Dáil Éireann Debate, Wednesday - 18 April 2018
236. Deputy Robert Troy asked the Minister for Employment Affairs and Social Protection her plans to alter the State pension qualification criteria to ensure that all persons who have had periods outside of the PAYE system or have been homemakers for a period are entitled to a full State pension; and her further plans for changes which would allow greater entitlements for persons with self-employed contributions. [16984/18]
View answerThe State pension (contributory) is a contributory pension, as exists in most developed countries, where people qualify based on a social insurance record, and credited contributions where appropriate. It is based, therefore, on contributions under the PRSI system, and not to income tax collected under the PAYE system. People with no such social insurance record may qualify for a means-tested State pension (non-contributory), paid at up to 95% of the maximum contributory rate. Over 70% of such pensioners qualify for that pension at its maximum rate.
Awarding a maximum rate contributory rate pension to all pensioners with periods outside the PRSI system would effectively remove the pensions-related benefit of paying PRSI, and would also result in very considerable additional costs to the pension system, which would require either very significant cuts either in the rate of payment, or substantial increases in the PRSI and/or income tax paid by workers, or diversion of other expenditure. Given that the main beneficiaries would be better off pensioners (who do not qualify for a non-contributory pension) and those who lose out would be people who either are solely dependent upon the State pension, or are working age people (who have higher rates of poverty than those aged over 66), this would be a regressive move, and also one which made the State pension system – which already faces significant sustainability challenges – unsustainable in the long term, endangering the future pensions of current workers who are paying for today’s pensions in their PRSI and taxes. I do not, therefore, propose to make the change suggested in the Deputy’s question.
PRSI contributions can be credited to people in a number of contexts, for example when in receipt of a Jobseekers or Illness benefit payments. Where applicable, these may be used towards PRSI-based social protection payments, including the State pension contributory. To qualify for a credit you must have worked and paid at least one PRSI contribution at PRSI Class A, B, C, D, E, or H and have paid or credited contributions in either of the last two completed tax years. Not all credits are reckonable for a State pension (contributory).
A new Total Contributions Approach to determining the level of pay for recipients of the State Pension (contributory) affected by the 2012 rate band changes was agreed by the Government in January. Under this approach a person who reached pension age after 1st September 2012 and has a 40 year record of paid and credited reckonable social insurance contributions, will qualify for a maximum contributory pension where they satisfy the other qualifying conditions for the scheme. Up to 20 years of a new HomeCaring credit, and/or 10 years of other credits, for example when unemployed or ill, may be used, subject to the total number of credits not exceeding 20 years. So, for example, a person might receive a maximum pension based on 20 years paid PRSI contributions, 5 years jobseeker credits, and 15 years HomeCaring Credits, over a 50 year period. Invalidity pensioners and, in most cases, Widows contributory pensioners will continue to generally qualify for a full pension. Instructions for legislation to give effect to this change are currently being set out. When drafted, the legislation will be brought forward at the next available opportunity.
Plans for legislation to introduce a Total Contribution Approach for all new pensioners for 2020 onwards will be brought to Government following public consultation later this year.
I hope this clarifies the matter for the Deputy.
