Seán Sherlock (Cork East, Labour)
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787. To ask the Minister for Employment Affairs and Social Protection the estimated cost in 2021 of not increasing the eligibility age for the State pension to 67 years of age in 2021, retaining 66 years of age; the cost of providing a transition payment to those forced to retire at 65 years of age until they turn 66 years of age; and if she will make a statement on the matter. [22594/20]

Heather Humphreys (Cavan-Monaghan, Fine Gael)
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The Social Welfare and Pensions Act, 2011 provided for increases to the State pension age to make the State pension system more sustainable as life expectancy increases. This began in January 2014 with the abolition of the State Pension (Transition). This measure standardised the State pension age for all at 66 years. The legislation provided for increases to the State pension age - to 67 in 2021 and further to 68 in 2028.

The Programme for Government makes a commitment to defer the planned increase to State pension age from 66 to 67 in 2021. I intend to introduce legislation later this year to do that.

Based on modelling conducted earlier this year, the Department’s best current estimate for the additional net costs per annum of not increasing State Pension Age to 67 years in 2021 range from c. €180 million in 2021 (due to a first year effect) to an average of over €400 million per annum thereafter, with this increasing every year. These estimates are for net costs and take into consideration additional increases or reductions arising in PRSI receipts, movements from other social welfare schemes, and secondary benefit entitlements including Free Travel, Fuel Allowance, Household Benefit Payment and Telephone Allowance. The estimates are based on current rates of payments and do not make any provision for rate increases. The cost of these estimates would be expected to double from 2028, should the State Pension Age not increase to 68, as is currently legislated for.

When State Pension (Transition) existed, it was a scheme which allowed those who were retired to get a transitionary payment between the ages of 65 and 66 years. The maximum personal rate was equivalent to the then maximum rate for the State Pension (Contributory). Eligibility was based on PRSI contributions and credits, and it was not a means tested payment. It is important to note that the conditions and eligibility requirements for State Pension (Transition) were different to those for the State Pension (Contributory). For example, a person had to have a minimum average of 24 contributions per annum to be eligible for the previous model of State Pension (Transition) whereas an average of 10 contributions per annum is required for State Pension (Contributory) eligibility. In addition, recipients of the previous model of State Pension (Transition) were not eligible for Free Travel, the Household Benefits Package (electricity, gas, TV licence) or Living Alone Allowance.

My Department’s best current estimate for the gross cost of reintroducing State Pension (Transition), on the same basis as it previously operated, is €293 million for a full year. It is expected that these costs would be offset somewhat by savings of €166 million on Working Age Schemes, arising from recipients transferring from these schemes to State Pension (Transition), giving a net cost of €127 million each year. These figures are based on current payment rates. This costing was calculated based on analysis of the observed ratio of SPT awards to State Pension (Contributory) awards for the period from 2009 to 2012, and projecting this forward in terms of estimated recipient numbers in coming years.

It should be noted that the above costings are subject to change in the context of emerging trends and associated revisions of the estimated numbers of recipients.

The Programme for Government also commits to introducing a Retirement Payment for 65 year olds paid at the same rate as Jobseeker's Benefit without a requirement to sign on, partake in any activation measures or be available for and genuinely seeking work. I wish to assure the Deputy that I have made the introduction of the new Retirement Payment an immediate priority for my Department. The new payment will be introduced as early as possible for those who are retired from employment. Officials in the Department are currently considering the design of the scheme and assessing the necessary legislation, ICT system requirements and administrative processes required to support the introduction of this payment. As design parameters for the Retirement Payment have not yet been finalised, it is not possible to provide an estimation of costs at this stage.

I hope this clarifies the matter for the Deputy.