Dáil Éireann Debate, Wednesday - 12 March 2014
85. Deputy Joan Collins asked the Minister for Social Protection if she will correct the anomalies whereby a person born on 31 December 1947 who paid an average of 21 PRSI contributions per year receives an old age pension of €225 per week but a person born on 1 of January 1948 who paid an average of 29 PRSI contributions per year receives an old age pension of €196 per week. [12232/14]
Amharc ar fhreagraThe figures provided by the Deputy do not entirely correspond with the rates of payment under the State pension (contributory) and it may be that one of the pensioners is in receipt of another payment, such as the State pension (non-contributory).
From 1 September 2012, people awarded a State pension (contributory) with an average of 29 contributions paid or credited will generally be paid a personal rate of €196 weekly. Another pensioner with an average of 21 contributions would be entitled to the same personal rate, as they would both be in the same band. This would apply both to pensioners born on 31 December 1947 and 1 January 1948. While both might be entitled to increases in respect of qualified adults and/or children, it would not appear that either individual would qualify for a State pension (contributory), based on his or her PRSI contributions, at a rate of €225 weekly. It may be, therefore, that the latter rate of payment is a means-tested one, rather than one based on his or her PRSI record.
The State pension is a very valuable benefit and is the bedrock of the Irish pension system. Therefore, it is important to ensure that those qualifying have made a sustained contribution to the Social Insurance Fund over their working lives. To ensure that the individual can maximise their entitlement to State pension, all contributions (paid or credited) from when they first enter insurable employment until pension age are taken into account when assessing whether they are entitled to a State pension, and the level of any such entitlement.
Once over 16 years of age, the date a person enters into insurable employment is taken as the date used for averaging purposes in order to qualify for a State pension.
To qualify for a state pension a person must:
- have at least 520 paid contributions and
- satisfy a yearly average condition (a yearly average of 48 contributions paid or credited is required for a full rate pension, and reduced rates of payment may be payable for pensioners with lower averages).
The yearly average test has been in existence since 1961 when contributory pensions were first introduced. The scheme was designed with a view to ensuring that people could qualify for contributory pensions immediately and to suit a system where social insurance coverage was limited.
The rates of State pension paid were more closely linked to the number of contributions paid in Budget 2012. Under the pension reform programme, it is planned to adopt a total contributions approach where the number of contributions paid over a work life will closely reflect the rate of payment received. For example, 30 years contributions (1,560) could qualify a person for maximum State pension (contributory). A person would accumulate 1/30th of a pension for each year of contributions up to a maximum of 30/30ths inclusive of a certain number of credits. It had been planned to introduce this change in 2020 but in the context of changing demographics and longer working, this date may change.
The OECD Review of the Irish Pension System which was published in April 2013 also endorsed the move to a total rather than an average contributions test to determine entitlement to a State pension.
An increase for a qualified adult, which is a means tested payment, may be made in respect of an individual who does not qualify for a pension in their own right or qualifies for a lower rate of pension due to gaps in insurance. It may also be the case that a means tested non-contributory pension may be available to an individual who meets the qualifying criteria for that payment.
