Dara Calleary (Mayo, Fianna Fail)
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755. To ask the Minister for Social Protection the position regarding work of her Department on the future provision of pensions; if she will engage with groups in the public service that are subject to early retirement rules but that remain subject to substantial pension contributions; and if she will make a statement on the matter. [32624/17]

Regina Doherty (Meath East, Fine Gael)
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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 from 65 for those who satisfied the qualifying conditions, thereby standardising State pension age for all at 66 years, which is the current State pension age. This will increase to 67 in 2021 and to 68 in 2028. The changes introduced in 2011 were on foot of a Government commitment included in the National Recovery Plan published in 2010, and in the subsequent Memorandum of Understanding with the EU/ECB/IMF

Each year more people are living to pension age and living longer in retirement. As a result of this demographic change, the number of State pension recipients is increasing by approximately 17,000 annually. This has significant implications for the future costs of State pension provision which are currently increasing by close to €1 billion every 5 years. The purpose of changes to the State pension age is to make the pension system more sustainable in the context of increasing life expectancy.

The Deputy should note that there is no legally mandated retirement age in the State, and the age at which employees retire is a matter for the contract of employment between them and their employers.

I am informed by the Department of Public Expenditure and Reform that the specific compulsory retirement age and minimum pension age provisions which affect individual public servants will reflect their particular employment sector and time of original recruitment. However, I understand that such public servants will, generally, be paid a public service pension upon reaching their respective retirement age, whether or not they have reached the age which applies for the State pension. Any question regarding the retirement age of public servants, and their public service pension arrangements, including such arrangements for those who retire before reaching State pension age, are a matter for the Minister for Public Expenditure & Reform.

In a general context whether someone will qualify for a State pension at age 66, or for an alternative social protection payment aged 65, will depend on a number of factors, including their personal circumstances. In particular, it will depend upon whether their PRSI contributions were at the full rate - which provides for State pension coverage - or at a modified (reduced) rate which does not, and which would often be associated with public servants.

There are specific measures which apply to someone claiming jobseeker’s benefit from a date after their 65th birthday. Where qualified, these recipients may continue to be eligible for that payment until reaching pension age.

At present, entitlement to the State pension (contributory) is determined by means of a ‘yearly average’ calculation, where the total contributions paid or credited are divided by the number of years of the working life. The yearly average test has been in existence since 1961 when contributory pensions were first introduced. Payment rates are banded. For example, someone with a yearly average of 48 or more contributions will qualify for a full pension, whereas someone with a yearly average of 20-29 will qualify for a pension at the 85% rate.

The National Pensions Framework (2010) proposed that a “Total Contributions Approach” (TCA) should replace the yearly average approach, for new pensioners from 2020. The aim of this approach is to make the rate of contributory pension more closely match contributions made by a person. Officials of my Department are currently working on the detailed development of the TCA with a view to making proposals for consideration later in the year. This is a very significant reform with considerable legal, administrative, and technical elements in its implementation.

Following completion of the Actuarial Review of the Social Insurance Fund in the coming months, a refined proposal will be developed. My Department will conduct a period of consultation with relevant stakeholders including interest groups, representative bodies and the Oireachtas. Following the consultation period, I will submit a proposal to Government seeking approval of the new approach.

I hope this clarifies the matter for the Deputy.