Dáil Éireann Debate, Tuesday - 30 January 2018
577. Deputy Declan Breathnach asked the Minister for Employment Affairs and Social Protection the status of the consultation process to find a resolution to the inequities in the averaging system for the State contributory pension; the status of a report in this regard completed by her Department; and if she will make a statement on the matter. [3941/18]
Amharc ar fhreagraOn 23 January, the Government agreed to a proposal that will allow pensioners affected by the 2012 changes in rate bands to have their pension entitlement calculated by a new “Total Contributions Approach” (TCA) which will include up to 20 years of a new HomeCaring credit. This approach is expected to significantly benefit many people, particularly women, whose work history includes an extended period of time outside the paid workplace, while raising families or in a caring role. It will make it easier for pensioners assessed under the yearly average model, to qualify for a higher rate of the State Pension (contributory). The TCA will ensure that the totality of a person’s social insurance contributions - as opposed to the timing of them - determines a final pension outcome. The new TCA with substantial HomeCaring credits will be available to all people who reached pension age after 1st September 2012, when the revised rate bands took effect.
Under the new arrangements a person who has a 40 year record of paid and credited social insurance contributions, subject to a maximum of 20 years of the new HomeCaring credits, will qualify for a maximum contributory pension where they satisfy the other qualifying conditions for the scheme. This means, regardless of when a person started working, they may only need 20 years of paid PRSI contributions, over the course of 50 years, to receive a maximum rate pension, if they also have home-making periods. If they had periods of unemployment or illness where they received credited contributions, they may use up to 10 years of such contributions for such periods, subject to an overall cap of 20 years. People who were in receipt of Invalidity or Widows Contributory Pensions at retirement age will generally receive a maximum rate pension, regardless of this calculation.
The new TCA for pensioners assessed under the 2012 rate band changes, comes into effect from 30 March 2018. The Department will invite over 40,000 pensioners, currently assessed under the 2012 rate band changes, to have their pensions recalculated under TCA to determine if they qualify for a higher rate of entitlement. However, as it will take time to design and set up administrative processes, and the necessary IT systems, the Department expects to send out the invitations from the fourth quarter of 2018, and to begin payments, including arrears for any period from 30 March 2018, from Q1 2019.
This measure will allow those who reached pension age since September 2012, and were negatively impacted upon by the yearly averaging system and/or lack of recognition of home-making periods pre-1994, to benefit from TCA. It will not, however, remove the situation where some people may receive a maximum rate pension for little over 10 years contributions, for example where they moved here in their early 50s. This anomaly will only be removed when the Yearly Average calculation system has been abolished.
It is envisioned that from 2020, all new pensioners will be assessed under the final Total Contributions Approach. The final design of this model will be subject to broad public consultation later this year and the final model will then be presented to Government for approval.
I hope this clarifies the matter for the Deputy.
