James Browne (Wexford, Fianna Fail)
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498. To ask the Minister for Employment Affairs and Social Protection the way in which she plans to address the inequality within differing levels of pension payments between persons retiring before and after 2012; and if she will make a statement on the matter. [52716/17]

James Browne (Wexford, Fianna Fail)
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499. To ask the Minister for Employment Affairs and Social Protection the date on which the report investigating the effects of the 2012 changes to contributory pensions will be published; and if she will make a statement on the matter. [52717/17]

Regina Doherty (Meath East, Fine Gael)
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I propose to take Questions Nos. 498 and 499 together.

The changes made to State Pension (contributory) rate bands in Budget 2012, affected those pensioners who had a yearly average of less than 39 social insurance contributions over the course of their working life.

The current rate bands were introduced from September 2012, replacing previous rates introduced in 2000. The rate bands in place between 2000 and 2012 were more generous than those in place before and after that period, and 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 were maintained. Instead of reducing those payments, which many vulnerable pensioners were solely reliant upon, the rates paid to new pensioners who both have additional means and lesser PRSI contribution records were reduced.

It should be noted that, for a person with a yearly average of 20 contributions, the new rate of payment introduced in 2012 was still higher than the maximum rate that was in place at the start of 2006. Also, it should be noted that in all European countries and beyond, pension reforms have been introduced to make them more sustainable, and these will generally result in people having different payments depending upon when they reach pension age. The only way to avoid this would be to introduce the reforms for existing pensioners, and decrease the incomes pensioners have become dependent upon.

The 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 better than proportionate with their level of contribution. A person with only 20 years of contributions over nearly 50 years will still get an 85% pension, which compares favourably with contributory pensions in other EU countries.

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 to €12 million extra each following year.

The Department is examining in depth various options that would provide some relief to those who would have a higher contributory pension, had the rate bands not been amended in 2012.

As soon as the report is finished I intend to bring it to a cabinet committee meeting and subsequently to Government for consideration early in the New Year.

If there are equitable changes that target relief to those who were particularly affected by anomalies under the yearly average system, especially if they had home-making periods prior to the introduction of the Homemakers scheme, I will ask Government to consider if and how these might be financed.

The National Pensions Framework proposed that a total contribution approach should replace the yearly average approach to the calculation of the State Pension (contributory). Under this approach, the rate of pension paid would more closely reflect the total number of Social Insurance contributions made by a person throughout her or his working life and the incongruities of the Yearly Averaging method of calculating entitlement would be removed. It is expected that this approach to pension qualification will replace the current one from 2020.

A discussion paper is being drafted by my Department and it is hoped to start the consultation process with relevant stakeholders including interest groups, representative bodies and the Oireachtas shortly. Following the consultation period, a proposal to Government will be submitted seeking approval of the new approach.

The main aim of Government policy on pensions is to make sure that pensions are affordable, sustainable and keep their value in the coming years. The reforms that are planned will result in a more inclusive and fairer pension system for all citizens.

I hope this clarifies the matter for the Deputy.