Thomas Pringle (Donegal, Independent)
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574. To ask the Minister for Employment Affairs and Social Protection the way in which her Department is addressing the shortfall in pension payments to women retiring since 2012 after changes were made in calculating pension entitlements; and if she will make a statement on the matter. [48967/17]

Regina Doherty (Meath East, Fine Gael)
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The current rate bands applying to the State pension contributory were introduced from September 2012, replacing previous rates introduced in 2000. The rate bands prior to 2000 were less generous, and the improved rate bands introduced in 2000 were a feature of the economic and political environment at that time. The economic crash changed the focus and while other payments were reduced as a result, the core rates of the pension, which many pensioners were solely dependent on, were maintained. Instead, the rates for people who had additional means and lesser PRSI contribution records were reduced.

The post-2012 rate bands more closely reflect the social insurance contributions history of a person than those in place between 2000 and 2012. The current rate bands still provide pensions to people which are not proportionate with their level of contribution. A person with only 20 years of contributions over nearly 50 years will still get an 85% contributory pension. Had all pensions been cut, regardless of means and contribution records, the hardest hit would have been pensioners with no additional income, those paid a State pension non-contributory, and widows and widowers living alone on only one pension payment.

People on the lower rate bands with other income, which meant they did not qualify for a non-contributory pension which is paid at a rate of over 95% of the contributory pension, are generally in a better financial position than those solely dependent on the non-contributory pension, as otherwise they could claim that payment instead. Changing these bands would give additional money to people who already have means. It is estimated that to revert to the previous bands from January 2018 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.

It is my intention to introduce a Total Contributions Approach to the calculation of the State Pension (Contributory) from 2020 onwards and I will bring 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 significant break to raise children, who retired after the 2012 changes but before the Total Contributions Approach has been implemented. We need to ensure that any proposed approach would 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 could be financed in the future. I would like to re-emphasise that any change with a significant cost is unlikely to be viable before the provisions of Budget 2019 are in place.

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 to 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 this clarifies the matter for the Deputy.