Seanad debates

Thursday, 11 March 2010

2:00 pm

Photo of John CurranJohn Curran (Dublin Mid West, Fianna Fail)

I am taking this matter on behalf of the Minister for Social and Family Affairs.

The national pensions framework which was launched on 3 March sets out the Government's intention for a radical and wide-scale reform of the pensions system. The framework contains a new approach to pensions policy which will allow Ireland to meet the challenges of an ageing society and a reducing workforce. The framework is our plan for future pensions reform and encompasses all aspects of pensions from social welfare to private occupational pensions and public sector pensions reform.

In developing the framework we were informed by the range of views expressed during the comprehensive consultation process that followed publication of the Green Paper on pensions. The aim of the framework is to deliver security, equity, choice and clarity for the individual, the employer and the State. It also aims to increase pensions coverage, particularly among low to middle income groups and to ensure State support for pensions is equitable and sustainable. It is set in a context in which people are living longer and the cost of financing pensions is falling to a diminishing share of the population.

There are currently six workers for every pensioner and by 2050 this ratio is expected to have decreased dramatically to only 2:1. The task of financing increasing pension spending will therefore fall to a diminishing share of the population. If we want to be in a position to maintain the value of the State pension at 35% of average earnings, it is necessary to increase the State pension age.

At present the contributory State pension is paid at the age of 66. A minority of people qualify for a transition State pension at the age of 65. From 2014, age 66 will be the standard for everyone. The qualifying age for the State pension will also be increased to 67 years of age in 2021 and 68 years of age in 2028. The changes relating to State pension announced in the framework will also enable people to work longer and receive an actuarially increased benefit or lump sum or to make up any shortfalls in their contribution record, thereby allowing them to receive additional benefits at a later date. Even with the changes to the State pension, State expenditure on pensions is still expected to increase dramatically. These changes will just help to keep the increase at a manageable level.

Average life expectancy is set to rise even further in the future, up to 89 years for women and 83 years for men. People will still, therefore, be spending at least the same amount of time in retirement as they are today, even though with a later State pension age.

The majority of people covered by Irish defined benefit occupational pension schemes are members of schemes which integrate with the contributory State pension. An integrated scheme is one where the pension payable takes into account the contributory State pension and looks at the State pension as part of the pension package promised to employees on retirement. There is a linkage, therefore, between the date on which retirement benefits are paid from the scheme and the date on which the contributory State pension is payable.

Where an occupational pension scheme provides for retirement before the date on which the State pension is payable, the scheme may, in addition to the pension payment due from the scheme, pay a supplementary or bridging pension in respect of that part of the pension which would equate to the appropriate rate of contributory State pension payable up to the date specified in the scheme rules. It is acknowledged that the changes to the date for eligibility for a contributory State pension will have an impact on these schemes. A person can apply for another social welfare payment in any intervening period between the termination of the supplementary or bridging pension and the commencement of the contributory State pension. It is also important that a person who retires before the age on which the State pension is paid would continue to maintain his or her social insurance record either through employment, by making voluntary social insurance contributions or by securing credited contributions so that his or her State pension entitlement is optimised.

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