Noel Harrington (Cork South West, Fine Gael)
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224. To ask the Minister for Social Protection the estimated number of claimants for all State pension payments; the associated total estimated cost for the years 2015 to 2020; and if she will make a statement on the matter. [18133/15]

Joan Burton (Dublin West, Labour)
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Projections in respect of the State pension (contributory) from the third Actuarial Review of the Social Insurance Fund, which was published in 2012, are as follows –

These projections were made on a ‘no policy change’ basis. The increase in State pension contributory expenditure reflects changing demographics with older people living longer. The number of State pension contributory recipients at the end of 2013 was 329,531 and this number is increasing by approximately 17,000 each year.

State pension (non-contributory) is a means tested payment, funded directly from the Exchequer, rather than the SIF and there are no corresponding projections. In addition to the variables such as demographic change, it is also impacted by other factors such as –

- Social Insurance coverage (increases in this result in higher numbers qualifying for the contributory pension, thereby reducing the number of non-contributory pensioners)

- Private pension coverage (again, increased coverage would be expected to reduce pressures on the non-contributory pension)

- General economic trends, which are likely to increase or decrease the means available to those over 66, thereby impacting on the numbers who qualify for non-contributory pensions.

The widening of the applicability of PRSI in recent decades has seen a small downward trend in the non-contributory pension. In 2009, the cost of this payment amounted to €1.0 billion (97,798 recipients), whereas by 2013 this had declined to €952 million (95,801 recipients), and this reduction is expected to continue as the numbers qualifying for the contributory pension increases. It is, of course, significantly less than the increase in the State pension (contributory).

The increase in the expenditure projected for the contributory pension would be expected to increase future shortfalls in the SIF, and in time become unsustainable without pension reform. In order to provide for sustainable pensions and to facilitate a longer working life, a number of significant reforms to State pensions have been introduced in recent years:

- The standardisation of State pension age to age 66 began in 2014. While the current State pension age of 66 remains, the State pension (transition) which applied for one year, for persons of age 65, ceased from 1^stJanuary 2014.

- State pension age will increase further to 67 in 2021 and to 68 in 2028.

- With effect from April 2012, and as provided for in legislation in 1997, the number of paid contributions required to qualify for a State pension increased from 260 paid contributions to 520 paid contributions.

- As provided for in Budget 2012, from September 2012, new rate bands for State pension were introduced. These additional payment rate bands more accurately reflect the social insurance history of a person and ensure that those who contribute more during a working life benefit more in retirement than those with lesser contributions.

Following considerable policy analysis, it is planned to introduce a ‘total contribution approach’. Under this reform, the level of state pension (contributory) paid will be directly proportionate to the number of social insurance contributions made by a person over his or her working life. The proposed date for the introduction of a move to a total contributions approach is 2020, but this may be subject to change. However, it is planned to finalise details and publicise them well in advance of its introduction, to facilitate retirement planning by those workers who may be affected by this change.