Dáil debates
Thursday, 7 December 2023
Ceisteanna Eile - Other Questions
Pension Provisions
11:20 am
Bernard Durkan (Kildare North, Fine Gael)
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97. To ask the Minister for Employment Affairs and Social Protection the extent to which she might consider a partial State pension commensurate with their contributions or with a slight enhancement to those who currently have contributions but not sufficient to warrant payment of pension and who may not qualify otherwise; and if she will make a statement on the matter. [54107/23]
Bernard Durkan (Kildare North, Fine Gael)
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I have raised this question previously. It relates to people with insufficient contributions to qualify for either self-employment based contributions or PRSI contributions in the normal way and who do not qualify for any pension. When I was in the Department once upon a time, I brought about some changes in this area, which made an improvement. Unfortunately, with the cutbacks during the financial crash, all of them have been eroded. This measure could be considered now. I spoke with the Minister about it before.
Joe O'Brien (Dublin Fingal, Green Party)
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Qualification for the contributory State pension is based on a number of criteria, including a minimum of 520 qualifying social insurance contributions having been paid. As the actuarial value of the State pension is currently estimated at approximately €380,000, it is reasonable to require people claiming a contributory pension to have made at least ten years of paid contributions over the term of their working life before qualifying for a payment. When a person reaches State pension age and does not satisfy the conditions to qualify for the contributory State pension or qualifies for less than the maximum rate, he or she may instead qualify for another payment from the Department such as the non-contributory State pension or an increase for a qualified adult if his or her spouse has a contributory pension. If the spouse or civil partner is deceased, a widow's, widower's or civil partner's contributory pension may be payable.
A key reform of the State pension system, which the Minister announced last September, is the introduction of a flexible pension system in Ireland. Under this new system, people can still retire at 66 and draw down their pensions in the same way as they can today. In addition, those reaching age 66 from January 2024 may choose to defer their pensions, work longer, build contributions and receive a higher pension payment if they wish. People will decide what best suits their needs and circumstances. For example, in the case of a person who reaches age 66 and has fewer than the 520 paid contributions required to qualify for the contributory State pension, he or she may opt to continue working and paying PRSI between the ages of 66 and 70 to build up contributions. I hope this clarifies the matter for the Deputy.
Bernard Durkan (Kildare North, Fine Gael)
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On self-employed contributions, if the payer of said contributions does not make a profit in whatever profession he or she is in for one or more years - which happened to many people, including some Members of this House - that could have a detrimental effect on his or her pension. Such contributors could buy out extra contributions to qualify until the financial crash, when emergency measures changed the position and made it virtually impossible to qualify. The period from 2035 onwards has been heralded as a time of great stretching of measures, given the population age imbalance. It is not as much as people say. A huge number of people are entering the contribution period now and they are all young.
Joe O'Brien (Dublin Fingal, Green Party)
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The Deputy is referring to the broader challenges of the ageing population in the years ahead. I may touch on that context in some of the proposals in the reform of the pension system. These include flexibility of the age of draw-down, which will be introduced from January. A person with less than 40 years of contributions may be able to use the period between the ages of 66 and 70 years to build up additional entitlements. The long-term sustainability of the State pension system is to be addressed through gradual incremental increases in social insurance rates, which has happened, the introduction of enhanced State pension provision for long-term carers of incapacitated dependants and a smoothed earnings method of calculating the benchmarking index rate of State pension payments, which is to be introduced as an input into the annual budget process and submitted to the Government in September each year. We have started that process. Those are some of the measures we are undertaking to ensure sustainability in the long term.
Bernard Durkan (Kildare North, Fine Gael)
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I welcome all of those measures. It is a tremendous budget for social welfare recipients and many others. All those improvements were admirable and necessary. However, there is a constitutional principle in this regard. People are paying into a system in anticipation of receiving a pension from it at a later stage but they do not qualify when the time comes. There is a constitutional commitment that does not arise as far as they are concerned. As the Minister of State said, it is usual that they would qualify for a non-contributory pension but there are many who do not. The few are the ones we should deal with now. It will not cost a lot. In any event, these people paid contributions but they were insufficient in number to qualify for the pension.
Éamon Ó Cuív (Galway West, Fianna Fail)
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I was reflecting on the Social Welfare (Miscellaneous Provisions) Bill 2023, which is going through the Seanad. As regards the extension of the age limit for making contributions beyond 66 years, the Bill states people cannot do so if they claim a contributory State pension. It is silent on the issue of a non-contributory pension. For someone who was short on contributions and subject to means testing, the best option would be to apply for the non-contributory pension, get a job at €39 a week, get the A stamp and claim the non-contributory pension because, on reaching the age of 70, that person will get the contributory pension as the extra contributions will be thrown in. That is an anomaly which was not foreseen by the Department. I do not expect the Minister of State to reply to my point because it is quite technical but perhaps he will convey my concerns to the Minister that the Department may be subject to a load of claims for non-contributory pensions that were foreseen. One could have an craiceann agus a luach.
Joe O'Brien (Dublin Fingal, Green Party)
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I will take Deputy Ó Cuív's query on board. I am not sure it is doable. From queries I have received, for some people aged 66 who are working and have got the contributory pension, it is a disincentive because they are paying more tax, whereas this measure will help them. It is not quite what the Deputy mentioned but it is related.
On Deputy Durkan's point, there will be a ten-year phase of full transition to the total contributions approach, together with a phased abolition of the yearly average approach. Workers have access to a social insurance contribution statement service each year to enable them to understand their entitlements based on these contributions. Officials in the Department will explore the design of a scheme that would modify the current benefit payment for 65-year-olds to provide a benefit payment for people with a long social insurance history.
The Department of enterprise will introduce measures that allow, but do not compel, an employee to stay in employment until the State pension age.