It is estimated that there could have been up to 20,000 self-employed people over age 56 when PRSI was extended in 1988 who are registered for PRSI purposes. As I indicated recently during the debate on the Social Welfare Bill and in earlier replies to parliamentary questions, the net additional cost of paying a full rate old age contributory pension to all this group would be of the order of £50 million per annum, equivalent to a capitalised cost of some £475 million over the full period of the payments.
The £50 million estimate is based on the payment of a full rate of pension and qualified adult allowance where applicable to this group and takes account of the value of the free schemes. It is an estimated net cost as it assumes that about half of the group could already be in receipt of another social welfare payment, for example, a non-contributory old age pension.
As I have already indicated to the House, it is very difficult to get estimates of the numbers and likely costs in this area. I assure the House that I will continue to ensure the broadest possible contributory pension cover to as many categories as possible.
The condition that a person must have entered insurance at least ten years before pension age before he or she is eligible to qualify for the old age contributory pension has been a feature of the scheme since it was introduced in 1961. The purpose of this condition is to ensure that entitlement to the pension is limited to those who have made a reasonable level of contributions to the social insurance fund during the course of their careers.
This ten year condition was supported by the Pensions Board and it is considered to be a reasonable condition. The amendment in the 1997 Social Welfare Act regarding the payment of refund of contributions to this group, which was agreed by the Deputy's party, effectively re-emphasised the position of the ten year test.
I assure the House that any self-employed person who has contributed and does not qualify for either a contributory or a non-contributory pension receives a refund of the pension element, 53 per cent of his or her PRSI contributions with interest, which is a fair arrangement. The position is that self-employed people over age 56 in April 1988 were not excluded from social insurance at that time, as a number of members of this group had earlier class A insurance as employees which they were able to combine with their insurance as self-employed people, class S, to qualify for a pension on retirement. The exclusion of this group in 1988 would have disadvantaged this group. The reduction in the yearly average condition from 20 to 10 years from November 1997 has also been of advantage to this self-employed group. In addition, those with three years' insurance are qualified for a widow or widower's pension.
There have been a total of 3,874 applications for refund, of which 2,868 have been paid to date amounting to more than £2.5 million plus interest — an average of £900 per person. A pro-rata factor has not been included in the £50 million cost estimate. While such an approach would reduce the overall cost, it is clear the cost is still significant and could only be considered in a budgetary context where the proposal would have to be assessed against other competing demands in the social welfare area. A person who is not entitled to a contributory pension is entitled to a non-contributory pension, subject to a means test.