Dáil Éireann Debate, Tuesday - 9 November 2021
458. Deputy Richard Boyd Barrett asked the Minister for Social Protection the number of persons in receipt of the State pension (contributory) who were born before 1 September 1946; the estimated annual cost of extending the total contributions system which was applied to pensioners after this date; and if she will make a statement on the matter. [54007/21]
View answerPeople who apply for the State Pension (Contributory) (SPC) after 1 September 2012 and who do not qualify for the maximum rate of pension under the Yearly Average approach can be assessed under the interim Total Contributions Approach, and can use the new Home Caring Periods Scheme to help them qualify for a higher rate of pension.
People whose pensions were decided under the 2000-2012 rate bands (i.e. those born before 1 September 1946) were subject to a significantly more generous payment regime than those who qualified before or afterwards, as a Yearly Average of only 20 contributions per year (out of a possible maximum of 52) could attract a 98% pension. If pre-2012 pensioners were also allowed to avail of the interim Total Contributions Approach, including HomeCaring Credits, their arrangements, as a group, would continue to be significantly more generous than those of post-2012 pensioners. There would also be a very significant cost to the Social Insurance Fund. This in turn could significantly impact funds available for future pensioners with consequential potential implications for pensioner poverty.
As at 31 October 2021, there were over 193,000 pensioners in receipt of the State Pension (Contributory) who were awarded it prior to 1 September 2012. Their rates of payment were calculated using the Yearly Average approach only. Of those, over 110,000 receive less than maximum rate. Any retrospective application of the interim Total Contributions Approach would have to be extended to this whole cohort, so my Department would have to review the pension rate for each pensioner, as well as for Qualified Adult Allowance and other pension claims where there is an underlying entitlement to SPC.
Retrospectively reviewing the SPC entitlements of those who retired on or after 1st September 2012 and whose original SPC rate was below the maximum resulted in an average pension rate increase of €7.90 per week. If the average uplift for SPC recipients who retired before 1st September 2012 was similar, this would result in additional annual expenditure of c.€46.5 million.
My Department’s Actuary estimates that the full cost of implementing such a policy change, including backdating of increases to the date of retirement and increased payments in the future, would be over €1 billion. Even if the backdating of increases was restricted to the years after 2012, the cost would still be over €700 million.
For those with insufficient contributions to meet the requirements for a State pension (contributory), they may qualify for a means tested State pension (non-contributory), the maximum personal rate for which is €237 (over 95% of the maximum rate of the contributory pension). This rate of payment does not include rent allowance, household benefits or fuel allowance. Alternatively, if their spouse is a State pensioner and they have significant household means, their most beneficial payment may be an Increase for a Qualified Adult, based on their personal means, and amounting up to 90% of a full contributory pension.
The Deputy may also wish to note the following:
- Recipient figures were taken as at 31st December 2020 (other than the total figure provided of 193,863).
- A record is taken to mean the aggregate of paid contributions, credited contributions and Home Caring periods.
- Those not achieving the maximum rate of SPC include pensioners with “Mixed” insurance records and EU/Bilateral pensions.
I hope this clarifies the matter for the Deputy.
