Regina Doherty (Meath East, Fine Gael) | Oireachtas source

I propose to take Questions Nos. 7, 14 and 18 together.

The current rate bands applying to the State pension (contributory) were introduced in 2012, replacing the previous rates introduced in 2000.

The rate bands prior to 2000 were less generous, and the improved rate bands introduced in 2000 were a feature of the economic and political environment at that time. The economic crash changed the focus and while other payments were reduced as a result, the core rates of the pension, on which many pensioners were solely dependent, were maintained. Instead, the rates for people who had additional means and lesser PRSI contribution records were reduced.

The 2012 rate bands more closely reflect the social insurance contributions history of a person than those in place between 2000 and 2012. The current rate bands still provide pensions to people which are not proportionate with their level of contribution. For example, a person with only 20 years of contributions over a 50-year working life will still get an 85% pension. It is estimated that, to revert to the previous bands from January 2018, would result in an annual cost of well over €70 million extra in 2018, and this annual cost would increase by an estimated €10 million to €12 million each year thereafter.

It should be noted that, even accounting for inflation, people affected by the 2012 rate-band changes receive a higher rate of payment now in real terms than they would have at the start of 2007.

The national pensions framework proposed that a total contribution approach should replace the yearly average approach to the calculation of the State pension (contributory) from 2020. I hope to start a consultation process regarding this reform shortly. Following the consultation period, a proposal to Government will be submitted seeking approval of the new approach.

This reform will make the rate of contributory pension more closely match contributions made by a person. It will also have significant homemaker's provisions that will assist those pensioners who spent significant periods caring for their children or adults with a caring need.

The main aim of Government policy on pensions is to ensure that pensions are affordable, sustainable and hold their value in the coming years. The planned reforms will result in a more inclusive and fairer pension system for all citizens.

My Department has examined in depth various options that may provide some relief to those who would have a higher contributory pension had the rate bands not been amended in 2012. My officials have done extensive work and I take this opportunity to thank them for that. We have completed a report on this matter, which I intend to bring to Cabinet sub-committee A on Thursday at 2.30 p.m. Following that meeting, and subject to any necessary amendments and further discussions, I will bring the proposal to Cabinet on Tuesday and I will publish the report thereafter.

I hope this clarifies the matter.

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