Michael McGrath (Cork South Central, Fianna Fail)
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Question 292: To ask the Minister for Social Protection if the new schedule of payment rates for the State contributory pension have been set for persons who have average PRSI contributions of less than 48 weeks; and if she will provide the relevant details. [2445/12]

Joan Burton (Dublin West, Labour)
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1The information in this reply was included in the reply to Question No. 363 to Deputy Robert Troy on 11 January 2012.

The recently announced changes to the rates of payment for State pension are necessary if we are to ensure the sustainability of pension provision into the future. People are living longer and healthier lives and growing numbers of people want to work, or may need to work beyond State pension age. The challenges facing the Irish pension system are significant. There are currently six people of working age for every pensioner and this ratio is expected to decrease to approximately two to one by 2050. The period for which an average pension will be paid will be greater than the period for which a pension is paid at present. In addition, those aged over 65 will account for a greater proportion of the population while the proportion who are of working age is expected to decline. So the task of financing increasing pensions will fall to a diminishing share of the population. This has obvious and significant implications in relation to the future costs of State pension provision.

The amount of pension paid has always been calculated based on the person's contribution to the PRSI system over a working life. This needs to be adhered to if we are to be able to fund pensions into the future. The upcoming change to the rate bands supports this policy objective. Currently a person with an average of 20-47 PRSI contributions per year over their working life receives a weekly State pension of only €4.50 less than a person with a yearly average of 48 or more PRSI contributions. This situation is neither fair nor sustainable.

With effect from September 2012, the rate band of between 20 and 47 yearly average contributions will be replaced with new rate bands of between:

(i) 40 and 47 yearly average contributions

(ii) 30 and 39 yearly average contribution and

(iii) 20 and 29 yearly average contributions.

The rate of State pension paid to new applicants will be appropriate to the average number of contributions paid. Those who have fewer contributions will receive a lower rate of pension. The maximum rate is unchanged as is the rate for those with yearly average contributions between 40 and 47.

Existing pension recipients are unaffected and any changes only apply to new claimants from September 2012. A person qualifying for State pension in July 2013 will be assessed using the new rate bands. Details of the new rates bands for both State pension (transition) and State pension (contributory) are set out in the tables below.