Social Security in Ireland

The National Insurance Act 1911 established the principle of compulsory insurance for a broad range of workers. Its main components were unemployment insurance and a national health insurance scheme. It was the foundation of the welfare state in Britain and Ireland and subsequently provision for retirement was included.

The social security system developed faster in the United Kingdom than in the newly established Irish Free State. In 1941 the British Government as part of its plan for post-war reconstruction, appointed a committee to examine the whole subject of social insurance chaired by Sir William Beveridge. The Beveridge report was to have a strong influence on later developments, not only in the United Kingdom but also in Ireland. In 1935 Widows’ and Orphans’ Pensions, both contributory and non-contributory were introduced. The widows pension would cease on re-marriage and be convertible to the old age pension at 70 years.The Department of Social Welfare was established in January 1947. In October 1949 the inter-party government issued a white paper on social security. The white paper included a proposal for the introduction of a contributory retirement pension at 65 years for men and 60 years for women. The Social Welfare (Insurance No. 2) Bill 1950 contained the appropriate provision, but fell with the government in May 1951. The incoming Fianna Fail government enacted some of the white paper’s proposals in the Social Welfare Act 1952. However, the retirement pension proposal was not proceeded with.

The Social Welfare (Amendment) Act 1960 introduced# a contributory old age pension, eligibility for which was based upon the then social insurance provisions. The qualifying age was 70 years for both men and women and was later reduced to 66 years. The Third Programme for Economic and Social Development on 7th March 1969 announced the introduction of a limited scheme of retirement pensions for insured workers at 65 years#. Thus 21 years after it had first been proposed the Social Welfare Act 1970 introduced a retirement pension from October of that year. The later implementation of a state retirement pension in Ireland ensured equality in such scheme as between men and women. This provided pensions for insured persons aged 65 years and over who retired from their employment and who satisfied the contribution conditions.

In 1976 a green paper on a National Income Related Pension Scheme was issued by the Department of Social Welfare#. This followed the introduction of the State Earning Related Pension Scheme (SERPS) in the United Kingdom in 1975. Subsequently, no action was taken on an earning related state pension in Ireland. In view of demographic projections the National Pensions Board in its Final Report# expressed serious reservations as to whether such a scheme would be sustainable in the longer term.

Employees in the private sector who pay the full rate of Pay Related Social Insurance (PRSI) qualify for state pensions. Public sector employees have paid a reduced rate of PRSI which gave no entitlement to state social security pensions. Since 1993 those commencing employment in the public sector pay the full rate of PRSI and will receive a statutory pension which is integrated with the state retirement pension. The self employed were included in the State pensions from 1988. This inclusion currently contributes 2% to the funding of Social Welfare spending, however in the longer term the pay out of pensions to the self-employed could be quite costly.

The contributory pension and the state retirement pension schemes are financed out of social insurance contributions by employees and employers and out of general taxation. In 1995# 102,984 persons# were in receipt of the old age non-contributory pension (with a total of 111,787 beneficiaries); 69,179 were in receipt of the contributory old age pension (with a total of 87,323 beneficiaries); and 65,761 were in receipt of a retirement pension (with a total of 90,626 beneficiaries), the additional beneficiaries were in the main adult dependents. In Ireland current state provision compares well with the United Kingdom, and provides 65% of pre-retirement earnings as compared with 50%#. As a result in the increased number of elderly people and the economic changes that came from industrialisation, public provision# of support for the elderly has come to be the largest single social undertaking of governments in the developed countries. In 1995 in Ireland 25.3% of the total social welfare expenditure of £4.178 billion was devoted to old age provision. Between# 1990 and 2010 these costs were projected to rise from £1.1 billion to £1.5 billion (+26%), to reach £2.1 billion by 2015 (+75%) and £2.4 billion by 2035 (+102%).

The existence of the three state pensions puts in place the universal first pillar of retirement provision in Ireland. The social security pension provided by the State is meant to provide a minimum income in retirement. The percentage of pre-retirement income which it accounts for varies from State to State. It is generally accepted that an occupational pension is meant to top up the State provision to a reasonable level. There is no question that governments in western Europe are looking at private pensions as being of increasing importance in providing for an increasing aged population. Personal savings are an added bonus to retired persons and in Ireland, where they exist, they do not generally match the lump sum which can accompany an occupational pension.