THE FUND into which every worker pays their PRSI contribution will run out shortly and face a deficit of some €4.4 billion by the end of next year, according to new official projections.
This contrasts with the findings of a 2005 review of the social insurance fund, which estimated it would remain in surplus for the next decade or more.
The fund is used to help pay unemployment benefit, State pensions, maternity benefit and redundancy and insolvency payments for those who make PRSI contributions.
Updated projections from the Department of Social and Family Affairs indicate the overall surplus will shrink from €3.4 billion last year to €360 million by the end of this year.
It will be exhausted within months and face a significant deficit by the end of 2010.
The deficit will place pressure on the Government to raise PRSI contributions from workers, or divert funds from the exchequer to pay out social insurance benefits.
The figures are contained in the department’s submission to the the Special Group on Public Service Numbers and Expenditure Programmes, also known as “An Bord Snip”.
The rate of increase on the Live Register this year and the continuing drop in contributions have contributed to the dramatic reduction in the fund, which has been in surplus throughout the years of the Celtic Tiger from 1997.
Minister for Social and Family Affairs Mary Hanafin has said the exchequer will make up any gap, but has acknowledged it will cause greater problems in framing a budget.
Separately, the document states that a number of cuts or cost-saving options are available to bring down social welfare expenditure.
These include abolishing the entitlement to “half-rate” payments for those in receipt of an existing welfare payment.
This includes the half-rate jobseeker’s benefit and carer’s entitlement.
The social insurance fund, meanwhile, has faced significant deficits before, with the Government making up almost a third of the fund’s contributions during the 1980s.
An actuarial review of the fund in 2005 advised that significant increases in contribution income would be required in future years.
The department, in the documents submitted to “An Bord Snip”, suggests building a closer relationship between contribution rates and benefit rates.
At present, for example, significant portions of the fund are not used for social insurance purposes and are used for health contributions and a training levy.
The document says recent contributions to the health levy will increase a person’s PRSI contribution without enhancing their right to any particular payment or service.
“This may have the effect of weakening the overall principle of social insurance in the mind of contributors (who may not be aware of the various elements of the overall contribution) as the overall amount payable will appear very much higher without any changes in benefit entitlement,” the document states.