State pension and poverty trap

Sir, – Given the erosion of the value of private pensions since the financial crisis, a growing proportion of private-sector employees and the self-employed will have to rely to a greater extent on the State pension than otherwise would have been the case.

The National Pensions Framework document published by the Government in 2010 formally announced the move from the current averaging system to a total contribution approach model based on a 30-year contribution requirement to qualify for a full State pension with a person accumulating 1/30th of a pension for each year of contributions up to a maximum of 30/30ths. However, the interim total contributions approach (TCA) model announced by the Government last week to apply to post-2012 pensioners is based on a 40-year contribution requirement.

This represents a major and significant policy change. If final TCA scheme to be introduced in 2020 is based on its 30-year contribution requirement, why use a 40-year contribution requirement for the interim fix? If on the other hand a full 40 years of contributions will be required to qualify for a full State pension, it automatically follows that a significant number of individuals currently in the labour force will suffer a considerable reduction in their pension entitlements.

If there is any justification of moving from a 30-year to a 40-year contribution requirement, such a move would have to be phased-in over a considerable period to prevent a poverty trap for the growing number of individuals who will be totally or significantly dependent on the contributory State pension as their sole income. – Yours, etc,




Co Limerick.