Will new pension commission cut my State pension?

Is the new Pensions Commission being set up by the putative coalition to look at changes in the pension age and other things likely to include discussions on TCA as well ?

I’m 66 in July 2021. TCA would significantly reduce my pension as I have only been paying in for about 17 years. Is the new Commission likely to come up with concrete proposals before then?

Mr K.A., email

Putative coalition indeed. As you read this, the three parties aspiring to form the new government are counting the votes of members on the issue. We, the electorate will know the outcome on Friday – 140 days after votes were cast in the general election.

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Assuming they do get it across the line, which is not a certainty by any means, changes on both the state pension age and, almost certainly (though the wording in the proposed programme for government is vague), a move to the new Total Contributions Approach (TCA) will be put on ice pending the deliberations of a yet to be formed pensions commission.

Pensions was the surprise issue of the election and quickly became a populist political football after emerging on the doorsteps. Parties, caught unawares, started outdoing each other in making promises without the benefit of even a “back of the envelope” assessment of cost.

As with most of the ongoing dithering on pensions, the price in the longer term will likely be paid by the more financially vulnerable of our children and grandchildren – but then, they’re not voting for the current generation of political “leaders”.

Your concerns are altogether more immediate.

Entitlement

The outgoing Government confirmed a new way of calculating entitlement to the State pension. It was designed to be fairer to people who opted, or were effectively forced, to take time out from the workforce – mostly to raise children or care for older relatives.

TCA – the Total Contributions Approach – as currently constituted will still require you to have 40 years of paid or credited contributions to secure a maximum state pension.

The good news from your point of view is that you are likely to slip in under the wire and benefit from the current regime

At present, if you are fortunate enough to start work in Ireland late in life, you can secure a full pension of close to €250 a week with just 10 years of contributions. If, however, you worked those 10 years over a 40-year working life, you will get just under 40 per cent of the State pension – less than €100 a week.

And if you were ill-advised enough to start working in your teens and have to spread those 10 years over a 50-year working life, you won’t qualify at all and will have to rely instead on a means test to secure any pension payment.

The new regime was due to come into operation this year. That would have left you at a loss. As it stands, you will be eligible for a full state pension; under the new rules that sum would be more than halved.

You have already benefited from the deferral of the scheme as the Department of Employment Affairs and Social Protection hammered it into shape. Now, as you note, we are facing the prospect of a new pensions commission.

Contributions

While this is predominantly concerned with squaring the circle on the issue of the state pension age, contributions are another of the factors to be considered. So the introduction of TCA is likely to be deferred further until the commission reports.

Again, assuming the aspiring partners form a coalition – and assuming no drift in timelines (always an optimistic assumption) – the pensions commission is due to report in June 2021, with the proposed programme for government committing to act on recommendations within six months.

Whether they will or won’t is, at this point, moot. The good news from your point of view is that you are likely to slip in under the wire and benefit from the current regime as you will likely be retiring a month after the report is scheduled to be completed, and well before any action is taken on it.

And, of course, you will also have benefited by the decision of the parties not to increase the pensionable age to 67 in January 2021 as originally planned. Lucky man.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.