Dáil debates

Wednesday, 13 February 2008

Priority Questions

Pension Provisions.

1:00 pm

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Labour)
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Question 102: To ask the Minister for Social and Family Affairs the action his Department is taking to inform and assist the high number of people in their late 50s and early 60s who may find themselves disqualified from a State pension from 2012 on the basis of the new contribution qualifying thresholds that will apply from that time; his Department's estimate of the number aged over 50 years currently on its records who would not qualify if they failed to make a further contribution or they made yearly contributions at their current average rate; and if he will make a statement on the matter. [5440/08]

Photo of Martin CullenMartin Cullen (Waterford, Fianna Fail)
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The final report of the National Pensions Board, published in 1993, recommended that the number of paid contributions required to qualify for a contributory pension should be increased to 520 contributions. At the time, the paid requirement was as low as 156 contributions. The new requirement represents 20% of the potential maximum number of contributions that a person can register over his or her working life.

The necessary legislation to effect the recommendations of the National Pensions Board was contained in section 12 of the Social Welfare Act 1997, which from that date to 2012 allowed 15 years for people to get the required number. This would have required them to have approximately five years within that 15 years which was reasonably generous. That section is now incorporated in the Social Welfare Consolidation Act 2005, which provided for the implementation of the change in two stages, with the paid contribution requirement being standardised at 260 from 2002, rising to 520 from 2012. Details of the proposed increase in the paid contributions required have been included in the Department's standard information material on pensions for some years.

In assessing the contribution records of those claiming pension for the first time in the context of work on the pensions Green Paper, the Department found that currently about 13% would fail the new conditions if they were applied at the moment. However, with improved social insurance coverage introduced in the 1980s and 1990s, and increased workforce participation across all sectors of society, this position can be expected to improve substantially in the years running up to 2012.

It is estimated that there are about 40,000 people with active social insurance records who will reach 66 in 2012. The Department is working to establish the impact of the planned change on these people. However, there are difficulties in establishing the contribution histories of those involved because of the many and varied ways in which records are held. The extent to which the increased contribution requirement should be promoted will be reviewed when the situation is clearer. Decisions will also be taken at that time on how and when individuals should be notified of their position.

The contributory pension is a very valuable benefit and I consider that it is reasonable to expect that people should contribute towards it to the fullest extent possible. Increasing contribution requirements is also consistent with trends across the EU as countries reform pensions systems to make them more sustainable in the future and to discourage early retirement among older workers.

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Labour)
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It seems that little or no work has been done on this in recent months. I would have thought that at this stage the Minister would be in a position to tell us exactly how many people are likely to be affected by these changes and that he would have worked out a strategy to notify those people of how they are likely to be affected. We all are guilty of not making adequate preparation for the future and often when it comes to pensions people really only take an interest when they approach retirement age.

In respect of the State pension, in particular, there are many who assume because of their work record that they will have an entitlement to a full pension but the changes that have been made in recent years clearly will result in a significant number of people discovering, in many cases perhaps on retirement, that they do not have such an entitlement. There is a requirement on the Minister and his Department to notify people of the likelihood of that happening to them and to set out clearly what they can do to supplement their pensions between now and retirement age.

Photo of Martin CullenMartin Cullen (Waterford, Fianna Fail)
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As I have stated to Deputy Shortall, since these changes were brought about there has been active involvement with all pensioners and those approaching pension age in ensuring that they are aware of the changes. I have asked that the position be clarified as soon as possible. We are four years from when the change will take place. There are, according to the estimates, approximately 40,000 people who will be affected in the system as we come towards 2012, and I have given Deputy Shortall that figure. Over the next two years or so we will see exactly what the position will be.

The Department is providing a quality service to all of its customers and this includes ensuring that applications are processed and that decisions on entitlement are issued as expeditiously as possible having regard to the eligibility conditions which apply. The first phase of this new initiative which is claim initiation, whereby my Department will be able to offer its customers an enhanced service by inviting them to claim pensions in advance of reaching pension age, commenced in January last. That will begin to assist us in getting all of the facts and assisting those customers.

Certain customers who have an entitlement to State contributory pension and have had recent interaction with the Department are being invited to apply for a pension in advance of pension age and the Department recognises the merits of proactively initiating pension claims. However, it will take some time before all customers can be addressed in this way.

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Labour)
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There is not much point in waiting until 2010 to notify people. It is at this point that the people who are likely to be affected by this — as the Minister stated, up to 40,000 who are likely to discover on retirement that they are not entitled to the full State pension — need to be notified so that they can take action.

What advice is the Department providing to those people? Many will be current welfare recipients who are in their late 50s or 60s. They are not necessarily in any position to do anything about their insurance record. What exactly is the Minister suggesting those people do? Can he provide any clear advice and support to them, or is it a case that he will merely wait and let them discover in their own time that they do not have an entitlement which they thought they would have? The Minister needs to take action now. He needs to notify current welfare recipients in particular and provide clear advice to them on what action they can take. Failing that, he should look at some kind of tapering system.

Photo of Martin CullenMartin Cullen (Waterford, Fianna Fail)
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I do not have any evidence from the Deputy that all of these people are not aware of the situation. My view is that most, if not all, of them are aware of what is happening.

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Labour)
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What is the advice to them?

Photo of Martin CullenMartin Cullen (Waterford, Fianna Fail)
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The advice given was from 1997, which gave a 15-year window. These people know that five years of contributions within the 15 year timespan, which is a fairly reasonable approach, is all that they must make up and most of them are doing so.

A person reaching age 66 on or after 6 April 2012 must have paid 520 full-rate employment contributions or if at least 260 full-rate employment contributions are paid, the balance of the 520 can be made up with high-rate voluntary contributions as well. There are a number of options and all people have been notified.

I will look at it again to see if there are within the system many people who are unaware and if so, I intend to do something about it. My understanding is that all of these people know the position.