Eamon Scanlon (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

124. To ask the Minister for Social Protection his plans to reverse the changes introduced to the State pension in 2012 which disproportionately affects women and their ability to qualify for a full State Pension (Contributory); the full year cost in 2016 of reversing these changes; and if he will make a statement on the matter. [18567/16]

Eamon Scanlon (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

125. To ask the Minister for Social Protection if he has conducted research on or an impact assessment of the changes introduced to the State pension in 2012, with particular reference to the impact on women; and if he will make a statement on the matter. [18568/16]

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

I propose to take Questions Nos. 124 and 125 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.

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, rising as the number of new claimants, assessed under the new rates, entered the system. While a projection was not made at that time for 2017, a figure of some €14 million might be expected to apply using a similar rate of increase.

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 Jobseekers 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, there are others who would not make a social welfare claim during that year (most notably those who continue in employment). Therefore, it is anticipated that over half of the 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.

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.

It is worth noting that the Actuarial Review of the Social Insurance Fund in 2012 confirmed that the Fund provides better value to female rather than male contributors. This is due to the distributive nature of the Fund. For example, those with a yearly average of only 20 contributions (38% of the maximum) may qualify for 85% of the maximum rate. The Review also examined the changes in the contribution rules and the associated rates of payment which were to be introduced in September 2012. The Review found that those with lower earnings and those with shorter contribution histories still obtain the best value from their contributions.

Any significant measures that would increase the cost of the State pension would have to be considered in an overall policy and Budgetary context.

I hope this clarifies the matter for the Deputy.