Brendan Smith (Cavan-Monaghan, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

42. To ask the Minister for Employment Affairs and Social Protection the status of the commitment to remove the anomalies in the method of calculation of entitlements to the State contributory pension; her plans to bring forward the necessary legislative measures; and if she will make a statement on the matter. [1875/18]

Eugene Murphy (Roscommon-Galway, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

46. To ask the Minister for Employment Affairs and Social Protection her plans to address the issue of pension equality and to reverse the changes to the bands for the contributory pension which were introduced in 2012 and had an adverse effect on older persons and women in particular; and if she will make a statement on the matter. [2031/18]

Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I propose to take Questions Nos. 42 and 46 together.

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 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 very favourable in comparison with their level of contribution over their working lives. A person with only 20 years of contributions over nearly 50 years will still get an 85% pension. Where they have limited additional means, they may instead be paid a non-contributory pension of up to 95% the maximum contributory rate, and over 70% of such pensioners are paid that pension at that rate.

It is estimated that to revert to the previous bands from January 2018 would result in an annual cost of well over €70 million extra in 2018, and this annual cost would increase by an estimated €10 to €12 million extra each following year.

I committed to examine in depth various options that may provide some relief to those who would have a higher contributory pension had the rate bands not been amended in 2012. Officials in my Department have completed a report on this matter, which I intend to bring to a cabinet committee later this week. Following that meeting, and subject to any necessary amendment or further discussions, I will bring the report to Government for consideration.

The National Pensions Framework proposed that a total contribution approach should replace the yearly average approach to the calculation of the State Pension (contributory). It is intended to introduce a total contributions approach for new pensioners from 2020. This will make the rate of contributory pension more closely match contributions made by a person. It will also have significant homemakers provisions that will assist those pensioners who spent significant periods caring for their children, or adults with a caring need.

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 Deputies.