Áine Brady (Kildare North, Fianna Fail)

I am taking this debate on behalf of my colleague, the Minister for Social Protection, Deputy Éamon Ó Cuív.

The Irish system of social protection is often described as a "mixed" system. It combines a social insurance system whereby entitlement to contingency based benefits is secured largely on the basis of paid contributions linked with earnings income, with a system of social assistance whereby entitlement for similar contingency based payments is made on the basis of an assessment of the person's means.

The social insurance system is based on two fundamental principles, namely, the contributory principle whereby there is a direct link between contributions paid and entitlement to a varying range of benefits and pensions that are payable as a right if and when particular contingencies arise, and the solidarity principle whereby contributions paid by insured persons are not actuarially linked to benefits but are instead redistributed to support contributors who are more vulnerable. It is an expression of solidarity between both earning groups and generations.

The system maintains a relationship between labour force status, earnings from work, contributions made and entitlement to benefits in the event of certain specified contingencies such as illness, unemployment or old age. As with many social insurance systems throughout the world, the Irish social insurance system is based on the pay as one goes principle, whereby current contributors fund the pensions and benefits of present recipients, namely, previous contributors, while building up entitlement to their own future benefits, in turn paid for by future contributors.

The current qualifying conditions for contributory State pension require a person to have entered into insurable employment before age 56, have at least 260 weeks full-rate contributions paid, that is, a minimum of five years minimum and a yearly average of at least ten contributions recorded, taking paid and credited PRSI contributions into account, from 1953 or from the date of entry into insurance, whichever is the later, to the end of the last complete contribution year before reaching pension age.

To qualify for the maximum rate a yearly average of 48 contributions is required. From 6 April 2012, and as provided for in legislation since 1997, the minimum number of paid contributions required for contributory State pension will increase from 260 to 520, that is, ten years. As the Senator will note, there is no requirement to have 40 years contributions to receive a full rate pension and many pensioners had considerably less than that.

The Government has committed to endeavouring to maintain the value of the State pension at 35% of average earnings. The national pensions framework, launched in March of this year, outlines Government policy on future pension provision. The Framework includes a number of changes to the State pension to make it more transparent, simple and equitable for those who reach pension age.

Recognising that people are living longer and healthier lives, the Government has decided to amend State pension age in three separate stages. In 2014, the State pension (transition) will be abolished. The effect of this will be to standardise State pension age at 66 years. In 2021, the State pension age will be set at 67 years. In 2028, State pension age will be set at 68 years.

For those who wish to postpone drawing down their State pension, arrangements will be put in place to enable them to receive an actuarially increased benefit when they decide to retire. In addition, for those with contribution shortfalls at pension age, arrangements will be put in place to allow them to receive additional benefit at a later date if they continue to make paid contributions for pension purposes while remaining in work or self-employment.

From 2012 onwards, social insurance credits will be introduced for people who take time out of the workforce for caring duties. This will replace the current homemaker's disregard and will assist people, particularly women, to qualify for a contributory pension or higher level of payment.

From 2020, the way in which eligibility for State pension is calculated will be simplified. Specifically, there will be a switch from the way in which pensions are currently calculated over the average working life. Under the new system, the level of pension paid will be based on the total number of social insurance contributions made by a person over his or her working life. A person will need to make contributions for 30 years to qualify for a maximum pension. Once a person has the minimum number of paid contributions required, he or she will accumulate one thirtieth of a pension for each year of contributions up to a maximum 30 years. Upon introduction of the total contributions approach, the maximum number of credits that can be used for pension purposes will be set at 520.

An implementation group for the national pensions framework has been established by the Department of Social Protection and is working through the relevant issues in implementing the measures contained in the framework.

It is important to stress that there is no proposal to means test pensions. On the budget, the Minister is engaged in an intensive round of consultations with a wide range of welfare representative organisations and is listening carefully to their views. In an uncertain international environment, the priority will be to ensure the overall Government strategy is advanced to protect those most in need in a manner which is sustainable in the years ahead.