Congress Concerned at Proposed Changes to State Pension

27 May 2018

Pensions

Ahead of the Department of Employment Affairs and Social Protection seminar (Monday May 28) to launch the public consultation for the Total Contributions Approach 2020, the Irish Congress of Trade Unions confirmed it has accepted the invitation to outline the views of Congress on the proposed reform to the method for calculating entitlement to the Contributory State Pension.

Congress Social Policy Officer Dr Laura Bambrick has said: ‘Congress recognises the anomalies and inconsistencies within the existing Yearly Average method of assessing entitlement to the contributory pension, and agree in principle with a move to a Total Contributions Approach.

That said, Congress do have concerns with elements of the proposed TCA model’.

Three key issues for Congress in switching to an assessment system based on total contributions are the qualifying years, the implementation date and the pension age.

Government is proposing that 40 years of social insurance contributions be required to qualify for a full pension.

‘A 40 year target fails to take into account the impact of legacy issues still evident in the contribution records of workers nearing pension age. Comprehensive social insurance coverage is less than 30 years in place which will negatively impact on the potential of older workers to accumulate the number of contributions proposed to receive the full payment’ Dr Bambrick said.  

Earlier this year, the Minister for Social Protection Regina Doherty announced that post-2012 pensioners adversely affected by the changes to the rate bands could have their pension entitlement calculated by averaging or total contributions, and be awarded the higher pension of either method.

This option is to be withdrawn in 2020, when the Total Contributions Approach will be the only method of assessment available to applicants reaching pension age.

Dr Bambrick said: ‘The option to calculate pension entitlement under either averaging or total contributions method must remain in place after 2020 for people of an age that they can do very little to improve their contributions record and who have a reasonable expectation that their future state pension entitlement would not change significantly’.

Government is in the process of increasing the qualifying age for the state pension. From 2014, the pension age increased to 66 years. It is scheduled to be increased again in 2021 to 67 years and to 68 years in 2028.

Workers contractually required to retire at 65, as well as workers physically unfit to continue in their job beyond 65, must now claim Jobseeker’s Benefit. The Jobseeker’s Benefit payment rate is €45.30 per week or €2,355.60 per annum less than a contributory pension. In addition, entitlement to the Household Benefits Package to assist with utility costs, worth €590 per annum, and free travel on public transport are pushed out in line with the pension age.

‘There was no public engagement with worker representatives on the significant financial implications of increases to the pension age for retiring workers. Instead, Government unilaterally implemented the changes.

‘While increases in the pension age are taking place in many countries, Ireland is currently on course to have the highest pension age in the OECD in 2028. Yet, we currently have the second lowest pensioner to worker dependency ratio in the EU27.  

‘Government must reverse its decision to increase the qualifying age and commit to consultation with stakeholders on steps to address the challenges of population ageing and the financial sustainability of the pension system’ Dr Bambrick said.

 

For further information contact Laura Bambrick – 086 814 23 58

ENDS