Written answers

Tuesday, 24 May 2016

Department of Social Protection

State Pensions

Photo of John BradyJohn Brady (Wicklow, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

308. To ask the Minister for Social Protection the cost of restoring the pension band rates to pre-September 2012 rates in 2017 in tabular form. [11517/16]

Photo of John BradyJohn Brady (Wicklow, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

309. To ask the Minister for Social Protection the cost of re-instating the State pension (transition) in 2017 in tabular form. [11518/16]

Photo of John BradyJohn Brady (Wicklow, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

310. To ask the Minister for Social Protection the cost of reducing pension contribution requirements for the State pension (contributory) from 520 to 260 in 2017 in tabular form. [11519/16]

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I propose to take Questions Nos. 308 to 310, inclusive, together.

State pensions account for the single largest block of social welfare expenditure. In 2016, €6.976 billion will be spent on pensions, which represents 35% of the Department’s total current expenditure. While expenditure on pensions is increasing by approximately €1 billion every five years because of demographic pressures, this is being successfully managed within the overall welfare budget. A number of significant reforms to State pensions were introduced in recent years which have allowed my Department maintain the value of the State pension, and indeed increase it in Budget 2016.

Firstly, from September 2012, new rate bands for State Pension contributory were introduced. These additional payment rate bands more accurately reflect the social insurance history of a person and ensure that those who contributed to the Social Insurance Fund more frequently during their working life will, generally, benefit more in retirement than those who made less frequent contributions. People who qualify for a lower contributory pension as a result, but who have an income need, may still claim the means-tested State pension (non-contributory), the maximum rate of which is 95% that of the State pension contributory. At the time this measure was introduced, the net exchequer savings arising were estimated to be in the region of €2.8 million in 2013, €5m in 2014 and €8m in 2015. While a projection was not made at that time for 2017, it is now estimated that a figure of approximately €13.8 million would apply.

Secondly, in order to provide for sustainable pensions and to facilitate a longer working life, the Government decided to increase State pension age in three separate stages. In 2014, the State pension age was standardised at 66. This will be increased to 67 in 2021 and 68 in 2028. This process saw the abolition of the State Pension Transition payment from 2014. In 2013, the cost of the State pension (transition) was €137 million. Its abolition was not expected to save that amount of expenditure in full, as some people who were affected would alternatively claim working age payments such as Jobseeker's Benefit (albeit at a lower rate than the rate of the State pension), or may claim an Increase for a Qualified Adult in respect of their spouse’s pension. However, it is anticipated that well over half of that cost has been saved each year as a result of this measure, and this would be expected to increase as (a) the number of 65 year olds increases, and (b) the change results in a higher percentage of people working while aged 65. It is estimated that the net saving in 2017 is likely to be in the region of €75-80 million.

Thirdly, with effect from April 2012, the number of paid contributions required to qualify for a State Pension increased from 260 paid contributions to 520 paid contributions. At the time this measure was introduced, the annual exchequer savings were expected to be in the region of €6m per annum in the short term, with the savings expected to increase significantly over the longer term. There are currently no more up-to-date figures available.

Comments

No comments

Log in or join to post a public comment.