Friday 19 October 2018

Fix for pension anomaly on the table - but 'new money' needed

Minister Regina Doherty
Minister Regina Doherty
Kevin Doyle

Kevin Doyle

A partial solution to the anomaly that sees thousands of pensioners lose out on €35 a week is on the table for later this year.

Social Protection Minister Regina Doherty has received a long-awaited report on the problem that estimates an immediate fix would cost well over €70m. The minister told the Dáil yesterday that something will have to "magically" happen if she is to find the money to instantly top up the pensions of 42,000 people.

"It is not that there is a pot of money sitting in the department somewhere that can resolve this," Ms Doherty said.

However, sources have indicated to the Irish Independent that the minister is not ruling out some movement on the issue in 2018.

The issue arises because of changes introduced in 2012, which altered how a person's State pension is calculated.

Eligibility for the State pension is based on an 'averaging system', where the total number of PRSI contributions made by a worker is divided by the number of years since they began work, when calculating the person's pension entitlement.

However, the rule changes negatively affected people who left the workplace before 1994 for a period of time, particularly women who left to raise families. Others are taking a pensions hit because they once had a summer job or worked part-time for a while.

Controversy erupted after last October's Budget when Finance Minister Paschal Donohoe admitted on radio that it was "bonkers and unbelievable" that women were losing out in this way. Ms Doherty subsequently commissioned a report to explore methods of restoring a higher pension rate to these workers, and the cost.

She has received the final recommendations in recent days and will present them to a Cabinet sub-committee today.

Sources said there was a desire to restore pensioners to the higher rate as quickly as possible but it would require significant investment that had not been budgeted for.

It is estimated that to restore payment from January 2018 would cost more than €70m, and the annual cost would increase by €10-12m a year as more people reach pension age.

In the Dáil yesterday, Ms Doherty said 42,000 people were "maligned by the averaging system because of the length of their service".

"I acknowledge that a disservice was done to those people through the averaging system. That was wrong," she said.

The minister said she "will fix it" but needs to first win over her Cabinet colleagues in order to secure the funding.

Fianna Fáil's Willie O'Dea said the changes were presented as "an equity measure" when they were introduced in 2012.

He wished Ms Doherty well in her negotiations with the Finance Minister in the coming days.

The minister replied: "I will be seeking new money and that new money does not exist today.

"I am grateful for the deputy's good wishes and if he could double and triple them over the next few days such that something magically would happen for me that would be great."

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business