Dáil Éireann Debate, Thursday - 9 September 2021
720. Deputy Darren O'Rourke asked the Minister for Social Protection if she will outline the rationale for the averaging rule as it applies to State pension calculations; if she accepts that this rule has the effect of reducing the total pension award of persons who take on temporary part-time work at an early age; if there are any plans to review this rule, process; and if she will make a statement on the matter. [42812/21]
View answerWhen the contributory pension was introduced in 1961 many workers had not been given the opportunity to build up social insurance contributions for all their working life. As such, the yearly average, and banded payments, were used to calculate the rate of payment - otherwise people would have had to wait and contribute for a considerable number of years to achieve a reasonable pension payment in retirement. The yearly average mechanism is set out in detail as part of the Operational Guidelines for State Pension Contributory published on the Department's web site at http://www.gov.ie/en/publication/4f38a6-operational-guidelines-state-pension-contributory/.
A policy to introduce the Total Contributions Approach (TCA) to pensions calculation was adopted by Government in the National Pensions Framework in 2010. In January 2018 the Government agreed to a proposal that allowed pensioners affected by the September 2012 changes in rate bands to have their pension entitlement calculated by an interim “Total Contributions Approach” (TCA) which would include up to 20 years of a new HomeCaring credit. This approach significantly benefited many people, particularly women, whose work history included an extended period of time outside the paid workplace, while raising families or in a caring role. The interim TCA ensured that the totality of a person’s social insurance contributions - as opposed to the timing of them - would determine their final pension outcome.
Those who reached state pension age after September 2012 had their pension entitlement reviewed under the interim TCA method with 56% of women reviewed receiving an increase while 24% of men reviewed also received an increase. Those who have reached state pension age since January 2018 have had their pension entitlement assessed under yearly averaging and the interim TCA with the most beneficial payment being awarded to them.
As part of the Programme for Government, a Commission on Pensions was set up to look at sustainability and eligibility issues with the State Pension and the Social Insurance Fund. More broadly, it has also been considering the issue of retirement ages in employment contracts and how the pension system can further accommodate carers, who are predominantly women. The Commission will set out options for the Government to address issues such as qualifying age, contribution rates, total contributions and eligibility requirements. The Commission formally submitted its report to me earlier this week.
I hope this clarifies the matter for the Deputy.
