Dáil Éireann debate -
Thursday, 25 Jul 1996

Vol. 468 No. 4

Written Answers. - Social Welfare Benefits.

Brendan Smith

Question:

766 Mr. B. Smith asked the Minister for Social Welfare the proposals, if any, he has to amend the regulations governing the entitlement to an old age contributory pension for self-employed persons; if his attention has been drawn to the system that currently exists for self-employed persons who commenced paying PRSI contributions in 1988 and who were over 56 years of age at that time; and if he will make a statement on the matter. [16034/96]

Minister for Social Welfare (Proinsias De Rossa)

To qualify for the old age contributory pension, a person must, inter alia, 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 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 widow's, widower's and ophan's pensions.

However, self-employed people in that age group, who had been insured as employed contributors for any period prior to age 56, could qualify for the old age contributory pension as such insurance can be combined 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 an 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 was estimated at 2.4 per cent over a 50 year period. Allowing self-employed persons to buy pension rights by paying the outstanding year's 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 any basis including a lump sum payment would be prohibitive.

The National Pensions Board in its final reportDeveloping the National Pension 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. However, they 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. The report and its recommendations are being studied within my Department at present. 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.