Report of the Commission on Pensions
From Department of Social Protection
Published on
Last updated on
From Department of Social Protection
Published on
Last updated on
Report of the Commission on Pensions: Executive Summary
Pensions Commission: Work of the Commission Infographic
Pensions Commission: The State Pension Challenge Infographic
Technical Working Paper 1: Population and Labour Force Projections
The Commission supports measures that encourage economic growth and competitiveness and increase labour market participation, including for older workers.
The Commission recommends that any of the proposals that are progressed by Government are subject to further gender, equality and poverty proofing.
The Commission emphasises the need for enhanced transparency, and recommends ongoing communication relating to State Pension reform to secure public understanding of the importance of sustainability, certainty and poverty prevention.
The Social Insurance Fund (including the State Pension system) should continue to be financed on a Pay-As-You-Go basis.
The Commission recommends the creation of a separate account in the Social Insurance Fund (SIF) for State Pensions. The separate identification, accounting, and reporting of State Pension contributions will provide transparency in relation to how State Pensions are financed, and the Fund’s ability to meet its commitments on an ongoing basis.
The Commission supports the principle of annual Exchequer contributions to the ‘State Pension’ account of the SIF. Rather than rely on Exchequer subventions only when the SIF is in deficit, the State should identify and allocate a separate Exchequer contribution to the SIF State Pension account.
The Commission endorses the early introduction of an automatic enrolment retirement savings system, which will introduce a funded component to the pension system and improve retirement income adequacy for future pensioners.
The Commission recognises and supports the State Pension system as the bedrock of the pensions system, and its first pillar function of preventing pensioner poverty.
The Commission endorses the general principle of benchmarking and indexation of State Pension payments.
To ensure that the State Pension system continues to provide a level of income that effectively prevents pensioner poverty, and to address public calls for certainty in the value of State Pension payments for current, upcoming and future pensioners, the Government should immediately implement the smoothed earnings approach the benchmarking and indexation as outlined in the Roadmap for Social Inclusion 2020 – 2025.
The Commission supports the establishment of an independent standing body that would advise Government on pension rates of payment as calculated initially by the smoothed earnings benchmarking and indexation mechanism recommended above, in a manner analogous to the Low Pay Commission as proposed in the Roadmap for Social Inclusion 2020 - 2025.
The Commission recommends that this body and its functions be established on a legislative basis.
The Commission commends the recent policy approach to Budget increases in the Living Alone Allowance and recommends that this pattern of enhanced increases in the weekly rate of the Living Alone Allowance continue to provide targeted support to single pensioner households who are at greater risk of poverty.
The Commission recommends that the full transition to a Total Contributions Approach and the abolition of the Yearly Average approach to calculating entitlement to the State Pension Contributory rate of payment should be implemented as soon as possible, pending the passage of necessary legislation and IT system changes.
The Commission recommends that for those who are better off having their pension entitlement calculated under the Yearly Average approach, a phased transition to the Total Contributions Approach should apply gradually over a 10 year period.
In terms of the specific design of the Total Contributions Approach (TCA), the Commission recommends that the current ‘Interim’ TCA should become the definitive TCA i.e. 40 years – or 2,080 contributions – required at State Pension age to qualify for a maximum rate pension. This includes 10 years of credited contributions and 20 years of HomeCaring periods, but with a cap of 20 years combined credited and HomeCaring periods.
The Commission recommends the issuing of regular PRSI contribution statements in an easy to understand format so that PRSI contributors are aware of their level of contributions and how this relates to the level of State Pension Contributory that they can expect to receive. These could be made available in real-time on MyGovID or could be issued to a person’s digital post-box.
The Commission recommends that long-term carers (defined as caring for more than 20 years) should be given access to the State Pension Contributory by having retrospective contributions paid for them by the Exchequer when approaching pension age for any gaps in their contribution history arising from caring.
The contributions would be exclusively for State Pension Contributory purposes, and would be recognised as paid contributions both for the purposes of the qualifying for the State Pension Contributory and for the purposes of calculating pension rate entitlement under the Total Contributions Approach.
The relevant Government Department(s) should examine, in conjunction with relevant stakeholders, options for the creation of a statutory ‘Family Carer Register’ which could, in time, facilitate the identification of long-term family carers for State Pension Contributory purposes as well as assisting in the planning and delivery of services for family carers. This could be considered as part of the Programme for Government commitment to update the National Carers’ Strategy.
The Commission recommends aligning retirement ages in employment contracts with the State Pension age, by introducing legislation that allows but does not compel an employee to stay in employment until State Pension age. Any such legislation must meet the standard required by the Equality Directive (objectively justified by a legitimate aim as set out in Article 6)
The proposed policy objectives of this legislation would be that:
The Commission supports measures that facilitate and encourage fuller working lives. Social partners, relevant Government bodies, and the Workplace Relations Commission should consider and issue guidance on measures to facilitate those who wish to continue working past retirement age, with proposals to be considered at appropriate fora, including the Labour Employer Economic Forum.
The Commission recommends a review by the relevant Government Department or statutory body to:
By a significant majority (10 out of 11 members *), the Commission recommends a gradual incremental increase in the State Pension age by three months each year commencing in 2028, reaching 67 in 2031 (10 years from now), with further increases of three months every second year reaching 68 in 2039.
* The member nominated by ICTU did not support any increase in the State Pension age.
The Commission recommends that access to the State Pension should be on a flexible basis.
The Commission recommends that a person may choose to defer access to the State Pension up to age 70, and receive a cost neutral actuarial increase in their State Pension payment.
The Commission recommends that a person can continue to pay social insurance contributions past State Pension age at their existing PRSI contribution rate (employees, employers and the self-employed) to improve their social insurance record for State Pension Contributory purposes.
These PRSI contributions will enable individuals without a full contribution record (and who have deferred access to the State Pension) to become entitled to the State Pension Contributory, or increase the pension rate of payment, as a consequence of the additional paid contributions.
As an option for Government to consider, done in conjunction with a State Pension age increase, the Commission sees merit in recognising long PRSI contribution histories by including a provision whereby those who choose to retire at 65, and have a long Total Contributions (TCA) record of 45 years, may receive a full pension.
The Commission recommends increasing the self-employed PRSI contribution rate. In the first instance, the Commission recommends that Class S PRSI for all self-employed income is gradually increased from 4 per cent to 10 per cent. In the medium term, the Class S PRSI rate should be set at the higher rate of Class A employer PRSI (currently 11.05 per cent).
Increase the Class A rate of PRSI for both employers and employees.
The Commission considered a range of PRSI base broadening measures.
The Commission recommends maintaining the exemption from PRSI on all social welfare payments.
Other than social welfare payments, the Commission recommends removing the exemption from PRSI for those aged 66 or over.
The Commission further recommends removing the exemption to pay PRSI on supplementary pension income (occupational and personal pensions, and public sector pensions).