Written answers

Tuesday, 18 September 2018

Department of Employment Affairs and Social Protection

State Pensions Reform

Photo of Catherine MartinCatherine Martin (Dublin Rathdown, Green Party)
Link to this: Individually | In context | Oireachtas source

768. To ask the Minister for Employment Affairs and Social Protection her plans to implement the recommendations of an organisation (details supplied) for a universal basic pension; and if she will make a statement on the matter. [37767/18]

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

Entitlements under the social welfare system are primarily based on a number of defined contingencies such as sickness, unemployment, old age or widowhood. There are two basic principles which underpin the Irish social insurance system.

Firstly, the State pension non-contributory is a means-tested pension funded from taxation. Secondly, the State pension contributory, which is not means-tested, but is based on social insurance contributions, is paid from the Social Insurance Fund. Accordingly, it is important to ensure those qualifying for the State pension contributory have made a sustained contribution to the Social Insurance Fund over their working lives. To ensure that the individual can maximise their entitlement to a State pension, all contributions, paid or credited, over their working life from when they first enter insurable employment until pension age are taken into account when assessing their entitlement and the level of that entitlement.

The idea of a universal State pension, paid at full rate to everyone over 66, regardless of their contributions or their means, has been proposed on a number of occasions, and officials in my Department have examined such proposals a number of times. There are significant issues regarding the scope such a pension would have, particularly in respect of its interaction with public service pensions, and with occupational pensions in companies that were previously part of the public service. Additionally, consideration would have to be given to the treatment of retirees who are not resident in the State, but who have built up a contributory pension entitlement over the years that they worked here and paid PRSI. There are also potential legal issues regarding treating occupational pensions differently when they are in the public or private sector.

These factors make precise costing of such a pension challenging. However, it is clear that regardless of decisions made regarding these factors, the cost would be very substantial, and officials in my Department believe that the additional cost could be expected to be over €1 billion per annum, and potentially substantially more depending on some of the factors I mention above.

Clearly, this would either be very expensive or, if introduced on a cost-neutral basis, require very significant diversion of funds from elsewhere, e.g. a large reduction in the current rate of the State pension, substantial increases in the rate of PRSI deductions, or equivalent measures reducing tax relief on occupational and private pensions, which would impact very significantly upon the take-home pay of the workers affected, and act as a disincentive to such pension provision.

The biggest beneficiaries would be people who, not only contributed less to the Social Insurance Fund, but who have significant additional means, resulting in their not qualifying for a non-contributory pension, which is paid at up to 95% that of the maximum contributory pension rate. Those who contributed most to the system, including those with no additional means, and widows depending on a single pension from the state, would receive no benefit at all from the additional spending involved. However, such people could be significantly impacted by any subsequent restraint in increases in the rate of the pension caused by the larger state pension bill faced by the Exchequer.

Any changes to pension entitlements would have to be considered in the overall budgetary context.

I hope this clarifies the matter for the Deputy.

Comments

No comments

Log in or join to post a public comment.