Thursday, November 25, 2010

Pension rates

In 1997 the contributory old-age pension was £80.30 per week (€101.96).  As of today the contributory old-age pension is €230.30.  This represents an increase of 126%.  The progression of this payment is shown below. 

Contributory Old-Age Pension

Here is the same data in a table with some additional CPI inflation numbers.

Contributory Old-Age Pension Table

Prior to 2010 there was only one year since 1998 when the increase in the contributory old-age pension was less than the rate of inflation.  This was in 2000 when the pension was increased by 5.1% while inflation was running at 5.6%.  In each subsequent year to 2009 the increases in the pension outstripped inflation.

We can also see that the total amount paid by the State in contributory old-age pensions has increased from €413 million in 1997 to €3,340 million in 2009 – an increase of 709% which is driven by demographic changes as well as increases in the rates.

Here is a graph comparing the contributory pension rates to the consumer price index can be seen here. 

Pension and CPI

This comparison is similar to a previous comparison we did with one public sector worker’s salary.   Some of the same caveats to that comparison also hold in this instance.

First, the CPI is a price index and not a cost-of-living index.  Second, we are not making a judgement on what the “right” weekly pension rate is.  The pension could have been “too low” in 1997 just as easily as it might be “too high” in 2010.  These are judgement calls.  Here we just make a comparison of two series.  Make of it what you will.

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