From September 2012, the rates of State pension (contributory) paid to those who had a yearly average of less than 40 contributions were lowered.
In recognition that these rate changes may have negatively impacted certain cohorts, 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 those post Budget 2012 rate bands. People whose pensions were decided prior to 1 September 2012 were not affected by the Budget 2012 rate band changes.
Work began on examining the social insurance records of over 94,000 pensioners in September 2018. Where these reviews resulted in an increase in the pensioner’s rate of payment, the increase was backdated to 30 March 2018 or the pensioners 66th birthday, as appropriate. At the end of October 2019, with the project completed, 94,258 reviews had been finalised; of these, 53,092 (56%) were women and 41,166 (44%) were men. Of the 53,092 women reviewed, 28,528 (54%) received an increase while the rest remained on their existing rate. Of the 41,166 men reviewed, 9,956 (24%) received an increase and the remainder continued to receive their same rate of payment. No pensioner had their pension payment reduced as part of this review.
One of the landmark reforms to the State Pension system, enacted in the Social Welfare (Miscellaneous Provisions) Act 2023, is a ten-year phased transition to the Total Contributions Approach and the abolition of the Yearly Average method. The phased transition will commence in January 2025. This was part of the recommendations from the independent Pensions Commission following its in-depth analysis of the State pension system.
Under the Total Contributions Approach for calculating the SPC, the total number of paid contributions can be supplemented by up to 20 years of credited contributions. These credits can take the form of HomeCaring periods (maximum of 20 years) or ordinary credits (maximum of 10 years) for reasons such as unemployment or illness. The total combined credits cannot exceed 20 years (i.e. if a person has 15 years HomeCaring periods and eight years ordinary credits, they will get a maximum of 20 years credits).
To receive the maximum rate of payment, a person needs a total of at least 2,080 contributions and credits combined (equivalent to 40 years). If the total is less than 2,080, the rate of payment will be a percentage of the maximum rate of pension. For example, a person may receive a maximum pension based on a record of 20 years paid PRSI contributions, 5 years jobseekers’ credits, and 15 years HomeCaring credits (before or after 1994).
The existing provision of up to 20 years credited periods can provide up to half of a full pension entitlement, having regard to the fact that 40 years contributions are required to receive a maximum rate of payment.
I trust this clarifies the matter for the Deputy.