Éamon Ó Cuív (Galway West, Fianna Fail)
Link to this: Individually | In context

Question 145: To ask the Minister for Social Protection her plans to expedite the introduction of the total contribution/credit system for the assessment of applications for State pension from 2020 to September 2012, in view of the proposed changes she announced as part of budget 2012 in regard to rates of payment of State pensions for those who become entitled to a pension after September 2012, particularly for those who have a contribution record of over 30 years payment/credits and who will lose out under the averaging rule because of the changes introduced by her; and if she will make a statement on the matter. [1673/12]

Joan Burton (Dublin West, Labour)
Link to this: Individually | In context

Recognising that the State pension (contributory) is a very valuable benefit, it is important to ensure that those qualifying have made a sustained contribution to the Social Insurance Fund (SIF) over their working lives. Aligning the rate of pension with the contributions made ensures that those who contribute more during a working life benefit more in retirement than those with lesser contributions thereby ensuring equity in the social welfare system.

The changes to rate bands, to be introduced for new customers in September 2012, supports the total contributions approach whereby payment made will be linked to contributions paid over a working life. When the total contributions approach is implemented in full, it will replace the current averaging system and remove the associated anomalies whereby those who pay less could in fact receive a higher payment under the current arrangement. It had been expected that the total contributions approach would be introduced in 2020. However, in light of economic circumstances, this date is being reviewed.

The Social Insurance Fund is expected to have a deficit of €1.9 billion this year. One of my key priorities has been to balance the books, in particular by starting to put the Social Insurance Fund on a sustainable footing. It is a reality that people need to contribute and work for longer if they are to achieve the sort of financial support they expect to receive in retirement. A core principle of sustainable social protection systems in advanced economies is that citizens receive benefits in proportion to their contributions. The changes to rate bands will move significantly towards that aim and supports the social contract between the State and the individual.