Joanna Tuffy (Dublin Mid West, Labour)
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To ask the Minister for Social Protection if she will provide details of the number of recipients who are in receipt of a reduced rate State contributory pension arising from the changes introduced from 1 September 2012 to the yearly average bands; and if she will make a statement on the matter. [45217/12]

Joanna Tuffy (Dublin Mid West, Labour)
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To ask the Minister for Social Protection if she will provide details of the number of recipients who are in receipt of reduced rate State contributory pension arising from their eligibility for having a yearly average of at least 10 full rate contributions paid and or credited from the date of entry into insurance to the end of the last full contribution year before reaching age 66 years. [45218/12]

Joan Burton (Dublin West, Labour)
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I propose to take Questions Nos. 172 and 173 together.

There is an important context to the proposed changes to State pension provision. Given the scale of the fiscal crisis and because spending on social protection accounts for nearly 40% of current Government expenditure, you will appreciate that savings have to be found in the social welfare system.

As social structures in Ireland are changing rapidly, the structures of our social support need to change to accommodate this and the changes to State pension have been made in the context of changing demographics and the fact that people are living longer and healthier lives. This has obvious and significant implications in relation to the future costs of State pension provision given that the period for which a pension will be paid will be greater than the current time period.

In addition to the budgetary imperative, there is an important long-term policy context for the proposed changes to State pension, which includes reform of pension rate bands and gradual increases in age of retirement for State pension 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. Therefore, the task of financing increasing pensions will fall to a diminishing share of the population.

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 paid with the contribution made ensures that those who contribute more during a working life benefit more in retirement than those with lesser contributions.

The change in relation to State pension (contributory) introduced in legislation from 1st September 2012 set out a wider graduation of yearly average bands and corresponding pension rates. The aim of this change is to ensure that the rate of pension entitlement is more closely related to the level of social insurance contributions a person has paid (including credited contributions, where applicable) over their working lives.

Overall, there are currently 308,752 State pension (contributory) claims in payment, at maximum and reduced rates. Of this number, there are 107,549 State pension (contributory) claims in payment at a reduced rate, where the claimants have a contributions yearly average of between 10 and 47. Everyone in receipt of a State pension (contributory) has a contributions yearly average of at least ten paid contributions as this is one of the qualifying criteria.

The changes introduced from 1 September 2012 only affected those who qualified for State pension (contributory) after that date and who had an average of between 10 and 39 contributions per year. The maximum rate of pension remains unchanged and the rate payable to people with an average of between 40 and 47 contributions per year also remains unchanged. However, those who have fewer contributions will receive a lower rate of pension. This change moves somewhat closer to the total contribution approach where those who pay more, benefit more. Since 1 September 2012, 1,800 claimants have been awarded a pension below the 98 per cent maximum rate.

It is important in assessing any rates of payment that we focus on the real impact of social welfare payments. In this regard, it should be noted that older people do not experience the levels of poverty that existed in the past. This can be clearly seen in a wide range of data such as the significant reduction in the ‘risk of poverty’ rate from 27.1% in 2004 to 9.6% in 2010. The consistent poverty rate over the same period also declined from 3.9% to 0.9%.