Changes to the State pension system is like trying to play whack-a-mole

TRYING to make changes to the State pension system is like trying to play whack-a-mole. The arcade game sees players use a mallet to hit toy moles that appear at random. Every time one mole is dealt with, another appears.

Changing the State pension to rid it of anomalies is similar. If you eradicate one anomaly, another will pop up elsewhere.

Social Protection Minister Regina Doherty announced changes last month to fix an issue where 42,000 people, mostly women, have received small State pensions because of breaks in their employment.

At the time she said the Government plans to work out how much of a State pension people will get by moving to a total contributions approach (TCA) by 2020. This will base pension entitlements on how much a person pays in PRSI over their lifetime.

It is in contrast to the current system of people getting credits for each year of PRSI contributions, with a banding system within that determining the exact weekly amount of pension.

Just to confuse matters, the new TCA approach will also involve banding. But in fixing the current anomaly the minister may have created an expectation that those retiring from 2020 will get less than the current batch of people who retired since 2012 are getting.

What this means is the banding to be used in the new TCA will have to be relatively generous to ensure a 2021 retiree will not get a lower pension than a 2019 retiree with a similar contribution pattern, according to pensions expert Tony Gilhawley of Technical Guidance.

Making sure there will be no anomalies between the current fix and the new TCA approach will be a mammoth undertaking. It is almost inevitable people will emerge post 2021 with a new anomaly.

In trying to solve these anomalies we seem to be moving towards a universal pension system, where a basic pension is payable to all citizens, regardless of whether they have worked or not.

It would be controversial, but a lot simpler than the mishmash we have at the moment.

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