Dáil Éireann Debate, Tuesday - 21 March 2023
845. Deputy Seán Canney asked the Minister for Social Protection her views on whether the exclusion of women born before 1 September 1946 from the total contributions approach to contributory pension, which allows for up to 20 years home caring periods, represents discrimination on the grounds of age; and if she will make a statement on the matter. [13729/23]
View answerThe current State Pension (Contributory) system gives significant recognition to those whose work history includes an extended period outside the paid workforce, often to raise families or to provide another full-time caring role.
Applicants for the State Pension (Contributory) have their entitlement assessed under two separate criteria, receiving a payment based on whichever method is most beneficial to the person. The Yearly Average (YA) method has been in place since the introduction of the contributory pension in 1961. The YA method uses 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 Yearly Average 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.
In January 2018, an interim Total Contributions Approach was introduced which removed the time spent in the Social Insurance system as a factor and simply added paid and credited contributions together. 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. This reform fundamentally changed the entitlement of many who spent time out of the workforce caring for others. For the first time, it acknowledged home caring periods prior to 1994. The Interim Total Contributions Approach arrangement results in a fairer and a more transparent system, as the person’s lifetime contribution is reflected in the State Pension (Contributory) payment received.
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 maximum of 52) could attract a 98% pension. If pre-2012 pensioners were also allowed to avail of Homecaring Periods, 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 which, in turn, could significantly impact funds for future pension increases with consequential implications for pensioner poverty.
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 10-year full transition to the Total Contributions Approach and the abolition of the Yearly Average approach.
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, he/she may qualify for the means-tested State Pension (Non-Contributory), the maximum rate of which is over 95% of the rate of the State Pension (Contributory). Alternatively, an Increase for a Qualified Adult (IQA) is paid, generally, where a pensioner has an adult dependent who does not have enough contributions to claim a maximum rate State Pension (Contributory) in his or her own right. The payment rate for the IQA is up to 90% of a full contributory pension. The most advantageous payment for a pensioner will depend upon their individual circumstances.
I hope this clarifies the matter for the Deputy.
