Terence Flanagan (Dublin North East, Independent)
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223. To ask the Minister for Social Protection the amount of money that has been saved by abolishing the transition pension; the average amount that was being paid to persons; her views on concerns that persons will be out-of-pocket because it is no longer available; her plans to reinstate it; and if she will make a statement on the matter. [18114/15]

Joan Burton (Dublin West, Labour)
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The existence of the State pension (transition) is historical and relates to the qualifying age for State pension (contributory) which, up until the early 1970s, was 70 years of age. State pension transition (known then as the Retirement Pension) was introduced at that time to bridge the gap for employees who had to retire at 65. The qualifying age for State pension (contributory) was subsequently reduced over time to 66 years, which left State pension (transition) effective for just one year.

The Social Welfare and Pensions Act 2011 provided that State pension age will be increased gradually to 68 years. This began in January 2014 with the abolition of the State pension (transition) available at 65, thereby standardising State pension age for all at 66 years. State pension age will increase further to 67 in 2021 and 68 in 2028.

The purpose of these changes is to make the pension system sustainable in the context of increasing life expectancy. With increases in life expectancy, more people are living to pension age and living longer in retirement. The period for which an average pension will be paid will be greater than the period for which a pension is paid at present. The number of pensions is increasing by approximately 17,000 annually as a result of demographic change. This has obvious and significant implications in relation to the future costs of State pension provision. In 2013, despite reforms introduced in 2012, the Department had to make provision for an additional €190 million, and further increases are required year-on-year to keep pace with this demographic change.

Maintaining the rate of the State pension and other core payments is critical to protect older people from poverty. Following on from its analysis of its award figures for State pension (transition) in 2011 and 2012 in order to establish the impact of the abolition of State pension (transition), the Department noted that only approximately 12.5 % came from employment, with over 50% coming from another social welfare payment, and the remainder coming from a combination of people already retired, paying credits or self-employed. This would indicate that a significant number of people have left employment well in advance of pension age. It also reflects the fact that there is no statutory retirement age in Ireland. Responsibility for setting retirement age is a matter for the employer/employee relationship and the contract of employment. As a result, people can retire before or after State pension age.

In 2013, the cost of the State pension (transition) was €137.27 million. It is estimated that the net saving resulting from its abolition, when taking into account that many people were instead in receipt of other payments at the lower rates applicable to those under 66, amounted to €33.5m in 2014 (as the scheme wound down over the 12 months) and will amount to some €66 million in 2015. There is also the impact of the additional PRSI and tax paid by those people choosing to work 12 months longer as a result of its abolition, and so the net cost to the Exchequer and Social Insurance Fund would be very significant if it was re-introduced.

The average weekly payment of the State pension (transition) in 2013 amounted to €235, although this varied depending on the circumstances of the pensioner. The maximum personal rate was €230.30, the increase for a Qualified Adult was €153.50 (under 65) or €206.30 (65 or over), and qualified children attracted an increase of €29.80 each.

It is hoped that, where appropriate, workers will choose and be able to work to pension age (and beyond if that is there choice) and in such cases they will have a higher income than they would have from their pension. However, it is recognised that for some this is not viable and there are measures to support them in such circumstances. All short term social welfare schemes are payable to age 66. The rate of such payments will vary from case to case, depending on the scheme they are paid under, and their dependants. For example, the personal rate for jobseekers benefit is €188, with an increase of €124.80 for a Qualified Adult and €29.80 for qualified children.

Specifically, in relation to jobseekers benefit and jobseekers allowance, there are a number of transitioning provisions applying in the case of people who are aged between 65 and 66. These include the following –

(a) Jobseekers whose benefit expires in their 65th year will continue to be paid benefit up until the age of 66.

(b) Where a jobseeker’s benefit claim spans two benefit years, a new Governing Contribution Year requirement is not applied to the second benefit year of a claimant aged 65 (effectively this means that they may receive payment in both years based upon eligibility in the first year).

(c) A further provision states that 3 waiting days do not have to be served for jobseeker’s allowance purposes in the case of certain people aged between 65 and 66 years who have been in receipt of JB within the past year.

Beyond the above measures, there are no plans to introduce a new payment as the demographic reasons for the change remain. Social welfare supports will continue to be available to those who need it most and where a person fails to meet the qualifying conditions of an insurance based scheme, a means tested assistance payment may be available provided they satisfy the qualifying conditions.