Dáil Éireann Debate, Thursday - 29 November 2018
234. Deputy Billy Kelleher asked the Minister for Employment Affairs and Social Protection the estimated cost of extending carers and illness benefit to eligible self-employed class S PRSI contributors in 2019; and the full year cost of extending these benefits, in tabular form. [50038/18]
View answerThe issue of extending additional social insurance benefits to the self-employed paying class S PRSI was considered in the Actuarial Review of the Social Insurance fund (SIF) as at 31 December, 2015, which I published on the 18 October 2017. The review, required by legislation, was carried out by independent consultants, KPMG. It examines the projected income and expenditure of the SIF over the course of the 55 year period from 2016 to 2071.
As part of the review the independent consultants were required to project the additional PRSI expenditure if invalidity pension and illness, jobseeker’s and carer’s benefits were extended to class S self-employed workers and the PRSI contribution rates required to provide these benefits on a revenue neutral basis.
The Actuarial Review calculated the first year cost in 2018 and the cost of the schemes out to 2071. The table below shows the estimated cost of extending carer's and illness benefits in the first year and the estimated cost by 2025 as follows:
|
First Year |
2025 |
|
|
Carer's Benefit |
€3m |
€6m |
|
Illness Benefit |
€40m |
€108 |
The review indicates that, where these benefits are extended to the self-employed, the class S rate of PRSI contribution would need to increase substantially in order to ensure that the benefits are delivered in a revenue neutral manner. It estimates that when expenditure on the additional benefits is considered over the entire projection period, PRSI rates would need to increase by 94% under a scenario of no subvention from the exchequer. This is equivalent to an increase of the Class S contribution rate from the current 4% rate to 7.8%.
This increased contribution is attributable to the costs of extending these additional benefits to PRSI class S contributors. It does not take account of the value to PRSI class S contributors of access to the range of existing benefits, and in particular State pension contributory. The consultants estimated that the typical cost of State pension (contributory) on its own is of the order of 10% to 15%, depending on other factors including rate of average earnings and date of commencing paying PRSI. Adding in the other benefits referenced the total class S rate of contribution to ensure revenue neutrality would be of the order of 20% per annum.
Self-employed workers who earn €5,000 or more in a contribution year, are liable for PRSI at the class S rate of 4%, subject to a minimum annual payment of €500. This provides them with access to the following benefits: State pension (contributory), widow’s, widower’s or surviving civil partner’s pension (contributory), guardian’s payment (contributory), maternity benefit, adoptive benefit, paternity benefit and treatment benefit. Entitlement to invalidity pension was extended to the self-employed from December 2017. As you aware extension of jobseeker's benefit was announced in Budget 2019.
This compares favourably with employees who, in general, are liable to the class A rate of 4%. In addition their employers are liable to PRSI at the rate of 8.6% on weekly earnings up to and including €376 or at the rate of 10.85% where weekly earnings exceed €376. Accordingly the combined rate of PRSI rate paid in respect of class A employees is 12.6% or 14.85%, depending on the level of weekly earnings. These class A employees are entitled to the full range of social insurance benefits.
The findings of the Review will play an important role in informing the overall debate on policy developments in relation to the SIF in the years ahead, including the financial sustainability of the Fund given the expected demographic challenges and consideration of extending the scope of benefits for workers generally, including the self-employed.
