Plan to increase pensions and social welfare in line with pay rises

Officials in the Department of Social Protection are preparing plans to benchmark the pension system.

Civil servants will then move to see if it is possible to link dole rates to the average industrial wagee.

Junior Social Protection ­Minister Joe O’Brien said: “There has long been a good case for benchmarking but I think the current cost-of-living situation has highlighted its potential as a protective tool for those dependent on welfare payments.

He said that the Government has committed to examining benchmarking both pensions and social welfare payments.

The Irish Independent previously reported details of the pension overhaul which would see five different pension rates, with the official State pension age staying at 66.

However, people who will be retiring later will be getting larger pensions.

It is expected the overhaul of pensions will include the new benchmarking system.

Green Party TD Mr O’Brien said the Government is also looking at benchmarking social payments.

“There is a key commitment in the Roadmap for Social Inclusion in relation to benchmarking,” he said.

“At the moment we are looking at the whole pension system and once we have that finalised there is a commitment to consider and prepare a report for Government on the potential application of the benchmarking approach to other welfare payments.”

Civil servants will then move to see if it is possible to link dole rates to the average industrial wage, which according to 2020 CSO figures, is €49,000 per year.

Mr O’Brien said there is a “good case” for benchmarking dole payments due to the cost- of-living crisis.

Wages are not guaranteed to rise when inflation hits but they do tend to increase over time as the cost of living increases.

Benchmarking both pensions and social welfare payments to wages would help insulate older people and those reliant on benefits against the impact of rising inflation.

“It does get more complex outside of pensions but nevertheless the commitment is there,” Mr O’Brien told a pre-Budget forum in recent days.

“There has long been a good case for benchmarking but I think the current cost-of-­living situation has highlighted its potential as a protective tool for those dependent on welfare payments.”

Officials are using a report from 2001 on benchmarking and indexation as a reference.

The social benchmarking and indexation group said in the report that while social welfare rates each year would have to reference average earnings from previous years, this would mean they are behind by a year at all times due to the budgetary process.

According to the report, a benchmark for social welfare payments should represent an income standard similar to the State support.

However, the report says that it is “fundamentally necessary” to put in place a “formal linkage” between the welfare rates and average earnings to make sure the income of welfare is up to speed with the rest of the wider population.

A spokesperson for the Department of Social Protection said that with regard to the value of welfare payments, recipients should have their purchasing power protected.

Officials have developed an approach called “smoothed earnings”, which protects the value of welfare payments.

“The approach developed, known as the ‘smoothed earnings’ approach, aims to ensure that the relative value of welfare payments, compared to market earnings, would be maintained over time and that, in the short term, the real value, or purchasing power, of these payments would be ­protected,” the spokesperson said.

“The Pensions Commission report also examined the issue of benchmarking pension rates and has endorsed implementation of the ‘smoothed earnings’ approach.”

Officials have not yet decided what percentage of the average industrial wage should be linked to pensions or social welfare rates.

Efforts to benchmark pension and social welfare rates are expected to be welcomed by campaigners, who have long called for rates to be linked to average wages.

Co-director of the Nevin ­Economic Research Institute, Tom McDonnell, recently called for the benchmarking of welfare rates after figures from a parliamentary advisory body said pensioners are down €12 per week.