Dáil Éireann Debate, Wednesday - 20 September 2017
58. Deputy John Brady asked the Minister for Employment Affairs and Social Protection her plans to address anomalies in the State pension which are leading to reduced State pension payments for those without the necessary PRSI contributions, namely the averaging calculation in place; and if she will make a statement on the matter. [39584/17]
View answerThe State pension contributory is one of a number of pensions the State pays to people over 66. The rate of payment to a person is related to the number of contributions made over the years into the Social Insurance Fund by the person.
Entitlement levels are calculated by means of a ‘yearly average’ calculation, where the total contributions paid or credited are divided by the number of years of the working life. Payment rates are banded. For example, someone with a yearly average of 48 contributions will qualify for a full pension, whereas someone with a yearly average of 20 will qualify for a pension at 85% of the full rate.
The homemaker’s scheme was introduced in 1994 to make qualification easier for those who took time out of the workforce for caring duties. It allows up to 20 such years, in the period since its introduction, to be disregarded when their record is being averaged for pension purposes.
Where someone does not qualify for a full rate contributory pension, they may qualify for an alternative payment. If their spouse has a contributory pension, they may qualify for an Increase for a Qualified Adult amounting up to 90% of a full rate pension, which by default is paid directly to them. Alternatively, they may qualify for a means-tested State Pension (non-contributory), which amounts up to 95% of the maximum contributory rate.
Work is under way to replace the yearly average system with a Total Contributions Approach (TCA). Under this approach, the rate of pension paid will more closely reflect the total number of contributions made by people, not when they paid them. The position of homemakers is being carefully considered in developing this new system of calculating the State Pension (contributory).
It is hoped that this approach to pension qualification will replace the current one from 2020. Following completion of the actuarial review of the Social Insurance Fund this year, a refined proposal will be developed. My Department will conduct a period of consultation with relevant stakeholders, including interest groups, representative bodies and the Oireachtas. Following the consultation period, I will submit a proposal to Government seeking approval for the new approach, and then proceed to introduce legislation to give effect to this reform.
I hope this clarifies the matter for the Deputy.
