Joanna Tuffy (Dublin Mid West, Labour)
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To ask the Minister for Social Protection if options have been considered to alleviate the shortfall in income for workers who are not covered by the homemaker’s scheme and who are facing reduced pension entitlements as a result of the introduction of new PRSI contribution rates and bands since 1 September 2012; if she will set out feasible measures that could be taken to moderate or offset the negative impact on workers currently of retirement age who have had little time to prepare for change, drawing on and or supplementing analysis in the Green Paper on Pensions; and if she will provide costings with regard to backdating the scheme, updating estimates presented in the Green Paper. [44106/12]

Joan Burton (Dublin West, Labour)
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As the Deputy will be aware, ensuring the sustainability of pensions into the future is vital given the changing demographics, the increased numbers of those over 65 and increased longevity and reduced dependency ratio. The State pension is a very valuable benefit. Therefore, it is important to ensure that those qualifying have made a sustained contribution to the Social Insurance Fund over their working lives. Recent changes to State pension supports the direct link between contributions made and the rate of pension received which underpins State pension policy. By aligning the rate of pension with the contribution made ensures that those who contribute more during a working life, benefit more in retirement.

The recently published Actuarial Review of the Social Insurance Fund confirms that benefits offer excellent value for money for those on the lower part of the income distribution, those with shorter contribution histories, and the self-employed. The social solidarity principle which underlies the Fund is reflected in the fact that, for those at the higher end of the income distribution, the Fund is redistributive and they generally get back less than they pay in.

Notwithstanding the changes in the contribution rules and associated rates of payment which were introduced in September 2012, those with lower earnings and those with shorter contribution histories will continue to obtain the best value for money from the Fund. This is because the negative impact of these changes continues to be outweighed by the lower contributions paid into the Fund in respect of these workers.

The report looked at the value for money provided by the Fund on a range of individual scenarios and found that:

- Those on lower incomes fare considerably better than those on higher incomes.

- Those with dependants achieve better value for money (when assessing value for money on an individual rather than on a per household basis).

- Those with short contribution histories have the potential to fare better than those with full contribution histories, which is particularly helpful for women who take time out of the workforce for caring purposes.

- The Fund provides better value to female than to male contributors.

- The self-employed achieve very good value for money compared with the employed – when the comparison includes both employer and employee contributions in respect of the employed person.

- For those at the higher end of the income distribution, the Fund is redistributive and these individuals generally get back less than they pay in.

- Higher value for money is achieved where benefits in addition to the State pension (contributory) are accessed.

In relation to the homemakers scheme, women who leave the workplace for caring purposes can, if eligible, avail of the homemakers scheme which helps to provide a higher rate of pension for those who meet the qualifying conditions. It should be noted that women who do not qualify for a pension or are affected by the rate band change may, if their spouse is in receipt of a State pension contributory, receive a qualified adult payment at a higher rate where they satisfy a means test. A State pension non-contributory pension, which is a means tested payment, may also be payable. I have no proposals to backdate the homemakers scheme given the policy issues and costs involved. While my Department will keep this scheme under review, any improvements which could result in further costs for the Exchequer could only be considered in a budgetary context.

Sustainable public finances are a pre-requisite for future economic stability and growth, as well as being a pre-requisite for maintaining and developing our social protection system. The Government’s priority is to secure economic recovery, promote growth and employment. To this end, the State must pursue a determined deficit reduction strategy. Accordingly, there will be an on-going requirement to curtail expenditure in 2013 and in later years. There are, therefore, considerable challenges ahead including the need to protect, as far as possible, the key income supports and services operated by my Department. These services and supports impact in some way on the lives of almost every single person in the State. The scope and scale of this expenditure plays a key role in the wider economy and helps to partially offset the effect of the downturn.

The Government is committed to tackling Ireland’s economic crisis in a way that is fair, balanced, and which recognises the need for social solidarity. The appropriate level of overall expenditure by my Department, including expenditure on weekly and other payments, will be considered in the context of Budget 2013 and subsequent Budgets.