Written Answers. - Social Welfare Benefits.
Rory O'Hanlon
Question:
479
Dr. O'Hanlon
asked the
Minister for Social Welfare
if he will take into account employee contributions pre-1953 when he is assessing eligibility for pensions for self-employed PRSI workers who have less than ten years contributions since 1988 because of age; and if he will make a statement on the matter.
[1027/96]
Rory O'Hanlon
Question:
480
Dr. O'Hanlon
asked the
Minister for Social Welfare
if he will introduce a pro-rata pension for those who cannot have ten years contributions under the self-employed PRSI pensions scheme; and if he will make a statement on the matter.
[1028/96]
It is proposed to take Questions Nos. 479 and 480 together. To qualify for the old age contributory pension, a person must have entered insurance at least ten years before pension age, have at least 156 contributions paid and have a yearly average of at least 20 contributions (or 24 in the case of a retirement pension) registered since January 1953 (when the unified system of social insurance came into effect), or the time they started insurable employment, if later.
The condition in relation to entry to insurance at least ten years before pension age has been a feature of the scheme since its introduction in 1961. The purpose of the condition is to link entitlement to a pension with a reasonable level of contributions to the social insurance fund during the course of a person's career. This condition applies to self-employed persons in the same way as it applies to all insured people. Accordingly, self-employed people, who became insured for the first time when social insurance was extended to the self-employed in 1988 and who were then aged 56 or over would not qualify for the old age contributory pension. They are, of course covered for survivors' and orphans pensions.
Social insurance paid before 1953 under the National Health Insurance Acts can be taken into account in satisfying the first two conditions but cannot be used in calculating the yearly average. In this regard it is relevant to point out that prior to 1953 three different types of contributions were payable. These were national health insurance, widow's and orphan's pension and unemployment insurance contributions. These contributions gave specific entitlement only to the benefits of the schemes under which they were paid.
The old age contributory pension scheme was introduced in 1961. Contributions paid by insured persons prior to 1961 did not contain an element in respect of that pension. However, as a concession and to enable persons reaching pension age at that time to qualify immediately for a contributory pension, contributions paid prior to 1953 were taken into account in calculating a person's entitlement to pension. These transitional arrangements operated until 1973. From that date contributions paid prior to 1953 were no longer counted for the purposes of the satisfying of the yearly average test. However, they are still reckonable for the other two conditions. Self-employed people who were over 56 in 1988 and who had been insured as employed contributors for any period prior to age 56 could combine that insurance with insurance as a self-employed contributor for old age pension purposes. Refunds of the old age contributory pension element of the contribution may be made to those who entered insurance for the first time less than ten years before pension age and who fail to qualify for either old age contributory or non-contributory pension.
Detailed consideration has been given by my Department to the possibility of providing for entitlement to the old age contributory pension to persons who entered insurance for the first time as self-employed contributors less than ten years before pension age. In this regard, costings done in 1989 estimated that the net cost of paying old age contributory pensions to all self-employed contributors, who were aged between 56 and 66 in April 1988 would amount to £756 million over the lifetime of the persons concerned. The extra rate of contribution which would need to be paid by self-employed contributors generally to finance such an extension would be 2.4 per cent over a 50-year period. Allowing self-employed persons to buy pension rights by paying the outstanding years contributions to qualify for an old age contributory pension would also be very costly to the Exchequer unless the payments made by the individual self-employed contributors were calculated on an actuarial basis. The cost to an individual contributor of buying rights on this basis would be prohibitive.
The National Pensions Board in its final report "Developing the National Pensions System" puts forward,inter alia, a number of recommendations relating to eligibility for old age pensions including proposals for a wider range of pro-rata pensions related to the average number of contributions over an insured lifetime and also recommended that the arrangement regarding pre-1953 contributions should be abolished. It also recommended that the number of paid contributions to qualify for an old age contributory pension be increased from 156 (three years) to 520 (ten years) contributions. These proposals which relate to a wider range of pro rata pensions, require careful consideration before specific provisions are brought forward. Furthermore, the additional resources required would have to be examined in the context of the overall future funding of pensions. I am not yet, therefore, in a position to indicate precisely when these provisions are likely to be introduced. While I, in principle, favour a pro-rata pension approach, I have no plans to relax the requirement that a person must have entered insurance at least ten years before pension age.
Tony Gregory
Question:
481
Mr. Gregory
asked the
Minister for Social Welfare
his response to the petition from PAYE workers (details supplied) for parity with the self-employed and farmers to enable then to qualify for the contributory old age pension with a minimum of ten years PRSI contributions.
[1110/96]
To qualify for an old age contributory pension a person must have entered insurance at least ten years before reaching pension age, have at least 156 contributions paid and have a yearly average of at least 20 contributions (or 24 in the case of a retirement pension) registered since January 1953 (when the unified system of social insurance came into effect), or the time they started insurable employment, if later.
The yearly average condition gives rise to particular problems for people with gaps in their insurance records. A number of these problems have been addressed by my Department in recent years. Measures taken include,inter alia: in 1988 when the self-employed were brought into insurance for the first time those self-employed people who had previous insurance were allowed to use April 1988 as their date of entry into insurance if this was to their advantage; in 1991 pro-rata pensions for people with `mixed insurance' records were introduced, the rate of pension payable being in proportion to the periods of insurance completed at the rate appropriate for old age or retirement pensions.
Regarding the petition referred to by the Deputy, the people involved have insurance paid at both the full and modified rates and, accordingly, are likely to qualify for apro-rata pension under the provisions introduced in 1991. All persons applying for an old age contributory pension including self-employed contributors must satisfy the qualification conditions. In certain circumstances any contributor may qualify with ten years' contributions or less but this would depend on the circumstances of each individual case.
The National Pensions Board (NPB) report `Developing the National Pension System' recommended apro-rata pension scheme, which, in its view, would resolve the problems arising from gaps in coverage in a more comprehensive way.
The NPB report recommended,inter alia, a wider range of pro rata pensions related to the average number of contributions over an insured lifetime, where, for example an average of 45 or over (as against 48 at present) would qualify a person for the maximum rate of pension while a minimum 30 per cent of full rate pension would be payable for an average of ten to 14 contributions. It also recommended that the number of paid contributions to qualify for retirement and old age contributory pension be increased from 156 (three years) to 520 contributions (ten years). As such proposals could lead to a reduction in entitlement for future pensioners, when compared with present arrangements, they have to be evaluated very carefully.
The NPB report, which is both comprehensive and complex, is at present being studied in detail within my Department. I will bring forward proposals on the issues addressed in the report based on these detailed considerations taking account of the future financing of pensions provision.
Dermot Ahern
Question:
482
Mr. D. Ahern
asked the
Minister for Social Welfare
the plans, if any, he has to extend the free telephone rental allowance scheme; and if he will make a statement on the matter.
[1111/96]
Dermot Ahern
Question:
483
Mr. D. Ahern
asked the
Minister for Social Welfare
the plans, if any, he has to extend the free electricity allowance scheme; and if he will make a statement on the matter.
[1112/96]
It is proposed to take Questions Nos. 482 and 483 together. The free schemes administered by my Department include free travel, free electricity allowance, free natural gas allowance, free telephone rental allowance and free television licence. They are available, in the case of free telephone rental allowance and free electricity allowance, to persons who are in receipt of a welfare type payment and who are either living alone or who otherwise satisfy the living alone condition.
The free schemes have been improved and extended progressively in recent years. In 1994, for example, a pensioner being cared for by a recipient of the carer's allowance was allowed to retain eligibility for the free telephone rental allowance. Previously, this was discontinued because the living alone condition ceased to be satisfied. Also, in 1994, the free electricity allowance scheme was extended to include night storage electricity schemes. This extension allows unused daytime units to be offset against the cost of night time units. The question of further extending the scope of the free telephone rental and electricity allowance schemes arises for consideration in a budgetary context and in the light of available resources.
Mary Wallace
Question:
484
Miss M. Wallace
asked the
Minister for Social Welfare
the meetings, if any, he has had to discuss the operation and extension of the carer's allowance.
[1248/96]
The Carer's Association was represented at the annual pre-budget forum which I hosted on 4 December 1994. At the forum, the association submitted its pre-budget submission which outlined the changes and improvements it wished to see introduced in the 1996 budget. My colleague, the Minister of State, Deputy Durkan, met representatives of the Carers' Association on 10 January 1996. The meeting allowed for a more thorough analysis of the points made in the association's pre-budget submission.
Mary Wallace
Question:
485
Miss M. Wallace
asked the
Minister for Social Welfare
if he is concerned with the pension implications of the growing casualisation of labour; and the action, if any, he will take on this matter.
[1249/96]
In recent years there has been a noticeable shift in work patterns towards part-time working. It would appear that work patterns are changing in this direction permanently, in line with the demand of industry and enterprise nationally and world-wide. The number of regular part-time jobs as a percentage of total jobs has risen from 4 per cent 20 years ago to nearly 10 per cent at present. As the Deputy will be aware part-time workers who earn £30 or over per week pay class A contributions since April 1991 (it was £25 per week when introduced). There are now about 27,000 part-time workers, mostly women, covered by PRSI. They have the full protection of the social insurance system and will be entitled, among other things, to retirement and to old age contributory pensions — subject, of course, to the normal qualifying criteria.
In recent speeches I have raised the issue of the importance of occupational pension cover for this group and in particular that they should be afforded the same access as their full-time counter-parts to such occupational pension schemes. The demographic patterns indicate a considerable increase in the proportion of elderly people in the population over the first half of the next century. This will have a significant impact on the future costs of social welfare pensions, which are set to increase by some 100 per cent by the year 2035.
The final report of the National Pensions Board "Developing the National Pension System" raised and considered all the major issues in relation to pensions. In relation to social welfare it recommended a wider range ofpro-rata pensions based on the average number of contributions over an insured life-time. This report is being considered within my Department at present and I intend to bring forward proposals based on the recommendations of the report. A major survey of occupational pension schemes, which was recommended by the National Pensions Board, has been commissioned jointly by my Department and the pensions board and a report will be available by the middle of this year. The last major survey was carried out in 1985 and the results of this new survey will give essential up-to-date information on occupational cover, including cover for part-time and atypical workers which will be of considerable assistance when proposals in relation to pensions are being formu-lated. The whole issue of pensions in the future, including those relating to part-time and atypical workers, is one we cannot afford to ignore. Provided we face up, over the next few years, to the needs which we know will arise because of the demographic changes and the changes in work patterns, we can plan to deal with them in an orderly and effective way.
