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

I propose to take Questions Nos. 2 and 3 together. The current rate bands applying to the State contributory pension were introduced from September 2012, replacing 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 environment, which we all acknowledge, at that time. Although the economic crash in 2008 led to a reduction in other welfare payments, the core rates of the pension, which many pensioners were solely dependent on, were maintained. In order to respond to the pressures on the State finances, however, it was necessary to achieve some savings in pension arena. In order to do this in a manner that both minimised the impact on the most vulnerable pensioners and was consistent with long-term pension policy it was decided to align pension payments for new pensioners after 2012 more closely with the number of social insurance contributions made by a person. This was achieved by introducing new rate bands for the purpose of calculating average contributions, which is the current system.

The rate bands introduced in 2012 more closely reflect the social insurance contributions history of a person than those in place between the years 2000 and 2012. Although for some people these bands have reduced their pension compared to what they would have received under the old rules, the pension that is paid is still disproportionate to the level of contributions that have been made. For example, a person with only 20 years of contributions over nearly 50 years of his or her working life still receives an 85% pension payment. Although the basis of averaging pensions is still relatively generous I recognise - I have said this before - that some people, mainly but not exclusively women, who have broken contribution histories are receiving a pension that is significantly lower than they would otherwise have received; a pension that is less, in some cases, than is paid to people with a similar level of contributions paid over an unbroken period. I therefore have committed to examine options that will address this issue.

It is estimated that to revert to the previous bands from January 2018 would result in a cost increase of well over €70 million in 2018, and this annual cost would increase by an estimated €10 million to €12 million each following year. Officials in my Department have completed a report on this matter, which I intend to bring to a Cabinet committee tomorrow.

See this speech in context