Vol. 481 No. 5
3 Mr. J. O'Keeffe asked the Minister for Social, Community and Family Affairs his views on the fact that self-employed contributors to the social insurance fund currently attaining the age of 66 years are denied contributory old age pension; and whether he will introduce pro rata pensions for those who are unable to make the necessary ten years of contributions from the introduction of the scheme prior to reaching pension age. [16559/97]
To qualify for the old age contributory pension, a person must, inter alia, have entered insurance at least ten years before pension age. This condition has been a feature of the scheme since its introduction in 1961. The purpose of the condition is to link entitlement to a pension with a reasonable level of contributions to the social insurance fund during the course of a person's career. This condition applies to all insured people.
Accordingly, self-employed people who became insured for the first time when social insurance was extended to the self-employed in 1988 and who were then aged 56 or over would not qualify for the old age contributory pension. They may be covered for widow's, widower's and orphan's pensions subject to satisfying the normal qualifying criteria. However, self-employed people in that age group, who had been insured as employed contributors for any period prior to age 56, could qualify for the old age contributory pension as such insurance can be combined with insurance as a self employed contributor for old age pension purposes.
Refunds of the old age contributory pension element of the contribution may be made to those who entered insurance for the first time less than ten years before pension age and who fail to qualify for either an old age contributory or non-contributory pension. In this year's Social Welfare Act provision was made that self-employed contributors who entered insurance in 1988, but were already over the age of 56 at that time and who had previously paid social insurance contributions as an employee would now be able to receive a refund of the pensions element of their self-employed social insurance provided that they do not qualify for an old age contributory or non-contributory pension. Heretofore, their earlier contributions precluded them from receiving such a refund.
In 1989 it was estimated that the net cost of paying old age contributory pensions to all self-employed contributors, who were aged between 56 and 66 in April 1988, would amount to £756 million over the lifetime of the persons concerned. The extra rate of contribution which would need to be paid by self-employed contributors generally to finance this was estimated at 2.4 per cent over a 50 year period. A review of these figures indicated that the estimated cost is now £500 million, based on numbers of some 20,000 people qualifying.
Allowing self-employed persons to buy pension rights by paying the outstanding years contributions in order to qualify for an old age contributory pension would also be very costly to the Exchequer unless the payments made by the individual self-employed contributors were calculated on an actuarial basis. The cost to an individual contributor of buying rights on this basis would be prohibitive. The cost of providing partial pensions would also be very high. I have arranged for these costings to be reviewed in greater detail by consultants in the context of the Actuarial Review of Social Welfare Pensions which I launched recently.
I recently announced the introduction of new pro rata pensions so that, in future, people who pay social insurance for a reasonable period of time will qualify for an old age contributory pension. From November of this year a yearly average of between 15 and 19 contributions will give a pension of 75 per cent of the maximum rate, while an average of between ten and 14 will give a pension of 50 per cent of the maximum rate. To qualify a person will also need to have a minimum of 260 paid contributions. This measure will be of benefit to many self-employed contributors.
While we will continue to ensure the broadest possible contributory pension cover to as many categories as possible, I regard the principle of a reasonable record of contributions as essential. As any proposals would have a major cost implication they would fall to be considered in a budgetary context. Any person resident in the State can, of course, apply for an old age non-contributory pension which is payable subject to a means test.
Will the Minister accept the present position discriminates against self-employed who were forced to join the scheme in 1988, obliged to pay contributions and yet are not eligible for a contributory pension? I understand they can get back only 53 per cent of their contributions. Will the Minister accept that if a way could be found that would not be too costly it would be fair, just and equitable that some arrangement should be made to accommodate these people?
I accept this is an anomaly that has been identified by all the political parties. We addressed it in our policy document where we indicated we would endeavour to come up with changes that might address the position. To date in my tenure I have had a number of meetings with interested groups and with a number of Deputies on all sides of the House who have made this valid point but, as has been the case in previous Administrations, the figures as presented are astronomical. With a view to addressing the position I asked the Department and its consultants to consider this issue to see if amendments could be made to alleviate the position of these people. I am not saying I will be successful, but I am endeavouring to be so.
Some progress has been made if the Minister accepts there is an anomaly to which we should try to find a solution. On the question of the cost involved, is there not a De Rossa precedent for a pro rata pension where people with a previous employment record can come in? Will the Minister accept that many of those who fall into this category will qualify for a non-contributory pension and that we are only talking about those who do not qualify for that type of pension? Will he accept the figure of £750 million quoted by the then Minister when the Bill was introduced and to which I, as the then Opposition spokesperson, tabled an amendment on this issue, has been slashed to £500 million? Will he show goodwill by agreeing to pay pro rata pensions to those who are caught by this anomaly if some reasonable way can be found to do so?
I could not commit myself in advance of considering the broad issue of the alternatives. Pro rata pensions is one of them, but despite the fact that the figures may have come down and have probably come down further since the figure of £500 million was arrived at, if we were to allow this to happen ultimately it might benefit many more people than those envisaged in the figures the Department have given. The estimate is in the region of 20,000, but it is possible that many others, who might not have indicated their interest in this type of pension, might come forward which would put the figure way in excess of 20,000 and increase the overall cost of the scheme over a lengthy period. People are suffering because of this anomaly. It has been an ongoing problem since the scheme was introduced and I am attending to it. I will endeavour to make an amendment within budget parameters but that may not be possible.
We will return to the subject.
