A policy to introduce the Total Contributions Approach (TCA) to pensions calculation was adopted by Government in the National Pensions Framework in 2010, as was the decision to base the entitlements of all new pensioners on this approach from around 2020.
In advance of this, on 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 current 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 their final pension outcome. Under this new arrangement, a person who reached pension age after 1 September 2012 and 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. Up to 10 years of other credits, for example when unemployed or ill, may also be used, subject to the total number of credits not exceeding 20 years. So, for example, a person might receive a maximum pension based on 20 years paid PRSI contributions, 5 years jobseeker credits, and 15 years HomeCaring Credits, over a 50 year period.
For those who do not qualify for the State Pension (contributory) (SPC), there are other state pension payments available. Notably, they may qualify for the State Pension (non-contributory) which is a means-tested payment (based on their share of household means) with a maximum payment of 95% of the SPC. If their spouse has a contributory pension, they may qualify for an increase for a qualified adult (based on their own means), amounting up to 90% of a full rate SPC pension. Consequently, if a person doesn’t receive a State pension after pension age, they have both significant means and have made little or no contribution to the Social Insurance Fund. Introducing a new pension entitlement for such people would reduce the resources available for other pensioners, most of whom have less means than they do, and have contributed significantly more to the Social Insurance Fund.
The model of TCA which will be in place for all new pensioners from 2020 will be decided upon following a consultation later this year, and I do not wish to pre-empt this process, nor the Government decision and legislation which will follow it. However, I can state that adequate provision for home-carers will be an important factor in the final design.
I hope this clarifies the matter for the Deputy.