State Pension (Contributory) Eligibility

Dáil Éireann Debate, Wednesday - 25 March 2015

Wednesday, 25 March 2015

Questions (27)

Tom Fleming

Question:

27. Deputy Tom Fleming asked the Tánaiste and Minister for Social Protection the proposed changes to the contributory State pension for 2020, whereby a person who has paid 520 contributions in ten years will qualify for one third of the maximum rate, and for each additional year of contributions a person will gain one 30th of the pension up to a maximum of 30 30ths or 30 years contributions; if this means a person will now need to be employed for 40 years and that only ten of those 40 years can be credited; and if she will make a statement on the matter. [12259/15]

Written answers

Tánaiste and Minister for Social Protection

The State pension is a very valuable benefit and is the bedrock of the Irish pension system. Therefore, it is important to ensure that those qualifying have made a sustained contribution to the Social Insurance Fund over their working lives and the reform measures introduced to date go somewhat toward that goal. To ensure that the individual can maximise their entitlement to a State pension, all contributions paid over their working life from when they first enter insurable employment until pension age is taken into account when assessing their entitlement and the level of that entitlement.

Since 1961, when contributory pensions were first introduced, the average contributions test has been used in calculating pension entitlement.

Therefore, to qualify for a state pension a person must:

- have at least 520 paid contributions; and

- satisfy a yearly average (a yearly average of 48 contributions paid and/or credited is required for a full rate pension).

There have been significant changes to the PRSI system over the years which have increased social insurance coverage to most classes of working people.

Accordingly, under the pension reform programme, it is planned to adopt a total contributions approach where the number of contributions recorded over a work life will more closely reflect the rate of pension payment received. For example, in a model where 30 years contributions (1,560) paid or credited would qualify a person for a maximum State pension (contributory), a person could accumulate 1/30th of a pension for each year of contributions up to a maximum of 30/30ths, if otherwise qualified for payment. This is just an illustration of a model as the new system is under development. It is not possible, therefore, at this stage to state with certainty the number of years that will be required for a full pension, but this will be announced well in advance of the introduction of changes.

The proposed date for the introduction of a move to a total contributions approach is 2020, but this may be subject to change as it is a very significant reform with considerable legal, administrative and technical challenges to be overcome in its implementation.