Dáil Éireann Debate, Thursday - 1 December 2022
264. Deputy Brendan Griffin asked the Minister for Social Protection further to Parliamentary Question No. 440 of 25 October 2022, if she will provide an example of the rate mix of averaging and the total contribution approach which will be used in the State pension (contributory) transition phase from January 2024; and if she will make a statement on the matter. [59874/22]
View answerThe Programme for Government Our Shared Future commits to introducing a Total Contributions Approach to align a person’s State Pension (Contributory) payment rate more closely with the contributions they make. This will include a provision for people who take time off from paid employment to undertake a full-time caring role. The Total Contributions Approach represents a fairer system for calculating State Pension (Contributory) payment rates and removes the anomalies that exist with the Yearly Average approach.
As the Deputy is aware, I announced a series of landmark reforms to the State Pension system last September. The measures are in response to the Pensions Commission’s recommendations and represent the biggest ever structural reform of the Irish State Pension system. One of the reforms agreed by Government is a phased 10-year full transition to the Total Contributions Approach and the abolition of the Yearly Average approach to commence from January 2024. The transitional arrangements are to avoid a ‘cliff edge’ effect and to mitigate the impact of the move on the first cohort.
All new State Pension (Contributory) applications are currently assessed under all possible rate calculation methods, including the Yearly Average and the Interim Total Contributions Approach (also known as the Aggregated Contribution Method), with the most beneficial rate paid to the pensioner. The elements which make up each method are set out in legislation.
The likely impact of the transition from the current arrangements to a Total Contributions Approach only system is outlined in the table below. The percentages, timelines and calculations in the tables are for illustrative purposes only. The introduction of the changes, including the eligibility rules and calculation methodology during the transitional phase, will require legislation. My officials are currently working to implement the reforms, including the drafting of legislation and development of administrative and IT systems as necessary.
Table 1 - Phased 10 year Full Transition to the Total Contributions Approach and Abolition of the Yearly Average Method
|
Year Attaining State Pension Age 66 |
If a person is better-off with Yearly Average Calculation Mix of the Yearly Average and Total Contribution Approach to be used in the transition phase |
If a person is better-off withTotal Contributions ApproachCalculation |
|
2024 |
90% Yearly Average +10% Total Contributions Approach |
100% Total Contributions Approach |
|
2025 |
80% Yearly Average +20% Total Contributions Approach |
100% Total Contributions Approach |
|
2026 |
70% Yearly Average +30% Total Contributions Approach |
100% Total Contributions Approach |
|
2027 |
60% Yearly Average +40% Total Contributions Approach |
100% Total Contributions Approach |
|
2028 |
50% Yearly Average +50% Total Contributions Approach |
100% Total Contributions Approach |
|
2029 |
40% Yearly Average +60% Total Contributions Approach |
100% Total Contributions Approach |
|
2030 |
30% Yearly Average +70% Total Contributions Approach |
100% Total Contributions Approach |
|
2031 |
20% Yearly Average +80% Total Contributions Approach |
100% Total Contributions Approach |
|
2032 |
10% Yearly Average +90% Total Contributions Approach |
100% Total Contributions Approach |
|
2033 |
100% Total Contributions Approach |
100% Total Contributions Approach |
I hope this clarifies the matter for the Deputy.
