Seanad debates
Wednesday, 11 July 2018
Commencement Matters
State Pensions Reform
10:30 am
Martin Conway (Fine Gael)
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I apologise for being slightly late. I have come directly from a meeting of the Joint Oireachtas Committee on Justice and Equality. I welcome the Minister of State, Deputy Jim Daly, to the House.
I raise this Commencement matter because there is an inequity in the system. Pay restoration is a fundamental principle across society, whether in the private or public sector. Many members of the public took a hit from 2008 or 2009 until 2014 or 2015 and their pay is now gradually being restored. There have been numerous examples of pay restoration, in particular across the public sector. It is likely that full pay restoration will be achieved in the next budget or the one thereafter.
However, in budget 2012 the pension guidelines, entitlements, structures and so on were changed for a group of pensioners who, prior to 2012, had a legitimate expectation to a specific level of pension entitlement when they retired. Under the new guidelines, many of those born in 1948 lost benefits to which they would have been entitled had they been born a couple of years later. A specific number of people have been affected by the changes.
The entire cost of reverting to the pre-budget 2012 guidelines would be approximately €270 million. An inequity has been created by the changes. The Minister for Employment Affairs and Social Protection, Deputy Regina Doherty, should consider reverting to the pre-budget 2012 guidelines. Doing so would not open a floodgate but, rather, help a specific number of people at a cost of €270 million. I do not ask for the entitlements to be backdated but, rather, that the former level of benefit now be restored. If that cannot be done immediately, I ask that a timeline for such be put in place.
The Department is fully aware of the circumstances of the issue because a constituent of mine has gone to the trouble of researching the matter, putting the figures together and making a case to the Department. Parliamentary questions on the matter have been tabled by Deputies. The case put forward by my constituent is fair and well articulated. This is a question of equity and fairness. I sincerely hope the Minister, Deputy Regina Doherty, will right the wrong done to these people, who have paid their taxes, served their country well and done their duty, or at least give a timeframe for that to be done.
Jim Daly (Cork South West, Fine Gael)
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I thank Senator Conway for giving me the opportunity to address this issue on behalf of the Minister, Deputy Regina Doherty. The current rate bands applying to the State pension were introduced from September 2012, replacing previous rates introduced in 2000, and more accurately reflect the social insurance contribution history of a person. A reversal of the rate bands for post-2012 pensioners to the 2000-2012 rate band percentages would carry an estimated cost of €73 million in 2018, including inflows from other payments such as the non-contributory State pension and increases for qualified adults, and rise at a rate of €10 million to €12 million per annum. That would mean an extra cost of approximately €85 million in 2019 and €97 million in 2020.
Better-off pensioners who do not qualify for means-tested pension payments and did not make sufficient contributions to the Social Insurance Fund to qualify for a full-rate contributory pension would be the main beneficiaries of a reversal of the changes. Prior to the introduction of the current rate bands, a person with an average of 20 pay-related social insurance, PRSI, contributions per year over his or her working life received a weekly State pension of only €4.50 less than a person with a yearly average of 48 to 52 contributions.
The Government does not propose the reversal of the rate band changes. Rather, it intends to introduce a total contributions approach to establish the level of entitlement for all new contributory State pension claims form 2020 onwards.This is currently the subject of a public consultation which stays open until 3 September and is available on the Department's website. The total contribution approach, TCA, will ensure that the totality of a person's social insurance contributions, as opposed to the timing of them, will determine their final pension outcome. In particular, it will benefit people whose work history includes an extended period of time outside the paid workplace while raising families or in a full-time caring role.
The roadmap for pensions reform 2018-2023 sets out how it is intended to implement the TCA to calculating entitlement to the contributory State pension. In the interim, on 23 January, the Minister for Employment Affairs and Social Protection announced the agreement of the Government to a proposal that will allow pensioners affected by the 2012 changes in rate bands to have their pension entitlement calculated under a total contributions approach which will include up to 20 years of a new home caring credit. This approach will make it easier for many post-2012 pensioners affected by the 2012 rate band changes, who are currently assessed under the yearly average model, to qualify for a higher rate of the contributory State pension. A person who reached pension age after 1 September 2012 and has a 40 year record of paid and credited social insurance contributions, subject to a maximum of 20 years of the new home caring credits, will qualify for a maximum contributory pension where he or she satisfies the other qualifying conditions for the scheme. Up to ten years of other credits, for example, awarded when on jobseeker's or illness benefit, may also be used, subject to the total credits not exceeding 20 years. People whose entitlements were assessed after the September 2012 rate changes will have the option to be reassessed under a TCA option and be paid whichever is the more beneficial amount.
Work is under way to draft legislation to enable implementation of these arrangements. In parallel with bringing in the legislative changes, information technology, IT, system solutions are being developed to implement the changes. In the final quarter of this year, the Department of Employment Affairs and Social Protection will begin inviting relevant recipients of the contributory State pension to seek a review of their pension calculations with the first payments being made in the first quarter of 2019, backdated to 30 March 2018.
Martin Conway (Fine Gael)
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I suspected that this probably would be the answer. I will advise my client to feed into the review. It is an issue the House will address again in September because there is an inequity in this area. Perhaps we will need to do more research to be able to articulate the inequity a little more. I encourage everybody following proceedings who has an interest in this issue to feed into the review because it is important. The more people participate in the review and engage with the process, the better and more reflective of society the outcomes will be. I encourage people to participate. I thank the Minister of State for coming to the House to address this issue.