisfy the necessary PRSI contributions and are retired from insurable employment. This pension was introduced in 1970 when it was known as the retirement pension. It was designed to bridge the gap between the standard social welfare pension age, which at that time was 70 years of age, and retirement age. Over time, the age for State pension contributory pension was reduced to 66 years, with State pension transition being payable at age 65. This will now change in 2014 as provided for in the Social Welfare and Pensions Act 2011, to which the Deputy referred.

In 2014, State pension age will be standardised at age 66 and State pension transition will cease to be paid. In addition, the age at which State pension contributory will be payable will increase to 67 years from 2012 and to 68 years from 2028. This decision to increase State pension age was taken in the context of changing demographics and the fact that people are living longer and healthier lives and is one of a number of measures implemented to improve the sustainability of pensions for the future. The abolition of State pension transition removes the associated retirement condition which acts as an incentive to leave the workforce. This has been widely criticised as a barrier to older people remaining in employment. There is no such retirement condition attached to State pension contributory.

In terms of the overall numbers impacted from the abolition of State pension transition in 2014, an analysis of 2012 figures for State pension transition indicates that an average of just 13% of those awarded State pension transition came from employment in the period immediately prior to the receipt of this payment. A significant proportion - 51% - was already in receipt of a social welfare payment prior to claiming State pension transition. A similar result emerged from an analysis of 2011 State pension transition recipients. This would indicate that a significant number of people have already left employment well in advance of pension age. It also reflects the fact that there is no statutory retirement age in Ireland.

In terms of financial supports, social welfare benefits will continue to be available to the age of 66 for those who are contractually obliged to leave employment. Also, existing legislation provides that jobseekers whose benefit expires in their 65th year will continue to be paid benefit up until the age of 66. In order to improve pension sustainability and adequacy in the future, it is recognised that in line with increases in pension age, people should have the opportunity and be encouraged to work longer. In the employment relationship, responsibility for setting retirement age is a matter for the employer-employee relationship and the contract of employment. However, it is recognised that the range of policy areas which influence working and retirement decisions fall within the remit of a range of Departments and require a co-ordinated response if labour market participation rates and effective retirement ages of older workers are to improve.

In this regard, an interdepartmental working and retirement group chaired by the Department of Social Protection is currently considering cross-departmental policy issues that may support longer working and thereby improve the sustainability and adequacy of pensions systems. This group, which includes the Department of Jobs, Enterprise and Innovation and the Department of Justice, Equality and Defence, is considering the broad range of issues impacting on the labour market participation of older workers and will prepare preliminary proposals detailing measures which may encourage participation and retention in the labour market of older workers. As social structures in Ireland are changing rapidly, the structures of our social support need to change to accommodate this. The standardisation of State pension age at age 66 in 2014 is one of the measures planned which aims to improve the sustainability of the Irish pension system.

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