Thursday, 9 November 2017
Department of Employment Affairs and Social Protection
State Pension (Contributory)
It is my intention to introduce a Total Contributions Approach to the calculation of the State Pension (Contributory) from 2020 onwards and I’ll be bringing forward proposals in this regard in the near future.
In the meantime, I have asked my officials to carefully examine approaches that may help to address the issue in relation to the averaging approach as it affects people with a short work period early in their career followed by a long break. We need to ensure that any proposed approach does not cause further anomalies or disadvantages to arise, or hinder the move to a Total Contributions Approach. We also need to determine, as best we can, the cost of any such approach and how that cost can be financed in the future.
It is worth remembering that the 2012 rate bands more closely reflect the social insurance contributions history of a person than those in place prior to that and people with only 20 years of contributions over nearly 50 years will still get an 85% pension.
Reverting to the pre-2012 bands would move additional resources to people who already have means, and it is estimated that it would result in an annual cost of well over €70 million in 2018, and this annual cost would increase by an estimated €10-12 million each following year.
Spending on State pensions has increased rapidly in recent decades. This year, the cost is €7.3 billion. This is estimated to increase by €1 billion every five years due the increased number of pensioners. These projections mean that there are considerable sustainability and affordability challenges in the years ahead and we must start to address them now.
Accordingly, I want to ensure that any approach taken is fair and sustainable in the long term.
I hope that this clarifies the matter for the Deputy.