The Government will have to find €55m next year to cover the cost of fixing the 2012 pensions anomaly relating to carers who took time out of their careers.
The detail of the cost in fixing the issue is revealed in a new report by the Department of Social Protection.
Last January, the Government decided to allow State pension (contributory) recipients affected by the 2012 changes in rate bands to have their pensions entitlement calculated on a total contributions approach basis.
The changes included a provision for up to 20 years of a new “HomeCaring credit”. This would benefit people whose work history includes an extended period of time outside the paid workforce, raising families, or in a full-time caring role.
According to the report, reviews will commence in the final quarter of this year, with the first payments being made in the first quarter of 2019. It is estimated the full-year cost will be in the region of €35m.
“Backdating to March 2018 will cost an estimated €20m, resulting in a 2019 cost estimated at some €55m. This is not currently included in the [department’s] 2019 ceiling,” he said.
The report, prepared as part of considerations of Budget 2019 in October, concludes that small “across-the-board increases” in weekly rates to pensions and other benefits are “very expensive, circa €70m for a €1 increase”.
The report says an alternative approach could be to focus available resources on targeted improvements for the most vulnerable people, particularly those most at risk of poverty.
“For example, further increases in the Qualified Child Increase payments could positively affect child poverty. Such an approach would also make the welfare package very progressive in its impact. The Back-to-Work Family Dividend scheme and improvements made to the Working Family Payment in recent years have helped to ensure that such measures do not negatively impact on employment incentives,” states the report.
It says the 2019 spending budget for the department is €20.257bn, with a capital expenditure allocation of €14m.
This is €246m greater than the ceiling for 2018. The 2019 ceiling allows for an increase in expenditure arising from demographic pressures in relation to pensions, child benefit, and disability- and caring-related payments.
It provides for a reduction, due to declining numbers, in jobseeker payments. Specifically, it allows for €50m in Live Register savings, which is equivalent to a circa 5,000 reduction in the average weekly Live Register in 2019.
It should be noted that many of the measures in Budget 2018 were introduced over the course of the year, rather than from January for the full year.
The €5 weekly rate increase and changes to the Working Family Payment thresholds commenced in March, for example, and the Telephone Support Allowance was introduced in June.