Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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1169. 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 that reach 65 years of age. [41241/21]

Heather Humphreys (Cavan-Monaghan, Fine Gael)
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Reducing the State Pension Age to 65 years would increase pension related expenditure significantly.

Last year my Department estimated the potential cost of introducing such a measure from this year (i.e., from 1 January 2021). Based on that, it is estimated that it would cost €450 million extra in the first year, €845 million extra in the second year, rising to over €1 billion extra in 2025, and this extra cost would continue to rise every year thereafter. The accumulated cost differential for the period 2021-2025 would be over €4.25 billion, i.e., it would cost c.€4.25 billion more than the existing system.

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

In February of this year, I introduced the new Benefit Payment for 65 year olds in line with the Programme for Government commitment, to provide a benefit payment for people who are aged 65 and who are required to retire, or who chose to retire, without a requirement to sign on, engage in activation measures or be available for and genuinely seeking work. This new payment is designed specifically to bridge the gap for people who retire from employment or self employment at 65 but who do not qualify for the State Pension until age 66.

The Deputy is aware that the public policy and social issues in relation to funding a sustainable and adequate State pension system are complex. That is why the Programme for Government committed to the establishment of a Commission on Pensions to examine a range of issues including contributions, calculation methods, sustainability, eligibility and intergenerational fairness. That Commission has now completed its deliberations and I expect to receive its report in the near future.

I hope this clarifies the matter for the Deputy.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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1170. To ask the Minister for Employment Affairs and Social Protection the estimated full year cost of reinstating the transitionary pension. [41242/21]

Heather Humphreys (Cavan-Monaghan, Fine Gael)
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When the 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.

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 secondary schemes such as 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 by savings of some €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 and are likely to increase over time in line with demographic changes. It should be noted that these costs could increase substantially if a State Pension (Transition) was introduced with reduced qualifying criteria or greater secondary scheme eligibility.

In February of this year, I introduced the new Benefit Payment for 65 year olds in line with the Programme for Government commitment, to provide a benefit payment for people who are aged 65 and who are required to retire, or who chose to retire, without a requirement to sign on, engage in activation measures or be available for and genuinely seeking work. This new payment is designed specifically to bridge the gap for people who retire from employment or self employment at 65 but who do not qualify for the State Pension until age 66.

I trust this clarifies the matter for the Deputy.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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1171. To ask the Minister for Employment Affairs and Social Protection the estimated cost to introduce a universal State pension of €350 weekly and reduce the pension age to 65 years of age. [41243/21]

Heather Humphreys (Cavan-Monaghan, Fine Gael)
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At present, the State pension system comprises two basic components. Firstly, the State Pension (Non-Contributory) is a means-tested pension funded from taxation. Secondly, the State Pension (Contributory) is not means-tested but is based on social insurance (PRSI) contributions and paid from the Social Insurance Fund, and as such it is important to ensure that those qualifying for the State Pension (Contributory) have made a sustained contribution to the Social Insurance Fund over their working lives.

The introduction of a universal State pension paid at full rate to everyone of 65 years of age and over, regardless of their PRSI contributions or their means, would require fundamental reform of the State pension system, and perhaps to the entire model of social insurance. It would give rise to a considerable range of complex policy and operational issues. Examples of such issues include -

- the impact on customer behaviour with respect to work, work patterns, employment status, personal savings, contributions into the system in tax/PRSI, etc.;

- the interplay between the State pension system and occupational and private pensions and the scope of the State to support such arrangements;

- the applicability of such a pension to those in public service employments;

- the potential legal issues involved in different treatments of those with occupational pensions in the private and public sector and those with a mix;

- how such a system would work with existing EU pension and social security law and with international bilateral arrangements; and

- 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.

The latest available figures from the CSO, in April 2020, estimated that 710,100 people were aged 65 and over in the state. This is an increase of 14.3% on the figures from April 2016.

Providing a €350 per week payment to this population would cost over €13.1 billion a year, including provision of a Christmas Bonus. This would represent an increase of over €4.6 billion on the amount spent by this Department on pensions in 2020 or, in percentage terms a year on year increase of 53%.

This is without any payment to those living abroad who currently receive the State pension contributory having paid into the social insurance fund during their working life and takes no account of increased costs anticipated in the future due to well known demographic issues in respect of the future pensioner population.

The Deputy is aware that the public policy and social issues in relation to funding a sustainable and adequate State pension system are complex. That is why the Programme for Government committed to the establishment of a Commission on Pensions to examine a range of issues including contributions, calculation methods, sustainability, eligibility and intergenerational fairness. That Commission has now completed its deliberations and I expect to receive its report in the near future.

I hope this clarifies the matter for the Deputy.