Claire Kerrane (Roscommon-Galway, Sinn Fein)
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567. To ask the Minister for Employment Affairs and Social Protection the gross and net costs of not increasing the pension age to 67 years of age quantifying each of the various factors; the reason for each factor; the estimated savings on working age payments that would otherwise be enabled if the pension age were to be increased; and if the estimated net cost includes public sector pensions in tabular form. [38375/20]

Heather Humphreys (Cavan-Monaghan, Fine Gael)
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The Programme for Government “Our Shared Future” sets out how the planned increase in the State pension age next year will be deferred and it will remain at 66 years pending the report of the Commission on Pensions. The Government confirmed as part of its Budget 2021 measures that the required amendment to primary legislation (the Social Welfare Consolidation Act, 2005) will be brought before the Oireachtas later this year as part of the Budget Bill for enactment in advance of the 1st January 2021.

Based on modelling conducted in advance of Budget 2021, my Department estimated costings for retaining the State pension age at 66 year, in both 2021 and 2022. The gross extra costs were estimated at approx. €321 million in 2021 and approx. €653.5 million in 2022.

The net extra costs for 2021 are estimated at approx. €221 million in 2021. The 2022 full year extra cost of retaining the State pension age at 66 years is estimated to be approx. €453 million. The smaller amount in 2021 is due to a first year effect. The 2022 extra cost figure of €453 million is expected to rise year on year thereafter.

The estimates for net extra costs take into consideration PRSI receipts forgone, movements from other social welfare schemes, and secondary benefit entitlements including 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 estimates do not include costs for public sector pensions. Policy issues in relation to public sector pensions are matters for my colleague the Minister for Public Expenditure and Reform.

A breakdown of estimated costs quantifying each of the various factors is in the following table:

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

I hope this clarifies the matter for the Deputy.

Claire Kerrane (Roscommon-Galway, Sinn Fein)
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568. To ask the Minister for Employment Affairs and Social Protection the estimated projected pension expenditure based on demographic cost estimates in each of the years 2020 to 2030, in tabular form.; and if she will make a statement on the matter. [38376/20]

Heather Humphreys (Cavan-Monaghan, Fine Gael)
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Population projections indicate that Ireland will undergo significant demographic changes between 2020 and 2050. As a result of demographic pressures, the number of State pension recipients will continue to rise. This has significant implications for the future costs of State pension provision. Sustainability is vital if the current workers, who fund State pension payments through their PRSI contributions, are to receive a pension themselves when they reach retirement age.

The Actuarial Review of the Social Insurance Fund, as at 31 December 2015, was published in September 2017 and highlighted Ireland’s rapidly altering age structure. The Review covered a 55 year period from 2016-2071.The Review emphasised that long-term projections are based on a wide range of assumptions about the future.The focus was on the trends which emerge over the projection period of the Review and on the relativities between various items of income and expenditure rather than on the results for individual years.

The Review indicated that the percentage of the population over State pension age was projected to increase from 12% in 2015 (when State Pension Age was 66 years), to 17% in 2035 (when the State pension age was expected to be 68 years) and to 23% in 2055 (again on the basis that the State pension age expected to be 68 years). It is also projected that the pensioner support ratio will decline from 4.9 workers/person over State Pension Age to 2.9 in 2035 to 2.0 in 2055.

Furthermore, the Irish Fiscal Advisory Council (IFAC) published its “Long-term Sustainability Report: Fiscal challenges and risks 2025-2050” in July 2020. This report provides the IFAC’s assessment of the long-run sustainability of the public finances in Ireland and demographic projections for the coming decades to 2050. The economic projections were formed on the basis of consistent macroeconomic and demographic underpinnings and assumptions.This report indicated that Ireland faces a rapid pace of ageing. It projected dramatic growth rates for older-age population cohorts.Age groups below 65 are set to see modest increases over 2020?2050, while older cohorts will increase much more markedly. The population aged 65–79 will expand by 88% and the 80+ population will expand by 240%.

Based on modelling conducted earlier this year, the following table sets out estimated increases in expenditure directly related to the demographic changes in the pension population for the period 2021 to 2025. These estimates are based on a State Pension Age of 66. These demographic pressures alone mean that total expenditure on pensions over the five years from 2021 to 2025 will increase by an extra €5.5 billion approx., without any payment rate increases.

Additional Annual State Pension Expenditure From Demographics 2021-2025 (€ Billions)

Modelling increases in pension expenditure on an annual basis beyond 2025 has not yet been done to this level of detail and requires a comprehensive examination of demographic changes and actuarial probabilities.

As the Deputy is aware, the Government has approved the establishment of a Commission on Pensions. The Commission’s Terms of Reference includes a review the projected changes in demographics, earnings and the labour market, and associated costs. In line with the Programme for Government, the Commission will report to Government on its work, findings, options and recommendations by 30th June 2021. The Government will take action having regard to the recommendations of the Commission within six months.

I hope this clarifies the matter for the Deputy.

Claire Kerrane (Roscommon-Galway, Sinn Fein)
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569. To ask the Minister for Employment Affairs and Social Protection the estimated number of 66-year-olds who would be projected to have an entitlement to the State pension in each of the years 2020 to 2030 if the pension age remains at 66 years of age; and the estimated average payment. [38377/20]

Claire Kerrane (Roscommon-Galway, Sinn Fein)
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570. To ask the Minister for Employment Affairs and Social Protection the estimated number of 67-year-olds projected to have an entitlement to the State pension in each of the years 2020 to 2030; and the estimated average payment. [38378/20]

Heather Humphreys (Cavan-Monaghan, Fine Gael)
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I propose to take Questions Nos. 569 and 570 together.

The Programme for Government “Our Shared Future” sets out how the planned increase in the State pension age next year will be deferred and it will remain at 66 years pending the report of the Commission on Pensions. The Government confirmed as part of its Budget 2021 measures that the required amendment to primary legislation (the Social Welfare Consolidation Act, 2005) will be brought before the Oireachtas later this year as part of the Budget Bill for enactment in advance of the 1st January 2021. The Government has set aside a provision of €221 million in 2021 to support this measure.

Based on modelling conducted earlier this year, my Department estimates that because of demographic pressures the number of pensioners will continue to rise over the next five years (up to 2025) as per the following table, depending on the State Pension Age. It should be noted that the estimates in these tables are subject to change.

Modelling on estimated numbers of 66 and 67 year olds who would have an entitlement to the State Pension beyond 2025 on an annual basis has not yet been done to this level of detail and requires a comprehensive examination of demographic changes and actuarial probabilities.

The primary focus of the modelling carried out was to forecast, monitor and explain trends in recipients, costs and expenditure for the current and next year. The average payment values used as part of the 2021 estimates calculations was €251 weekly for State Pension (Contributory) and €228 weekly for State Pension (Non-Contributory). The average payment values includes provision for Increase for Qualified Adult/Child, Living Alone Allowance, Island Allowance and Over 80s allowance as they are all included under the primary scheme payment.

As the Deputy is aware, the Government has approved the establishment of a Commission on Pensions. The Commission’s Terms of Reference includes the development of a range of options to address the sustainability of the state pension and the Social Insurance Fund in terms of pension age, eligibility criteria, contribution rates, pension calculation methods and pension payment rates. The Commission will report to me on its work, findings, options and recommendations by 30th June 2021. The Government intends to take action having regard to the recommendations of the Commission within six months of its report.

I hope this clarifies the matter for the Deputy.