Closing Case Study: The Policy Cycle in Practice - State Pension Reform

The following case study illustrates the policy cycle in practice using the example of the introduction of state pension deferral in 2023. The case study also highlights that it can take many years between the first consideration of a policy demand and the implementation of a policy response. For a policy to reach the final phase of the cycle, it requires the alignment of public support, political will, and the availability of a feasible solution. (18)

(18) If you are interested in learning more on this area, Kingdon’s Multiple Streams Framework is one representation of the conditions required for progressing policy.

The State Pension (Contributory) (SPC) is paid to people over the age of 66 who have enough qualifying social insurance contributions. Prior to 1 January 2024, the rate a person received was only calculated based on their contribution history on their 66th birthday.

Since the early 2000s successive Irish governments committed to supporting and encouraging fuller working lives. As people lived longer and healthier lives, many individuals were continuing to work further into their later years. However, they had no option to continue to build contributions towards their state pension after age 66.

In addition, there were those who, for various reasons, did not have the minimum number of contributions needed to qualify for the SPC by the time they reached 66 years of age. Even if they continued working after 66, they could not build contributions to allow them to qualify.

There was a question as to whether the ‘one size fits all’ approach of the Irish State Pension was appropriate.

Solutions to the issue had been considered for several years. A Green Paper on Pensions was published in 2007, followed by a National Pension’s Framework in 2010 which included the policy agenda to enable ‘postponement’ of the SPC. The ‘Roadmap for Pension Reform 2018-2023’ included a commitment to develop proposals for a State pension deferral scheme, while the Programme for Government 2022 committed to introducing a system to enable people to defer receipt of their state contributory pension and establishing a Commission on Pensions to examine sustainability and eligibility issues with state pensions.

A Pensions Commission was formed in November 2020. Its role was to examine sustainability and eligibility issues with regard to the State Pension. The Commission was an independent body comprised of knowledgeable and experienced academics, pension experts, members of civil society and representatives of workers and employers. The Terms of Reference for the Commission included an examination of pension deferral. (19)

(19) gov.ie - About the Pensions Commission

Over the course of its work, the Commission invited experts to present and speak to the Commission on specific issues. It also conducted a public consultation process, which resulted in over 200 individual and organisational submissions and over 1,100 online survey responses. The Commission reviewed the evidence and submissions and published its final report in October 2021. The report established that changes were needed to the State Pension system and it set out a wide range of recommendations in this regard, including deferral.

Officials in the Department of Social Protection examined each of the recommendations of the Commission and consulted across Government through the Cabinet Committee system. This department also considered the views of the Joint Committee on Social Protection, Community and Rural Development and the Islands, and the Commission on Taxation and Welfare as part of these deliberations.

The department also did an actuarial analysis to examine the likely cost and impact of various policy options. It considered the political, social, and operational context to make sure that policy advice was evidence-based, legitimate, and implementable. Based on the consultation and analysis, officials provided policy advice to the Minister as to how to respond to the Pensions Commission recommendations.

Officials in the Department of Social Protection prepared a memorandum for Government outlining the proposed policy direction and brought it to Cabinet for approval. In September 2022, the Minister for Social Protection announced landmark reforms to the State Pension system. Among these was the introduction of a pension deferral system which gave people the option to delay drawing their SPC until age 70 in return for an actuarially adjusted higher rate of pension. The department communicated these reforms to stakeholders and the general public. (20)

(20) gov.ie - Minister Humphreys announces landmark reform of State Pension System in Ireland

The decision to provide for pension deferral had significant legislative, operational, and policy implications within and outside the Department of Social Protection.

Legislative matters: The conditions for payment of SPC are governed by legislation which would need to be revised.

Operational matters: State Pension applications and payments were managed using complex IT systems which would need to be redeveloped to support deferral.

Policy matters: Deferral of the SPC had implications on the payment of other social welfare payments such as job-seekers benefit, and the deduction of PRSI from employee income, which impacted on the work of the Revenue Commissioners.

The government commitment was that this policy would be effective from 1 January 2024. To ensure delivery of this policy decision on time, the department established a project team to coordinate the various strands of work internally and to liaise with key stakeholders externally. The project team consisted of representatives from affected policy areas, operational teams, and IT. Team members also worked closely with legislation staff and external stakeholders including other government departments and the Office of the Attorney General.

A communications strategy was developed to inform the public of the upcoming changes, with a combination of print, radio, and online information pieces. The communications team worked closely with the pension policy and operational teams to ensure the information was accurate and informative.

Primary legislation for state pension deferral was passed in December 2023, and the policy came into effect from 1 January 2024, supported by an extensive media campaign. At this point, the department began closely monitoring policy implementation, pensions data, media coverage, and public representations. As a new and significant policy, ongoing monitoring will be crucial to ensuring that the policy is meeting its intended objectives.