State Pensions Reform

Dáil Éireann Debate, Wednesday - 4 December 2019

Wednesday, 4 December 2019

Questions (38)

Willie Penrose

Question:

38. Deputy Willie Penrose asked the Minister for Employment Affairs and Social Protection her plans to review the qualification age for the contributory and non-contributory State pension; the number of persons who will be impacted by the increase in the qualification age for the State pension in 2021; the number who have 20 or more years of PRSI contributions; the transition measures she plans to put in place; and if she will make a statement on the matter. [50651/19]

Oral answers (8 contributions)

Deputy Willie Penrose

In 50 years' time, Ireland will have the lowest proportion of older people in the European Union. The figure here will have be nearly 20% below the EU average, as we currently have the youngest population and the third highest fertility rate. Consequently, contrary to the scaremongering about a demographic time bomb in which everybody, including the Taoiseach, is engaging, the percentage of national income spent on public pensions will only rise by three percentage points in the next half century. Despite these facts, the Government intends to push ahead with its plan to increase the pension age to 67 by 2021 and 68 by 2028. The Joint Committee on Employment Affairs and Social Protection has recommended that we stop this plan to increase the age of qualification for pensions and I support it.

Deputy Regina Doherty

To provide for sustainable pensions and facilitate a longer working life, successive Governments have considered the sustainability challenges faced by the pensions system as a result of changing demographics in Ireland. As far back as 2007, the then Minister for Social and Family Affairs, Martin Cullen, launched the Green Paper on Pensions, which proposed raising the pension age. That was followed by a major public consultation exercise. Three years later, following the public consultation, the then Minister for Social and Family Affairs, Mary Hanafin, launched the national pensions framework. Following a Government decision, it set out the agenda of changes in the State pension age to be enacted in 2014, 2021 and 2028. This strategy was enacted via legislation introduced by the then Minister for Social Protection, Deputy Burton, and passed in 2011. It provided for an increase in the State pension age in three separate stages. In 2014, the State pension age was standardised at 66. This will be increased to 67 in 2021 and 68 in 2028.

The Roadmap for Pensions Reform 2018-2023, which I launched last year, stated that future changes in the State pension age after 2035 will be based on research into life expectancy. We are all well aware that, thankfully, we are living longer and happier lives. That is in keeping with similar measures introduced by most EU and OECD countries.

The reason for the changes was to make the State pension system more sustainable as life expectancy increases. That is essential, as people who are working now and whose PRSI contributions fund State pension payments will need a State pension when the time comes for them to retire. The demographic change has significant implications for the future costs of the State's pension provision, which are increasing by approximately €1 billion every four to five years. This figure does not take account of any rate increases we may want for pensioners. The number of recipients of contributory and non-contributory State pensions is estimated to increase by an average of 21,300 per year up to 2024. It is also estimated that 88% will have entered insurable employment at least 20 years before reaching the State pension age.

Deputy Willie Penrose

I must contradict what the Minister said about the European trend and the average age of retirement. The average EU pension age will only rise to 66 years of age by the middle of this century. Why is it necessary for Ireland to be in the vanguard and to do more than every other European country is doing? It is not fair on those who have worked and paid taxes all their lives.

I know the Minister is not responsible for all the changes but let us put a stop to it. Let us halt this horse. The way things are going, someone who starts work at 17 years of age will continue working until 68 years of age, which is 51 years of work. That person will spend three quarters of his or her life before retirement working and one quarter up to the age of 17. Let us stop this runaway train. Thankfully, we have money. I will not be around but I hope if we are ever in government again we will stop this. We will continue to work towards that aim. My estimate is that 30,000 - the Minister said 21,300 - additional people per year will be in receipt of a pension up to 2024 so the story is even better. My estimate is that 30,000 additional people would reach 66 years of age in 2021. The Minister's estimate is lower than that. The Minister can stop the runaway train, which is a bureaucratic one as well.

Deputy Regina Doherty

I think we are all suffering from a bout of changing our minds.

Deputy Willie Penrose

I have no problem changing my mind.

Deputy Regina Doherty

With respect to Deputy Penrose, I was a lowly backbencher in 2011 when Labour Party Ministers were sitting at the Cabinet table that made this decision. Nothing has changed since, other than that there are more people working. We have thankfully a jobs led recovery and the Social Insurance Fund is now in a small surplus. When the Labour Party entered government in 2011, the fund was in a small surplus that rapidly went into a deficit in a matter of years. I cannot ignore that, no more than Deputy Penrose could in 2011, the former Minister, Mary Hanafin, could in 2010 or her predecessor, Martin Cullen, could before that. We have an ageing demographic and the number of workers versus the number of pensioners is flipping. While it would be lovely, populist, warm and fuzzy to tell people at home that we will bring the retirement age back to 65, the simple fact is that for every year it is delayed, I or whoever is lucky enough to be in this position after me, has to find €250 million just to stand still. That is €250 million in every year that we delay.

We are looking at calculating pensions in a fairer way to address anomalies in the system that allow people get more out of the Social Insurance Fund, SIF, than others who may have put more into the fund. When I bring the memo for total contributions in a few weeks, we will be able to see the new approach. Regardless of how much we want to be warm and fuzzy to people who will be retiring in the coming years, nobody can escape the fact that we will have many more people drawing a pension and fewer workers supporting those pension payments.

Deputy Willie Penrose

Many people are being forced to retire at 65 based on contracts. They can already spend a year on jobseeker's benefit. The Minister has already created an extension to the jobseeker's benefit rules to allow them to go to 66. What will happen to continue it to 67 and to 68 if the Government extends it? How many will be affected by this change? If we are to continue to pay jobseeker's benefit rather than a pension to a single person, there is only €45 a week in the difference. It will not bring down the citadel. Let us not try to portray it as something that will cause serious trouble. Let us not deceive anybody. The people still need to be paid and it is only a meagre saving for the Government, but €45 is a considerable amount of money for an ordinary person. It comes to €2,400 per annum. We are not robbing Peter to pay Paul. We are robbing everybody.

I know what it was like there. I was not at the Cabinet table when the Government approved this. I was only there for nine months. The Minister's erstwhile colleague, Mr. Shatter, was the cause of me leaving. I do not want to say too much about him. If we want to go into history, I can give the Minister plenty of it.

Deputy Regina Doherty

The net cost is not small beans. It is €215 million a year every year. In no context could €215 million a year be called small beans. The purpose of successive governments in doing this was to recognise that we are living longer and many people want to work longer. I agree we need to change the practices and mindsets of some of our employers not to be pigeonholed to a retirement age of 65. We have done so in the public sector to allow people to work until they are 70 if that is what they want to do. That mindset needs to be brought to all of our private enterprises.

We are reaching full employment and I meet employers every week who find it difficult to get staff, which is why we are working on a returners programme and looking at people who are furthest to reach and reskilling and retraining them. We have large untapped talent pools, including a large number of people aged over 55. People need to change their mindsets as well as recognising that the SIF is under pressure. The demographic changes are decreasing the pensioner support rate. Nobody can ignore that regardless of how popular we want to be in keeping the pension age at 65.