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State Pensions

Dáil Éireann Debate, Thursday - 17 November 2016

Thursday, 17 November 2016

Ceisteanna (185)

Niamh Smyth

Ceist:

185. Deputy Niamh Smyth asked the Minister for Social Protection the details of the current system for pension entitlements (details supplied); if his attention has been drawn to the way it is discriminating against persons, particularly women; his plans to review the current system; and if he will make a statement on the matter. [35658/16]

Amharc ar fhreagra

Freagraí scríofa

The rate of payment of the State pension (contributory) is related to contributions made over years into the Social Insurance Fund. As such, those with a stronger attachment to the workforce, who have paid more into that fund, are more likely to be paid under that scheme. There are a number of criteria which must be satisfied in order to qualify for a State pension contributory. One of the conditions of the State pension (contributory) is that a person needs a minimum of 520 weekly contributions (i.e. 10 years) paid since entering insurable employment. If a person does not have this minimum number of contributions paid, they will not generally have an entitlement to this particular pension, either at a full or reduced rate. Since 1961, when contributory pensions were introduced, the average contributions test has been used in calculating the rate of pension entitlement.

Entitlement is banded, with the maximum rate payable to those with a yearly average of 48-52 contributions, and the minimum rate payable to those with a yearly average in the range of 10-14 contributions per year. Even if someone has only 10 years (520 weeks) of paid reckonable contributions between their 16th and 66th birthdays, they would generally qualify for a State pension (contributory), although the rate payable would vary depending on their circumstances, and it will not always be their most advantageous payment to claim.

The State assists those with caring roles to qualify for a State pension (contributory). The homemaker’s scheme makes qualification for State pension (contributory) easier for those who take time out of the workforce for caring duties. The scheme, which was introduced in 1994, allows up to 20 years spent caring for children under 12 years of age or incapacitated people to be disregarded when a person’s social insurance record is being averaged for pension purposes. Given the valuable nature of the State pension (contributory), those who qualify under the homemaker’s scheme still need to fulfil the eligibility requirements for that scheme, and have at least 520 paid contributions over the course of their working lives.

Prior to the introduction of the Homemakers scheme in 1994, there was no provision for the recognition of periods of homemaking. This scheme introduced such recognition of periods going forward from that date, but had it been backdated, the costs would have been very considerable. I am advised that if the Homemakers scheme was to be backdated to all dates prior to 1994, for payments from January 2017, the net cost to the Exchequer could be expected to amount to approximately €290 million in 2017, and this annual cost would rise at a faster rate than the overall cost of State pensions.

Where people who were unattached to the labour market during most of their adult lives cannot qualify for a contributory pension in their own right as they have paid few or no contributions, or cannot qualify for a full rate as a result of an intermittent PRSI record, the social protection system provides alternative methods of supporting such pensioners in old age. Therefore, if their spouse has a contributory pension, they may qualify for an Increase for a Qualified Adult amounting up to 90% of a full rate pension, which by default is paid directly to them. Alternatively, they may qualify for a means-tested State Pension (non-contributory), amounting up to 95% of the maximum contributory pension rate.

The National Pensions Framework (2010) proposed that a “Total Contribution Approach” (TCA) should replace the yearly average approach, for new pensioners from 2020. The aim of this approach is to make the rate of contributory pension more closely match contributions made by a person. Officials of my Department are currently working on the detailed development of the TCA with a view to making proposals for consideration in the first half of next year. It’s worth noting that this is a very significant reform with considerable legal, administrative, and technical elements in its implementation. An important element in the final design of the scheme will be the position of people who have gaps in their contribution records for various reasons, and this factor is being considered very carefully in developing this reform.

I hope this clarifies the matter for the Deputy.

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