Dáil Éireann debate -
Tuesday, 8 Apr 1997

Vol. 477 No. 2

Written Answers - Social Insurance.

Noel Dempsey

Question:

247 Mr. Dempsey asked the Minister for Social Welfare the plans, if any, he has to amend the terms of the scheme of PRSI for self employed people to allow them a pro-rata pension for the contributions paid or to buy the necessary contributions to allow them to qualify for a pension. [9065/97]

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 become 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 covered for widow's, widower's and orphan's pensions subject, of course, to satisfying the normal qualifying criteria.

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. In this year's budget I provided,inter alia, that self employed contributors who entered insurance in 1988 but were already over the age of 56 at that time and who had previously paid social insurance as an employee will now be able to receive a refund of the pension element of their self employed social insurance provided, again, that they do not qualify for an old age (contributory) or (non-contributory) pension. Heretofore, their earlier contributions precluded them from receiving such a refund.

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. These costings are currently being reviewed in the context of the actuarial review. 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 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 be prohibitive.

I have no plans to relax the requirement that a person must have entered insurance at least ten years before pension age.