Written answers

Tuesday, 18 September 2018

Department of Employment Affairs and Social Protection

State Pensions

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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760. To ask the Minister for Employment Affairs and Social Protection the estimated full-year cost of ensuring the State contributory and non-contributory pensions are available to all those who reach 65 years of age; and if she will make a statement on the matter. [37675/18]

Photo of Regina DohertyRegina Doherty (Meath East, Fine Gael)
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In order to provide for sustainable pensions and to facilitate a longer working life, legislation passed in 2011 provides for an increase in the State pension age in three separate stages. In 2014, the State pension age was standardised at 66. This will be increased to 67 in 2021 and 68 in 2028. The Roadmap for Pensions Reform 2018-2023 has stated that future changes in State pension age will be decided on research into life expectancy.

As a result of considerable demographic change, the number of State pension recipients is increasing year on year. This has significant implications for the future costs of State pension provision which are currently increasing by roughly €1 billion every 5 years. This sustainability is vital, if the current workers, who fund State pension payments through their PRSI, are to receive a pension themselves when they reach retirement age.

Census 2016 has confirmed that the population of over 65’s increased by 19.1% to approximately 638,000 over the preceding 5 years. The ratio of the number of people of State pension age and above relative to the size of the working age population is projected to change from the 2015 rate of 4.9:1 to 2.7:1 by 2045. This will be paralleled by an increase in the number of years spent in retirement and over which pensions payments are required.

In 2013, the cost of the State pension (transition) was €137 million. Its abolition was not expected to save that amount of expenditure in full, as some people who were affected would alternatively claim working age payments such as Jobseeker's Benefit (although at a lower rate than the rate of the State pension), or claim an Increase for a Qualified Adult in respect of their spouse’s pension.

It is estimated that the net saving in 2019 is likely to be in the region of over €85 million, and this is expected to increase over time.

However this would not be the total cost of reducing the State pension age for existing State pension payments. If the age for the State pension (contributory) and the State pension (non-contributory) were both reduced to 65 from 66, rather than the reintroduction of State pension (transition), there would be an additional cost as the State pension (contributory) does not have the retirement criterion that the State pension (transition) did. There would, therefore, be an additional cost to the Social Insurance Fund, paid in respect of people who would still work while aged 65, in addition to receiving the State Pension (contributory). There would also be an additional cost in respect of those with insufficient PRSI contributions to qualify for the State pension (contributory) who, prior to 2014, would still have to work until 66 to qualify for a pension. It is unclear what that additional cost would amount to, but it would mean that the cost would be significantly higher than the estimated cost for re-introduction of the State pension (transition).

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. While such a contract may have been entered into with a retirement date of 65, in the context of the previous State pension arrangements, there is no legal impediment to the employer and employee agreeing to increase the duration of employment for one or more years, if both parties wish to do so.

Where this is not possible, 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.

I hope this clarifies the matter for the Deputy.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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761. To ask the Minister for Employment Affairs and Social Protection the estimated full-year cost of reinstating the transitionary pension; and if she will make a statement on the matter. [37676/18]

Photo of Regina DohertyRegina Doherty (Meath East, Fine Gael)
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Increasing pension age, to moderate the increase in pension duration, is a means by which pensions can be made sustainable in the context of increasing longevity. In order to provide for sustainable pensions and to facilitate a longer working life, legislation passed in 2011 provides for an increase in the State pension age in three separate stages. In 2014, the State pension age was standardised at 66. This will be increased to 67 in 2021 and 68 in 2028. The Roadmap for Pensions Reform 2018-2023 has stated that future changes in State pension age will be decided on research into life expectancy.

As a result of considerable demographic change, the number of State pension recipients is increasing year on year. This has significant implications for the future costs of State pension provision which are currently increasing by roughly €1 billion every 5 years. This sustainability is vital, if the current workers, who fund State pension payments through their PRSI, are to receive a pension themselves when they reach retirement age.

Census 2016 has confirmed that the population of over 65’s increased by 19.1% to approximately 638,000 over the preceding 5 years. The ratio of the number of people of State pension age and above relative to the size of the working age population is projected to change from the 2015 rate of 4.9:1 to 2.7:1 by 2045. This will be paralleled by an increase in the number of years spent in retirement and over which pensions payments are required.

In 2013, the cost of the State pension (transition) was €137 million. Its abolition was not expected to save that amount of expenditure in full, as some people who were affected would alternatively claim working age payments such as Jobseeker's Benefit (although at a lower rate than the rate of the State pension), or claim an Increase for a Qualified Adult in respect of their spouse’s pension.

It is estimated that the net saving in 2019 is likely to be in the region of over €85 million, and this is expected to increase over time.

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. While such a contract may have been entered into with a retirement date of 65, in the context of the previous State pension arrangements, there is no legal impediment to the employer and employee agreeing to increase the duration of employment for one or more years, if both parties wish to do so.

Where this is not possible, 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.

I hope this clarifies the matter for the Deputy.

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