Changes to the qualifying rules for the contributory State pension will mean a reduction of some €1,500 in the annual income of some people for the rest of their lives, an advocacy body for older people has said.
Age Action said changes to the qualification criteria for the pension would mean “significantly smaller” pensions for some people who become eligible from September of this year.
Changes in the average annual PRSI contribution bands were announced in the Budget in December.
They will mean a person with an average of 30 contributions per year, and who becomes eligible for the State pension after September, will be entitled to €29.80 less per week than someone with the same contributions who qualifies for a State pension today.
Under the proposals, the Government would introduce new, reduced rates of pension payment where new pensioners have a yearly average of less than 48 PRSI contributions.
This would involve the introduction of three new contribution bands (a 40-47 band, a 30-39 band and a 20-29 band).
Age Action spokesman Eamon Timmins said the changes would result in “an unexpected reduction of €1,500 in a person’s annual income for the rest of their lives”.
The charity asked Minister for Social Protection Joan Burton to allow those affected by the changes to make additional voluntary contributions to make up the shortfall in their pensions.
“The Government’s Comprehensive Spending Review estimates that 1,117 people will be affected this year by the changes, resulting in savings of over €2 million. This is expected to rise to 14,029 people and savings of over €25 million by 2015,” the organisation said.
Over 5,400 people would be affected by the change next year, with over 9,700 pensioners hit by it in 2014, and a further 14,000 in 2015.
Age Action called on the Department of Social Protection to do more to publicise the changes to for those who will become eligible from September “to enable them, even at this late stage, to plan financially”.
It also sought clarity on the Government’s longer-term plans for the State pension, after Minister for Social Protection Joan Burton yesterday indicated she was examining the possibility of bringing forward major changes which had been planned for 2020.
The charity said that regardless of the economic pressure on the Exchequer, there had to be clarity about the long term plans for the State pension, so people knew the level of income they would receive and so they could plan financially for the years ahead.
Head of the Retirement Planning Council, John Higgins, said today it appeared the Minister was signalling a system whereby the pension would be calculated on a system of total contributions rather than average contributions, much sooner than 2020.
This would affect people such as those who had left the workforce to rear children, and those who had entered the workforce early but had left the country for a period of time.
Mr Higgins said such people would be “badly hit” in terms of having the correct total PRSI contributions in order to qualify for a full pension.