Dáil Éireann Debate, Tuesday - 21 March 2023
795. Deputy Jim O'Callaghan asked the Minister for Social Protection if the averaging system used for the calculation of State pensions is to be retained; if not, the proposals the Government has for its replacement; and if she will make a statement on the matter. [12337/23]
View answerCurrently all applicants for the State Pension (Contributory) (SPC) have their entitlement assessed under two separate criteria, the Yearly Average (YA) method and the interim Total Contributions Approach, receiving a payment based on which method is most beneficial to the person.
The YA method has been in place since the introduction of the contributory pension in 1961. The YA method sees all paid and credited contributions divided by time spent in the social insurance system to give an average of Social Insurance contributions per year with payments made on a banded basis. Under the YA method, applicants can apply under the Homemaker's Scheme for those years since 1994 spent caring for children under 12 or other dependent relatives to be disregarded in the calculation. Up to 20 years disregard can be applied. This means the pension average does not disadvantage an applicant for the time spent caring.
The interim Total Contributions Approach was introduced in January 2018. It removes the time spent in the Social Insurance system as a factor and simply adds paid and credited contributions together. 2080 contributions (equivalent to 40 years) are required for a full rate payment with pro-rata payments for those who have the minimum required 520 paid contributions, but less than 2080. Homecaring periods can be claimed for providing full time care to children under 12 or people aged over 12 who require an increased level of full-time care. Up to 20 years of Homecaring Periods can be claimed.
Last September, I announced a series of landmark reforms to the State Pension system. 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 transition to the Total Contributions Approach and the abolition of the Yearly Average approach to commence from January 2024.
During this transition period, individual pension rates will be based on best of the Total Contributions Approach, or a rate based on a mix of the Yearly Average and Total Contributions Approaches, with the proportion accounted for by Yearly Average reducing from 90% to zero over 10 years and the proportion accounted for by the Total Contributions Approach increasing commensurately.
Where a person reaches State Pension age and does not satisfy the conditions to qualify for a SPC or qualifies for less than the maximum rate, they may instead qualify for one of the following:
- The means-tested State Pension (Non-Contributory) (SPNC) which is a means-tested payment with a maximum payment of 95% of the SPC; or
- An increase for a qualified adult, amounting up to 90% of a full rate SPC pension where their spouse has a contributory pension; or
- Where their spouse/civil partner is deceased, a widow's/widower's/civil partner's contributory pension, which they may claim either based on their spouse's or their own social insurance record. The qualifying conditions for this require fewer contributions paid (260) than the SPC and the current maximum personal rate for those aged 66 or over is €265.30, i.e., the same as the maximum rate of the SPC, with allowances (e.g., the Living Alone Increase) payable where applicable.
I hope this clarifies the matter for the Deputy.
