Workers who retire after 2020 could lose out on up to 60pc of their expected pension under proposed changes to the payment system.

A massive reform of how pensions are calculated has sparked fears that significant numbers of older people will lose out financially.

The Government plans to move to a Total Contributions Approach (TCA) - which will base pension entitlements on how much a person pays in PRSI over their lifetime.

At the moment, pensions are based on 'yearly averages' of contributions made by a person during their time working.

The exact type of TCA system to be adopted is still being finalised, but this week the Department of Social Protection released an early model in a bid to fix an existing anomaly that led to 40,000 pensioners losing out on up to €40 a week.

The fix, along with a HomeCaring Credit, is expected to enable around 30,000 people benefit from higher pensions.

Overhaul

However, in this special case, those who would not be better off have the option to remain on their current rate. This will not be the case following the full pensions overhaul.

Illustrative examples provided by the department included a man, 'William (67)', who moved to Ireland aged 50 and has 16 years of contributions.

Under current rules, he gets €238.30 per week but when TCA is applied this drops to just €95.30. Other examples provided by officials saw pensioners lose out with drops of 14pc and 32pc.

Speaking this week, Minster Regina Doherty said the TCA approach "will ensure that a person's pension payments reflect more fully and fairly a person's lifetime contributions history". However, Fianna Fáil's welfare spokesman, Willie O'Dea, said that if the incoming TCA model was an expanded version of what was announced this week, many people would be "worse off than they would be if no changes were made". "It [the model] could be adapted or it could be a different type of TCA but we have no clarity on that," he told the Irish Independent.

He plans to raise the matter directly with Ms Doherty in the coming days, adding that there are legitimate questions to be asked about the incoming changes and whether people are facing a retirement on less money than they are expecting.

The Government is planning to carry out a public consultation on the changes to the pension system - including an auto-enrolment policy that automatically move workers onto a scheme when their income reaches a certain level.

In a statement, the Department of Social Protection said the full TCA model was currently being developed.

"This will include engaging in a public consultation exercise later this year.

"Thereafter the Department will finalise a proposal for consideration by Government taking into accounts all the views expressed during the consultation.

"Accordingly, the interim TCA model that was announced this week should not be used as a basis for calculating pensions that people may get when the full TCA model is introduced from around 2020.

"The examples provided only apply to post 2012 pensioners that will be assessed under this interim TCA model."

Irish Independent