Over 35,000 pensioners hit by cuts of up to €1,500, says report
State pension changes cut money for thousands, claims Age Action
According to a report from Age Action, more than 35,000 pensioners had their pensions cut because of changes introduced to the eligibility criteria for the contributory State pension in 2012. Photograph: Bryan O’Brien
More than 35,000 people, two-thirds of whom are women, have had their State pensions cut by as much as €1,500 a year as a result of changes introduced in 2012.
According to a new report from Age Action, the body which promotes positive ageing, more than 35,000 pensioners had their pensions cut because of changes introduced to the eligibility criteria for the contributory State pension in 2012. While those entitled to a full pension have been unaffected by the changes, many of those who would have been in line for smaller pensions lost out.
“We need to put to bed the myth that the State pension was protected by the last government. It was cut, drastically cut, for tens of thousands of older people who have lost substantial sums of money as a result,” says Justin Moran, head of advocacy and communications at Age Action.
Back in 2012, the government changed the eligibility criteria for a full pension, which will be paid at a rate of €235 a week from March 2017, making it more difficult for people with irregular PRSI contributions to get a decent pension. At the time, the government argued that the changes were necessary to protect “core payments” and ensure sustainability of the State pension. However, one side effect of the changes has been to diminish the entitlements of some 36,000 pensioners.
The changes mean that someone who briefly worked in the 1960s, and then went back to work in 2000, is entitled to a far smaller State pension than someone of the same age who just started work for the first time in 2000.
Under the old system, if you had an average of 20 PRSI contributions a year, you would be entitled to payment of €228.70. But after 2012, this dropped to €198.60, a cut of more of more than €30 each week. Women, who historically would have spent more time out of the workforce, either as a result of the marriage bar – which only ended in 1973 – or to raise their families, have been particularly hit by the changes.
Figures from Age Action show that 22,248 women, or 62 per cent of the total 36,000 who have been affected by the changes, are women. Unsurprisingly then, the figures also show that females account for just 21 per cent of those who receive the full-rate contributory pension – to qualify for a full contributory pension, you now need 48 or more yearly contributions.
The situation is compounded by the so-called “averaging rule”, which means that entitlement to a pension is calculated by the number of PRSI contributions a worker has made, divided by the number of years between her first day of work and her retirement.
“This means that someone who worked for a few months in the 1960s and then went back to work in 2000, gets a far smaller pension than someone of the same age who just started work in 2000,” says Mr Moran.
While the Homemaker’s scheme, which provides a disregard of up to 20 years for time spent away from the workforce, partly addresses the gap, it only applies from 1994.
“Because the current generation of pensioners get no benefit from the Homemaker’s scheme, it makes it difficult for them to qualify for a full State pension,” says Mr Moran.
To address the shortfalls, Age Action is calling on Minister for Social Protection Leo Varadkar to make a number of changes, including removing the band changes and backdate these; backdate the Homemakers’ Scheme to ensure all women retiring from now on and who cared for children will benefit; and include gender disaggregation on the levels of payments under all State pension schemes in annual statistical reports.