Tuesday, 11 June 2019

Questions (936)

Éamon Ó Cuív

Question:

936. Deputy Éamon Ó Cuív asked the Minister for Employment Affairs and Social Protection the estimated full year cost in 2019 and projected cost in 2020, exclusive of arrears, of reassessing persons for entitlement to a contributory pension under the total contributions approach; and if she will make a statement on the matter. [24171/19]

View answer

Written answers (Question to Employment)

On 23 January 2018, this Government agreed to a proposal that will allow pensioners affected by the 2012 changes in rate bands to have their pension entitlement calculated on a Total Contributions Approach (TCA) basis, including provision for up to 20 years of a new home caring credit. The effect of this is that a post-2012 pensioner who has 20 years of HomeCaring periods can qualify for a maximum rate pension with just 20 years of paid contributions. Most pensioners with only 20 years contributions, whether qualifying under pre-2012 or post-2012 ratebands, could not qualify for a maximum rate pension under the Yearly Average system, unless they first entered insurable employment in their 40s, or later.

The TCA ensures that the totality of a person’s social insurance contributions, as opposed to the timing of them, determines what their final pension outcome will be. In particular it will benefit people whose work history includes an extended period of time outside the paid workplace raising families or in a full-time caring role. Crucially, unlike the current Homemakers scheme or earlier proposals for Homemakers Credits, HomeCaring Periods apply to periods both before and after 1994. This recognises that most people reaching pension age between 2012 and 2019, if they had taken a home caring break looking after young children, would most likely have done so before 1994.

This approach will make it easier for many post-2012 pensioners affected by the 2012 rate band changes to qualify for a higher rate of the State pension (contributory), particularly if they were absent from the workforce caring for children, or an older person with a care need.

Using figures provided by the Actuarial Review of the Social Insurance Fund, my Department estimated that the cost of the interim TCA approach for those who reach State Pension Age in 2019 would be circa €54 million. The precise figure will depend upon a number of factors, including take-up of HomeCaring periods, and also the inflows from other payments, where a person has no existing SPC claim in the system, but may now find it more advantageous than their current payment.

At this stage, we do not have sufficient information to provide an estimate for 2020 costs, as the Department intends introducing further reform in this area, TCA 2020, within that timeframe.

I hope this clarifies the matter for the Deputy.