Are pension rates further marginalising Ireland’s older generations?

“I find it hard to live on €233 a week and pay the property tax along with the everyday expenses like oil, phone, food and clothing and if one is lucky, like me, to own a car (it’s 10 years old) for getting the groceries that too can be a headache with rising costs of insurance and motor tax along with NCT bills and upkeep of the vehicle. It’s certainly hard.”

Growing old in Ireland should not mean growing afraid. But it does, for this pensioner who helped shape Age Action’s budget proposals last year, and for tens of thousands more. Pensioners struggling to cope with rising costs are afraid of losing their home because they are unable to pay the property tax.

Others make whatever sacrifice they must to keep their health insurance. They’re afraid of getting sick, of relying on our public health system, of prescription charges that have increased 500%, and of losing their medical card. And what’s more, it is the fear of being forced into a hospital or a nursing home because they can’t afford the extra help they need so they can stay home.

 

Hidden deductions

The majority of Irish workers do not have a private pension and, for most of those who do, its value to them in retirement will generally be less than the State Pension. This is why the State Pension is so important. A fair State Pension enables older people to age with dignity and with independence, keeping them out of poverty.

For those over 65, up to three-quarters of their income is made up of public transfers and this can be lost in a debate about pensions that too often focuses on the private sector. The impact of austerity on older people has been hidden because of the assertion, frequently made, that the previous Government protected the top rate of the State Pension. But this ignores two features of the recession for older people that attracted little attention.

While the State Pension was not changed, secondary income supports for older people were devastated. The Telephone Allowance, crucial for older people in rural areas to participate in the Senior Alert Scheme, was abolished. So, too, was the Christmas Bonus. The Fuel Allowance, particularly important for older people on low incomes, was cut and the value of the Household Benefits Package reduced.

Age Action has calculated that all of these cuts would be equivalent to cutting the State Pension by more than €13 between 2009 and 2015.

The second big change during the recession was introduced in 2012. The Government left the top rate for the contributory State Pension alone but made it harder to qualify for the lower payment rates. Before 2012, if you had an average of 20 social insurance contributions you would have been entitled to €228.70 per week. After these changes, this dropped to €198.60, a cut of more of more than €30 each week.

More than 40,000 pensioners, mostly women – exacerbating the gender pension gap – have ended up with pensions a fraction of the size they expected.

As with many other sectors of society, the last two budgets have seen some genuine efforts to heal the damage caused by seven successive austerity budgets.

In 2016, then-Tánaiste, Joan Burton TD, delivered the first increase in the State Pension since 2009 and last October, Minister for Social Protection, Leo Varadkar TD followed it up with a €5 increase that took effect in 2017.

Some of the cuts to secondary income supports have been partially restored. There has been some progress, but a lot more is needed.

Part of the problem is that new taxes, charges and rising prices in recent years, while affecting everyone, can have a greater impact on older people. This is particularly true with the property tax. Census data shows that 86% of those aged between 65 and 74 years and 89% of those aged over 75 years own their own homes. As property prices continue to rise, increases in the property tax are inevitable. This will pose the risk of serious hardship to older people who may own property but be reliant entirely, or mostly, on the State Pension.

 

Falling short of the goal

The impact of all of this is rising poverty rates among older people with 14.3% of those aged over 65 (around 85,000 older people) experiencing deprivation; this is up from 9.5% in 2009.

In a specific effort to ensure that those who depend on the State Pension would not fall into poverty, the National Pensions Framework committed to “sustain the value of the State Pension at 35 per cent of average weekly earnings”.^[i]

Preliminary CSO figures for the first quarter of 2016 indicate that average weekly earnings in the Republic of Ireland are €707.99, which would indicate a desired State Pension of €247.80, substantially higher than the current rate.

 

Recommendations

In Budget 2017, we must see a determined effort from the Government towards achieving the target set in the National Pensions Framework.

However, this issue is bigger than simply increasing the State Pension.

Proposed reforms, such as a mandatory second-tier pension currently being considered by the Department of Social Protection, are not without merit but should be considered a distant second priority to reforming, simplifying and improving the more important State Pension.

By 2041 there will be an estimated 1.4m people aged over 65, representing 20–25% of the population. Even with the retirement age due to rise to 68 by 2028, there is a legitimate question about the sustainability of the State Pension system.

This is not, as some have suggested, a demographic crisis. People are living longer, healthier, more active lives. This is one of the most underreported success stories of recent years.

But we do face a policy crisis as short-term thinking prevents us developing the solutions to the need to provide long-term care, to funding a State Pension that enables people to age in dignity and to supporting older people who want to continue working but fall victim to ageism and discriminatory mandatory retirement clauses.

The Government’s National Positive Ageing Strategy^[ii], which was published in 2013, was supposed to be the roadmap, pointing the way to how to build an Ireland in which no one fears growing old.

Four years on, implementation of the strategy has been patchy and uncoordinated.

The recent initiative from the Minister of State for Mental Health and Older People, Helen McEntee TD, to set up a forum to drive implementation forward is welcome, but it must be more than a talking shop — it needs to start delivering, not just for older people in Ireland, but for all of us who hope to grow old.

 

Notes

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^[i] National Pensions Framework (2010), pg 19. Available here.

^[ii] PDF available here.