Heather Humphreys (Cavan-Monaghan, Fine Gael)
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A Roadmap for Pensions Reform 2018 - 2023 committed to:

(i) set a formal benchmark of 34% of average earnings for State pension contributory payments, and

(ii) Institute a process whereby future changes in pension rates of payment are explicitly linked to changes in the consumer price index and average wages.

The approach proposed by the Department, known as the smoothed earnings approach, was subsequently endorsed by the Pensions Commission.

Government subsequently decided that the Department of Social Protection would, in submitting budget options, set out a rate of pension payment calculated using the smoothed earnings benchmark approach as an input for consideration as part of overall Budget discussions, on an annual basis.

I can confirm that this calculation was prepared and submitted to Government as part of preparations for Budget 2024. In assessing Budget options, and taking account of this calculation, Government was mindful that the cost of living pressures are most acute over the winter period. For that reason, rather than taking a simplistic approach to applying an indexed rate of increase to weekly rates of payment, the Government decided to 'front-load' supports through the provision of once-off payments, including extra payments for pensioners receiving Fuel Allowance, those in receipt of carer’s payments and those living alone.

These payments were provided in addition, not only to the €12 increase in the weekly payment rate, but to the double week payments delivered in December last and this January.

This combination of once-off payments in conjunction with the €12 weekly rate increase, not only exceeds the value of a benchmarked increase but ensures that a significant proportion of this value is delivered when people need it most over the winter period.

For example, the value of the double payments for a single pensioner is €542.60 – equivalent to over €10 per week from these two payments alone.

Pensioners living alone, and in receipt of Fuel Allowance will have received bonus payments of €500 – equivalent to a value of about a further €10 per week.

In addition, the ESRI post-Budget analysis shows that the approach taken by the Government is progressive in nature and that households, including pensioner households, are better off compared to a purely indexed linked approach.

The smoothed earnings calculation will be assessed in the coming months and submitted for consideration of Government as part of the preparations in advance of Budget 2025.

Any changes to the State Pensions, both Contributory and non-Contributory would need to be considered in an overall budgetary and policy context.

Heather Humphreys (Cavan-Monaghan, Fine Gael)
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The Roadmap for Social Inclusion contains a commitment to develop a benchmarking approach for use in adjusting the value of State pension payments. The approach proposed by the Department, known as the 'smoothed earnings' approach, was subsequently endorsed by the Pensions Commission.

Government subsequently decided that the Department of Social Protection would, in submitting budget options, set out a rate of pension payment calculated using the smoothed earnings benchmark approach as an input for consideration as part of overall Budget discussions, on an annual basis.

The smoothed earnings benchmark references both price and earnings elements in its calculation. The relevant CSO earnings statistic, published quarterly, is the Average weekly earnings, excluding irregular and overtime earnings. The smoothed earnings calculation averages this statistic over the most recently available 4 quarters of CSO data.

The current State Pension rate of €277.30 per week.

Average weekly earnings, excluding irregular and overtime earnings, is produced by the CSO, and is available on the CSO website (EHQ03, Average Earnings, Hours Worked, Employment and Labour Costs).

The CSO has released final values for this statistic in respect of Q1, Q2 and Q3 of 2023 and a preliminary value for Q4 2023.

Averaged over these four quarters, average weekly earnings are €834.70. The State Pension rate of €277.30 per week currently represents 33.2% of average weekly earnings.

Any changes to the State Pensions, both Contributory and non-Contributory would need to be considered in an overall budgetary and policy context. The smoothed earnings calculation will be assessed in the coming months and submitted for consideration of Government as part of the preparations in advance of Budget 2025.