Dáil Éireann Debate, Tuesday - 16 November 2021
391. Deputy Paul Murphy asked the Minister for Social Protection if her attention has been drawn to the issue concerning the formula for averaging the qualifying period for the State pension (contributory) (details supplied). [55839/21]
View answerIt is well known that as the yearly average method of calculating the rate of pay at which the State Pension (contributory) uses the time spent by individuals in the social insurance system, some can receive a full rate pension with as little as 10 years worth of contributions.
To this end, the National Pensions Framework (2010) confirmed the intention to introduce a new method for calculating entitlement to the State pension contributory from 2020. It proposed that the current ‘yearly average’ system, be replaced with a ‘Total Contributions Approach’ (TCA), which would make the level of pension directly proportionate to the number of social insurance contributions made by a person over his or her working life, with significant pension credits granted to people who have taken time out of the workplace to perform caring duties.
In January 2018, the Government announced an Interim Total Contributions Approach (TCA) to calculate the entitlement of pensioners who reached state pension age on or after 1 September 2012 (i.e. those born on or after 1 September 1946) and who had a reduced rate pension entitlement based on post Budget 2012 rate bands. All pensioners who have reached state pension age since September 2012, therefore, have seen both YA and interim TCA methods applied and they receive whichever rate is most beneficial.
The Pensions Commission was established in November 2020 to examine the sustainability of the State Pension system and the Social Insurance Fund, in fulfilment of a Programme for Government commitment. The Commission was an independent body comprised of knowledgeable and experienced academics, pension experts, members of civil society and representatives of workers and employers. The Commission has completed its work and its report was published on 7th October 2021. That report, the Commission's Technical Sub-Committee's working papers and the submissions received by the Commission as part of its public consultation are available on the Commission’s website, pensionscommission.gov.ie.
The Commission recommends that the full transition to a Total Contributions Approach and the abolition of the Yearly Average approach to calculating entitlement to the State Pension Contributory rate of payment should be implemented as soon as possible, pending the passage of necessary legislation and IT system changes. It further recommended that for those who are better off having their pension entitlement calculated under the Yearly Average approach, a phased transition to the Total Contributions Approach should apply gradually over a 10 year period.
In the interests both of older people and of future generations of older people, the Government intends to consider the comprehensive and far reaching recommendations in the Commission’s Report very carefully. My officials will work over the coming months to examine each of the recommendations. They will consult across Government through the Cabinet Committee system. I think it is really important that we complete that work before reaching conclusions. I intend to bring a recommended response and implementation plan to Government by the end of March 2022.
I hope this clarifies the matter for the Deputy.
