Vol. 462 No. 1
8 Mr. B. O'Keeffe asked the Minister for Social Welfare if he intends to provide a retirement and old age pension to self-employed people who are over 56 years of age in 1998, thereby removing an inequality in the current scheme. [3525/96]
To qualify for the old age contributory pension, a person must have entered insurance at least ten years before pension age. This condition 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 survivor's and orphan's pensions. I presume the Deputy meant to refer to 1988, not 1998, in his question.
The Minister of State said that if a person was over the age of 56, it was not possible to have ten years' contributions to qualify for a pension. That is compounded by the 1994 legislation in that if a dependant dies, the survivor automatically receives a pension if they have three years' contributions. Will the Minister of State agree that is harsh on self-employed people who paid their taxes, RSI, PRSI and VAT through the years and whose employees were entitled to all benefits? They now find they are not entitled to this pension.
The conditions pertaining to qualification were set out in the 1988 Act. Everybody will agree it would be better from the point of view of the beneficiaries to make the necessary changes but it would require an amendment to the 1988 Act which would have financial implications. Detailed consideration has been given by the 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 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 in order 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 also be prohibitive. The question would also arise as to whether the option should be available.
The Minister of State's response is disappointing because in reply to a parliamentary question on 14 February 1995 the Minister, Deputy De Rossa, said that the Department was considering a review of the regulations dealing with refunds which raised hopes that some change would be made to this Act. In regard to the £756 million mentioned by the Minister of State, I would refer him to a reply given in this House——
I must dissuade the Deputy from quoting at Question Time. It is not in order.
On the figures referred to by the Minister of State, a review has been carried out by the people concerned which would suggest that, because of the 1994 Act, the number of those affected by this anomaly might be as low as 1,500. That suggests that the cost involved in correcting it would be negligible and I ask the Minister of State to take that into consideration because these people have been treated harshly. As the Minister's backup team is costing £200,000, they have a very jaundiced view of how they are being treated by him.
The Minister and myself have spent a considerable amount of time examining this aspect of pension entitlements. A number of anomalies have arisen over the years, some of which have been addressed, but it will take considerable time, effort and funding to resolve any outstanding issues. In its final report, "Developing the National Pension System", the National Pensions Board put 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. However, it also recommended that the number of paid contributions to qualify for an old age contributory pension be increased from 156, or three years, to 520 or ten years' contributions. The report, and its recommendations, are currently being studied in the Department.
I should mention also that a number of other problems have arisen over the years with particular reference to the non-qualification of persons with contributions prior to 1953. Many of those people do not qualify for any pension despite the fact that they might have more than the equivalent number of contributions in the ten year period to which the Deputy refers. We are attempting to address that anomaly also. I should mention that the parliamentary reply to which the Deputy referred was similar to those given to me when I sat on the opposite side of the House. Unfortunately, the basic information has not changed dramatically because the problem is virtually the same in terms of addressing it financially but the matter is under constant review.
I agree with my colleague, Deputy O'Keeffe, that this is an important issue for self-employed people and farmers. I cannot understand the Government's attitude to dealing with this anomaly because correcting it would be a popular move. The issue is being talked about by farming groups, the self-employed and others. Much money has been paid out to social welfare recipients over the years but the people in this sector gave a great deal to this State in terms of taxation and employment. They were not in a position to make these contributions prior to the introduction of the scheme in 1988. I agree with the Minister of State when he refers to the anomalies in the pre-1953 scheme in that they should be assisted also but in this case we are talking about a small number of people, approximately 1,500, who contributed to the welfare of this State in many ways over the years. They are now at the end of their working lives and are faced with having only eight or nine years' contributions paid. They were unable to pay any more contributions because the system was not in place. This is the right time to correct that anomaly because the figures can be fully assessed — perhaps it was not possible to do that in 1988. The Government should act to help farmers and the self-employed who have contributed to the State in so many ways over the years.
This area covers a multiplicity of self-employed people, including those who spent part of their lives working both in and outside the public service. There has been an ongoing review but it is not possible at this stage to determine the changes that will take place in the future. The anomalies were pointed out in 1988 when the legislation was initiated but it was accepted there was not enough money to extend entitlement. A base line had to be found for determining eligibility. The number who may be eligible has grown. The review is with a view to determining the best way to tackle this issue. What is most upsetting for the individual is when he or she has up to a dozen contributions in 1955 for example and then work again, not having worked for 20 or 30 years and is excluded by virtue of having the contributions for this short period included in the calculable period over which his or her working life is determined. That is one anomaly and there is a number of others.
The National Pensions Board report sets out what would appear to be a reduction of the pension payable in some cases. It is not possible, feasible or politically correct to reduce someone's pension and it is unlikely it will occur in any event. It is not a simple issue. We have spent a great deal of time, effort and energy in the Department researching this issue and will continue to do so with a view to addressing the problems raised by the Deputies.
Time is getting short and quite a number of Deputies are offering so I ask for brevity.
Members were fobbed off for years when they queried pension entitlements because the Minister was waiting for that report. The Minister now has the report; when will decisions be taken on it? There is merit in saying that pension should relate to contributions. For example, if one contributes for 40 years one gets a full pension, for 20 years a half pension and for one year, one fortieth. I accept there are winners and losers and obviously change would have to be phased in because there would be murder if a person's pension entitlement was cut. When will the fundamental decisions be taken?
I can understand Members' frustration because I was frustrated when I asked similar questions, particularly after constituents had raised the issue with me a number of times. It is annoying not to be able to give a reasonable response. The report was received before this Government took office but the former Government had not had the time to consider it before the change of Government. We have spent considerable time studying the issue and hope to reach a decision before the end of the year. We will try to encompass within the changes that may be made the issues that have been raised by Deputies. I take Deputy Noel Ahern's last point into account and any changes made will have to be of a positive nature. There would be no sense in creating further anomalies but there is always that problem when we shift the sliding scale.
In my book, the man who pays the piper calls the tune. The self employed and farmers have paid tax and have created employment and as soon as they had the opportunity to join the scheme they paid into it. We can look with clarity at what was introduced in 1988 and we can now say that the State took money from these people knowing they would not be entitled to a pension. That is wrong. Whatever about the provisions that applied to people who were in insurable employment in 1953, the Minister should say he will look at the position of the self-employed and farmers and do something for them.
Let us have the reply now.
Who was in Government in 1986?
The conditions with regard to contributions were laid down in 1988 and have not been changed since. The conditions were restrictive because of the cost to the Exchequer in the event of expanding the scope of the scheme beyond that envisaged in the first instance.
It is not true to say that funds were collected by way of contributions and nothing is repayable because the widows, surviving spouses and orphans have entitlements. It is true that if one group has entitlements based on a precise number of years' contributions others who may have far greater contributions may be offended if a group with fewer contributions gets a higher return for their contributions.
In Opposition I raised issues with the Government and one can imagine what the Deputies on the other side were saying from 1988. I am amazed that it will cost £750 million to implement this report. Will the Minister consider allowing a person with eight years' contributions to get at least four fifths of the pension or a pro rata pension? Of the 1,500 people in question is it not true that many would be entitled on a means test to a non-contributory pension. Has that been factored into the cost?
We are not talking exclusively about the pensions of the self-employed. A woman in full-time employment who does not have ten years of contributions will not be entitled to a contributory pension. Am I right in deducing that? To what degree does the review factor in the changes because I think the amount of money involved is excessive.
May I once more ask for brevity. There are Deputies who have tabled questions waiting patiently.
All the points raised by Deputy Finucane are being taken into consideration in the context of the review. That some people would qualify for non-contributory pensions has been considered. The pro rata element as set out in the National Pensions Board report would mean that some people in receipt of pensions would now be entitled to a lower pension.
The Minister of State's policy at least has the merit that if we keep reviewing it for long enough it will resolve itself. I have some sympathy with that as a former Minister who knows about using scarce resources. How much is raised under the scheme per annum?
I do not have that information, but I will make it available to the Deputy.
When I referred to the self-employed I did not mention the farmers because I was afraid that farmerette Lynch would get her hooks on it removing any opportunity to change the scheme. It appeared at one stage as if we were getting nowhere, but at least the Minister of State has now given a commitment to review it. A similar promise was given in February last year. To ensure consistency will the Minister of State consider reducing the ten year requirement to three in line with the provisions of the 1994 Act dealing with widows and widowers? That would prove extremely helpful.
That matter can be considered as part of the review which is not being undertaken lightly. The Minister and I have spent a considerable amount of time attempting to devise ways and means of addressing the problems highlighted by Deputies and brought to our attention time and again by others with a view to removing any anomalies in the system but we must have regard to the financial constraints within which we must operate.
