Value of state's unfunded social welfare pensions: €359 billion

NoRegretsCoyote said:
(A) will not happen. This is one AAM myth that refuses to die. There will always be a contributory state pension which is more than the means-tested one.

(B) is likely - it wouldn't surprise me if in my own retirement the SPC is lower in real terms than it is today. Indeed it is lower than it was a year ago and there is barely any notice of it!
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1) Hard Times require Hard Decisions.
2) The government in the past has 'Raided and Robbed' our pensions, as ranted about by Joe Duffy on the RTE only yesterday.
3) Other countries have interduced a means test for state pensions. Eg Australia: https://www.servicesaustralia.gov.au/assets-test-for-pensions?context=22526
 
There is a social insurance and a social assistance State Pension.

Social insurance = based on SI conts
Social assistance = means-tested, non-con

I don't think both could be means-tested?

Any suggestion of means-testing all State Pensions implies abolishing the social insurance State Pension, as far as I can see?
 
@Towger
Note that the State Pension is Australia is social assistance, not social insurance:



Australia has a three-pillar pension system. The first, public pillar, is composed of a means-tested, tax-financed Age Pension that provides basic benefits. The second pillar forms the backbone of the Australian pension system, and is made up of funded individual pension accounts provided by superannuation funds. The third pillar involves individuals contributing to their superannuation funds or to Retirement Savings Accounts (RSAs).?

Public Pensions
Australia's state pension system operates on a non-contributory basis and is financed by general tax revenues. The Age Pension provides means-tested benefits for men over 65, but at different ages for women, based on their date of birth. By 2014, however, the age limit will be set at 65 for both men and women.
 
NoRegretsCoyote said:
(A) will not happen. This is one AAM myth that refuses to die. There will always be a contributory state pension which is more than the means-tested one.

(B) is likely - it wouldn't surprise me if in my own retirement the SPC is lower in real terms than it is today. Indeed it is lower than it was a year ago and there is barely any notice of it!
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As I far as I recall the Additional Dependant payment used to be not means tested but now is. Personally, I never really bought into the concept that PRSI was an insurance premium. Like the Health Levy etc. I just saw it as an additional tax albeit there is an attempt to target at those who might enjoy the benefits but it is very loose as all employees pay the same irrespective of the risk of say being unemployed.
Now that I am in receipt of the €260 a week payment I feel that it is a bonus rather than an entitlement.
Having said that the majority of DB schemes where what are called "integrated" with the State pension. That obviously assumed that it would not be means tested. To renege on that retrospectively would be a huge political decision.
 
Duke of Marmalade said:
That obviously assumed that it would not be means tested. To renege on that retrospectively would be a huge political decision.
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It would result in civil disobedience, mass protests, fall of government. Unless we plan to go down the Russian road of totalitarianism but we don't have the military and security forces for that. In a word the government would not be strong enough to implement such a change.

It wouldn't just affect people entering retirement but all working people as suddenly the prsi they are paying will not provide them with a pension that they had been expecting.
If the government was to reach a financial crisis where they could no longer afford it, they would have to reduce all pensions and welfare payments equally.
 
joe sod said:
It wouldn't just affect people entering retirement but all working people as suddenly the prsi they are paying will not provide them with a pension that they had been expecting.
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It doesn't provide them with that now. It is provided from general taxation. If the PRSI people paid was enough to fund the State pension they will receive then this conversation wouldn't be taking place.
 
joe sod said:
It would result in civil disobedience, mass protests, fall of government.
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To me, this is why they'll always go the inflation route. People don't understand it and the cause of it can be obfuscated. Even the (fairly mild, in my opinion) austerity we had after the banking crisis was met with huge public resistance and anger. If that had not been forced on us by Europe and we had our own currency don't you think they'd have printed/inflated before resorting to austerity?

The fact that we're part of the euro, and our monetary policy is not within influencing range of our politicians may save us from ourselves to some degree, assuming the general monetary policy of Europe doesn't follow that path anyway of course.
 
Sophrosyne said:
If an individual has paid sufficient contributions to qualify for a full State contributory pension, why would it then be means tested?
Where did that come from? It make no sense.
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When the retirement age went up to 66 the idea was that if you had the cheek to retire before 66 instead of having COAP you'd be on a means tested s/w payment between 65 and 66.

Now so far that's not played out and from what I remember people get some form of jobseeker's benefit for the year but don't have to jobseek. (Presumably if you instead retire at closer to 60 however you only get a means tested payment for that year?)

But that's one way you move people on to means tested payments, shove up the retirement age. It's not COAP being means tested - but you get means tested for the substitute payment instead - until you become eligible for COAP.

While hard to see anyone trying to push up retirement ages now, it might happen at a time where a government can tell you it's a a choice of closing hospital beds or moving the retirement age.
 
I think we need some context.

The State pension is primary a mechanism to keep people out of poverty.

Where it is the only income source that’s just about what it does.

In 2016, the Social Insurance Fund (SIF) had a surplus of €454m, the first surplus since 2007. Further surpluses of €731m, €1,134m and €1,569m were recorded in 2017, 2018 and 2019 respectively. The accumulated surplus at the end of 2019 was almost €3.9 billion.

The eventual erosion of the SIF fund, in February 2021, was due to pandemic-related supports and reduced PRSI contributions.

The Government has accepted most of the recommendations put forward by the Commission on Pensions – and that reforms and PRSI increases will be introduced gradually.
 
Sophrosyne said:
If an individual has paid sufficient contributions to qualify for a full State contributory pension, why would it then be means tested?
Where did that come from? It make no sense.
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Hi Sop

When the country defaults on its national debt and is unable to borrow any more, very little will make sense.

Sophrosyne said:
The State pension is primary a mechanism to keep people out of poverty.
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That is the role of the non-contributory pension. Many of those receiving the Contributory OAP would survive fine without it. They would just leave less money to their children.

Brendan
 
That is hardly helpful. Is it likely to default?

The same hyperbole was used during the banking crises.

No! That is the primary role of both contributory and non-contributory pensions.

Thinking that the contributory pension is something else does not make it so.
 
The state is very likely to default. We are using artificially high tax receipts during a boom to just about stay within our means.
When anything goes wrong, we will be in a huge defict.

And we are simply unable to address long term problems of reducing the pension or increasing contributions.

The objective of the non-contributory pension is to give an income to people who have no other income.

Not sure you can say that about the contributory pension. Most have other income and they would not be in poverty without it.

It will be means-tested at some stage. There won't be any other option.

Brendan
 
That's your opinion Brendan but I think it is an exaggerated one.
The State has had worse challenges since its inception.
 
Sophrosyne said:
That's your opinion Brendan but I think it is an exaggerated one.
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The forecasted costs and demographic changes over the next 50 years suggest otherwise.
Sophrosyne said:
The State has had worse challenges since its inception.
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Yes, and we got poorer in real terms for the first 40 years after independence. Much of that was self inflicted. It is only since the last 1980's that we have been reasonably well run fiscally but much of our current prosperity is funded with deferred taxation (borrowing) and the current taxation boom which Brendan mentioned.
 
I don't think the State will default on its legal borrowings such as Irish Government Bonds but it certainly will reduce the real value of the pensions paid to future generations compared to the pensions paid to today's pensioners

That is an implied promise not kept, but not a default.
 
It is more likely that PRSI contributions will increase - see the Commission on Pensions report referenced above.

The reforms mentioned in that report are intended to take place from 2024.
 
Sophrosyne said:
The Government has accepted most of the recommendations put forward by the Commission on Pensions – and that reforms and PRSI increases will be introduced gradually.
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The population is approaching retirement gradually so significant reforms could be in place by the time they retire regardless of how gradually they're done.

There's a recommendation from that report - recommending that people currently in their 50's are moved onto means tested benefits until 68 instead of COAP.

In preference to this the government was talking about a penalized COAP pension for people who retire earlier than 70.
The government won't have to say, "you've a 20k p.a private pension you don't get the full COAP", they get the worker to say "I've a 20k p.a private pension I'll opt to retire and take the reduced COAP". Much the same result as means testing but better optics.

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
 
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