The State pension (contributory) 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. To ensure that the individual can maximise their entitlement to a State pension, all contributions paid or credited over their working life from when they first enter insurable employment until pension age are taken into account when assessing their entitlement and the level of that entitlement.
To qualify for a state pension (contributory) a person must have at least 520 paid reckonable contributions and satisfy a yearly average condition (a yearly average of 48 contributions paid or credited is required for a full rate State pension (contributory), and reduced rates of payment may be payable for pensioners with lower averages). Once over 16 years of age, the date a person enters into insurable employment is the date used for averaging purposes.
PRSI credited contributions (“credits”) are an integral part of the social insurance system. For the most part they are linked to having an underlying entitlement to a social welfare payment while temporarily detached from the labour force or having entitlement to statutory leave, e.g., parental or maternity leave. The primary purpose of PRSI credits is to secure social welfare benefits and pensions of employees by covering gaps in insurance where they are not in a position to pay PRSI such as during periods of unemployment or illness for example.
In order to qualify for credits, a person must first have entered insurable employment – he or she must have paid at least one PRSI contribution as an employed contributor and, unless deemed to be exempted, must be available for and genuinely seeking work. Subsequently, insured workers may be awarded credits if they claim a social welfare payment because they are out of work, or they are ill or incapacitated, or if they are engaged in certain training or education courses. When a person does not qualify for a payment, they may sign-on for credits provided they qualify for the award of credits.
If at any stage in their working life, a person has no PRSI paid or credited contributions for two full tax years, they cannot be awarded credits again until they return to work and pay PRSI contributions for at least 26 weeks. The rationale for this measure centres on the general principle that there should be a reasonable link between entitlement to benefit and a recent participation in the (active) labour force.
In 2013 new provisions were announced for older persons who left work before reaching the State pension age of 66 and who wished to claim a jobseeker’s payment. Ordinarily, people in receipt of a jobseeker’s payment must engage with the Department’s activation process and can face penalty rates if they refuse to engage with Department offers of training or education. These criteria were eased for people aged 62 and over in light of their contribution to society. They can still avail voluntarily of an array of supports, which are available from the Department if they wish to return to work, training or education. However, penalty rates are not applied to this cohort should they decide they do not wish to engage with the activation process.
Entitlement to State pension (contributory) is based upon reckonable contributions paid and/or credited over a working life. Periods of retirement before State pension age, where a person was not genuinely seeking work, and where they have not been awarded credits, may result in lower such entitlements, compared to the outcome had they reckonable contributions paid or credited during that period. There are no special arrangements to make State pension qualification easier for public sector employees who retired early, and in many cases they would have paid a reduced rate of PRSI, which is not reckonable for State pension purposes, in recognition of Public Service pension entitlements they may alternatively build up as a result of that employment. My Department does not have responsibility for Public Service pensions, and any queries regarding the adequacy of such pensions, including for those who have retired early, should be directed to the Minister for Public Expenditure and Reform.
Where people cannot qualify for a State pension (contributory) in their own right as they have paid few or no reckonable contributions, or cannot qualify for a full rate as a result of an intermittent PRSI record, the social protection system provides alternative methods of supporting such pensioners in old age, if they have an income need. Notably, they may qualify for a means-tested State Pension (non-contributory), amounting up to 95% of the maximum contributory pension rate. However, if someone has a substantial income, such as that from a public service pension, they may not satisfy the means test for payment under that pension.
I hope this clarifies the matter for the Deputy.
