Actuarial Review of the Social Insurance Fund to be undertaken

The Tánaiste and Minister for Social Protection, Joan Burton, T.D. advised the Government today (Tuesday, 22 March 2016) that an Actuarial Review of the Social Insurance Fund is to be carried out. The last actuarial review of the Fund was completed in June 2012.

The Tánaiste said: “The Minister for Social Protection is legally required to carry out an Actuarial Review of the financial position of the Social Insurance Fund every 5 years. The next Review must be completed by mid-2017. The Department is now commencing work in this regard. The outcome of this Review will inform the future Government in its considerations of appropriate social insurance pension and benefit levels, the financing of such payments, the value for money received by PRSI contributors, social insurance cover generally and the demographic and other pressures facing the Social Insurance Fund.”

The Social Insurance Fund operates on a pay-as-you-go basis, with the Exchequer acting as the residual financier of the Fund where there is a shortfall between PRSI contributions received and the cost of social insurance benefits paid.

The Social Insurance Fund was established in the early 1950s and annual Exchequer contributions were the norm for over 40 years. No Exchequer contribution was required during the period 1997 to 2007 as the Social Insurance Fund income exceeded the Fund expenditure. In 2008, the current operating balance went into deficit and the deficit accelerated rapidly in 2009 and 2010 when it reached €2.75 billion. This resulted in the requirement for an Exchequer subvention in 2010 as the accumulated surplus was exhausted. The Social Insurance deficit has reduced significantly in recent years and a surplus of €217m is expected in 2016. In the medium to long term, however, the deficit is expected to grow and significant Exchequer subventions will be required.

The Tánaiste added: “The current health of the Social Insurance Fund is tangible proof of Ireland's jobs recovery. When the Government took office, unemployment was soaring and would eventually peak at 15.1%, meaning fewer workers contributing to the fund and more people claiming necessary benefits. Our unrelenting focus on helping people back to work has seen unemployment fall to 8.8% now, and this jobs recovery, in tandem with a range of specific policy measures we've taken, has seen the fund return to surplus. Nonetheless, despite this projected surplus in 2016, the 2010 Actuarial Review found that, in the medium to long term a very significant Exchequer subvention will be required to meet expenditure requirements. In particular, the Review highlighted the fact that financing state pension entitlements, which are largely driven by demographic pressures, represents a major challenge."

The 2015 Actuarial Review will project the income and expenditure of the Fund over a 50 year period, taking into account policy, economic and demographic changes since the previous review was undertaken. In providing an assessment of the financial “health” of the SIF, the findings of the Review will contribute to the development of policy for social insurance benefits generally and for state pensions in particular.

The Department of Social Protection will, in carrying out the review, consult with a range of other relevant Departments and bodies including the Department of Finance, the Department of Public Expenditure and Reform and the Central Statistics Office.

ENDS

Note for Editors

Details on the Social Insurance Fund Income and Expenditure between 2011 and 2016

Findings of the 2010 Review

The 2010 Actuarial Review of the Social Insurance Fund looked at the 55 year period from 2011 to 2066. The principal findings from this Review were:

• assuming no action is taken the sum of all the annual deficits up to 2066, expressed in 2011 terms, is projected to be €323.7bn
• in the medium to long term, pension related expenditure will account for an increasing proportion of Fund expenditure- rising from 57% to 85% in 2066. The over 65 year old population is projected to increase from 11% of the total population in 2010 to 15% in 2020 and to 24% in 2060
• the pensioner support ratio is projected to decline from 5.3 workers for every individual over pension age in 2010 to 3.9 workers by 2020 and to 2.1 workers by 2060
• the Fund is strongly redistributive - those with lower earnings and those with shorter contribution histories continue to obtain the best value for money from the Fund
• the self-employed generally receive better value for money than employees (when account is taken of the employer contribution)