MINISTER FOR Social Protection Joan Burton and her department should launch a public information campaign on the implications of changes in the rules for State contributory pensions, the lobby group Older and Bolder has said.
The organisation’s director, Patricia Conboy, called on Ms Burton to provide those affected by the changes with “clarity, transparency, and adequate time to prepare and plan”.
She said the Minister was now “flagging the possibility” of changing the way in which entitlement to the State contributory pension was calculated, moving from a mix of total number of years and yearly averages of contributions to total number of years solely.
“The possibility of introducing this change in September 2012 is being mooted,” Ms Conboy said.
“What is not clear is what any of the above means for parents who take time out of the labour force to care for children; people who become ill for example with cancer and take leave to undergo chemotherapy; carers of sick/older relatives; people who work/travel abroad for a period of time.”
The State pension (contributory) is paid to people from the age of 66 who have enough social insurance contributions. It is not means-tested and the maximum rate at present is €230.30 per week.
The minimum, for people with an average of 10 contributions per year over a minimum five-year working life, is currently €115.20.
Under changes already announced in the budget and due to come into force in September, those with the minimum 10 contributions per year will see their pension drop to €92 a week. The five-year working life requirement is being doubled to 10 under separate measures announced as far back as 1997.
The new “total contributions” plan under review by the Minister would see this minimum payment for those with 10 years of contributions fall to €76 a week.
Eamon Timmins from charity Age Action warned that changes to the qualification criteria will mean significantly smaller pensions for some.
“The changes will result in an unexpected reduction of €1,500 in a person’s annual income for the rest of their lives,” Mr Timmins said.
Age Action has also called for clarity about the Government’s long-term plans for the State pension, following comments by the Minister that she was examining the possibility of bringing forward changes which had been originally planned for 2020.
The 2010 National Pensions Frameworkstated that the Government would adopt a "total contributions approach" from 2020 when calculating a person's PRSI contribution. This would replace the "average contributions" system currently used.
The government in 2010 accepted the Framework’s suggestion that any change should not be introduced immediately as “the introduction of the total contributions approach at this stage would, as a result, see a reduction in the levels at which pensions are paid”.
As a result, it decided implementation of the new regime would not take place until 2020.
A department spokeswoman said last night there were no plans to bring forward the implementation date from 2020.
However, the Minister stated at the weekend she was reviewing the date, which might come forward.
Barry Cowen (FF) said: “Many will experience a cut of as much as €1,550 or 13 per cent a year on the pension that they had expected to receive.”
Aengus Ó Snodaigh (SF)accused Ms Burton of eroding pensioners’ rights since she took office.
Q&A
What is the Government doing now with the State pension?
Minister for Social Protection Joan Burton announced over the weekend that she was looking at bringing forward previously published plans to reform the State contributory pension – formerly the contributory old age pension.
It would mean that a person's pension would be determined by the overall number of PRSI contributions or "stamps" over their working life rather than the current system which looks at the average number per year.
I thought they had just announced changes to the pension in the budget?
They did. At present, to get a maximum pension of €230 a week, you need to have an average of 48 PRSI contributions per working year.
The next band, with a weekly pension of €225.80 (98 per cent of maximum pension), covers people with contributions of between 20 and 47 per year, on average. The scale continues down to those with an average of 10 contributions a year, who get a pension of 50 per cent, or €115.20.
The Government is changing this so that those with fewer PRSI contributions will receive a lower pension – as little as €92.
This came on top of changes announced as far back as 1997 but only coming into force in April this year, which will mean the minimum number of PRSI contributions required between the time you started work (or 1979, whichever is the more recent) and the time you retire double to 520 from 260 previously. Effectively, this means you will have to have paid PRSI for a minimum of 10 years to get a contributory pension
So where does the latest pronouncement fall into the scheme of things?
When it happens, anyone with the minimum 10 years' paid PRSI contributions will get a pension of just €76 a week – one-third of the €230.30 maximum.
This sum increases by one-thirtieth per year. To get a maximum pension, you will need to be working for 30 years.
When is this happening?
We don't know. The National Pensions Framework first announced the intention to move to a "total contributions" model in March 2010.
At that time it also indicated the change would take place in 2020.
The Minister said over the weekend that she was reviewing that date.
However, the Department of Social Protection last night would state only that there "are no plans to bring forward the implementation date from 2020" – which is not very helpful!
Why are they doing it anyway?
There are several reasons, including the fact that it will be a fairer system, especially to people who have paid PRSI for longer. However, like most things, in our current economic straits it mostly comes down to a question of money.
The rules will save the Government money as they will mean lower pensions for some people than they had expected.
Who will be affected by the changes?
Anyone who reaches pensionable age after any changes are introduced. Those already on pensions should see no change.
What if I am on a non-contributory pension?
You will not be affected. Eligibility for the non-contributory pension – a maximum of €219 a week – will continue to be assessed on the basis of a means test.
DOMINIC COYLE
