To qualify for the old age contributory pension a person must have entered insurance at least ten years before pension age. This scheme for the self employed and farmers is one which I introduced in 1988 and the benefits given under the scheme for people under the age of 56 were substantial. Normally in a scheme like this people should be contributing from the age of 20 to 35 years of age and contributing over a long period so that the scheme could carry the cost of the pensions. Under the terms of the scheme, a person has to have entered insurance at least ten years before pension age in order to qualify. This condition has been a feature of the scheme since it was introduced in 1961 and it applies to everybody, not just the self employed or farmers. The purpose of the 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 condition applies to farmers and to all other self-employed people in the same way as it applies to all insured people.
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 covered for widow's and orphan's pensions. 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. Such insurance can be combined with insurance as a self employed contributor for old age pension purposes. Quite a number of farmers might have worked off the farm earlier in their careers and may have paid the full rate of PRSI at that stage. If so, those periods can be combined with the self-employed pension scheme.
Refunds of the old age pension element of the contribution may be made to those who entered insurance less than ten years before pension age if they fail to qualify for either old age contributory or non contributory pensions. If they do not qualify for either pension, they get back the old age pension part of the contribution. They do not get back the widow's and orphan's pensions part as that still remains operative. If the farmer dies and leaves a wife he is covered for the widow's and orphan's pensions in any event. That element continues.
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. Naturally, I appreciate the difficulty Senator Fahey raises, which can be regarded as an anomaly. It is a problem of how far one can go with the scheme at the stage of introduction. In that regard costings made 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 years in April 1988 would amount to £756 million over the lifetime of the group of people concerned. That is the additional cost approximately which would be taken on by bringing in people over 56 years of age. Some good friends of mine were in this situation of just being marginally over 56 and were excluded. I was conscious of the difficulty from an early stage.
The additional contribution which would need to be paid by self-employed contributors generally to finance such an extension would be 2.4 per cent over the whole period. The difficulty is one of providing sufficient cash to provide for the pensions that would arise. By going as far as 56 years we brought in people who would only have made small contributions to the scheme. At least that was consistent with what can happen in the rest of the scheme generally whereby if one has ten years' contributions one can come into benefit.
The contribution conditions for entitlement to pensions are being examined by the National Pensions Board and they will be reporting on this and other issues in their final report which I hope to receive in about a month. The matter will be then considered further in that context.
This matter is one to which I have given a lot of thought and the Senator will see that there is a considerable difficulty in relation to the costings of such a further expansion. That is the main problem. However, a person in that situation remains covered for the widow's and orphan's pensions. Statistically, seven out of ten are widows so in practice it is wise to have the cover for widows' contributory pension, which is the insurance based pension. We will look again at that question in the light of the final report of the National Pensions Board, which is due shortly.
