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State Pension (Contributory)

Dáil Éireann Debate, Wednesday - 29 July 2020

Wednesday, 29 July 2020

Questions (235)

Bernard Durkan

Question:

235. Deputy Bernard J. Durkan asked the Minister for Employment Affairs and Social Protection if the case of applicants for the State pension, contributory, who fall short of the required number of contributions in order to qualify has been examined; if pro rata payments will be considered in such cases in view of the fact that such contributors receive no benefit for their contributions; and if she will make a statement on the matter. [19504/20]

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Written answers

Pay Related Social Insurance (PRSI) contributions finance pension payments to an earlier generation of contributors and also pay for benefits to people who are temporarily economically inactive through illness or short-term unemployment.  In return, contributors build up entitlements which will be paid to them as of right, without having to undergo a means test, when they themselves need them.  It is an important vehicle of income redistribution and solidarity between generations and between those in work and those who are not.  Therefore, it would be inaccurate to suggest that people who do not receive a State Pension (Contributory) because they have made too few contributions to be eligible receive no benefit for their contributions as they have been entitled to or in receipt of other shorter term benefits depending on the contingencies they have experienced.

The State Pension (Contributory) is a PRSI-based pension, financed by contributions made by current workers and their employers, and paid to pensioners, at a rate based upon their PRSI record when working.  A person is required to have a minimum of 520 paid reckonable PRSI contributions in order to qualify for the State Pension (Contributory).  The actuarial value of the State Pension is estimated at over €300,000 which requires people who claim a contributory pension to have made at least 10 years of paid contributions over the 50 year term of a working life.  It is reasonable to require people who seek a contributory pension to have made at least 10 years paid contributions into the Social Insurance Fund which finances it.

Those with few or no PRSI contributions paid over the years may alternatively qualify for the State Pension (Non-Contributory), which is a means-tested pension, financed by the Exchequer, and paid at up to 95% the maximum rate of the State Pension (Contributory).  There are significant disregards in the household means test for the State Pension (Non-Contributory).  Alternatively, if their spouse has a contributory pension, they may qualify for an increase for a Qualified Adult (based on their own means), amounting up to 90% of a full rate State Pension (Contributory).  The most advantageous payment for a pensioner will depend upon their individual circumstances. 

The new Programme for Government “Our Shared Future” includes a commitment to introduce a Total Contributions Approach (TCA).  This is intended to be a fairer and more transparent system where the person’s lifetime contribution will be more closely reflected in the benefit received.  Officials in the Department are designing the scheme, with a view to including significant recognition for home caring periods in the new model.    

The public policy and social issues in relation to funding a sustainable and adequate State pension system are complex.  Therefore, this Government is also establishing a Commission on Pensions to examine a range of issues including contributions, calculation methods, sustainability, eligibility and intergenerational fairness, which is expected to report by mid 2021 with recommendations.

I hope this clarifies the matter for the Deputy.

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