The Government intends to introduce a Total Contributions Approach (TCA) to establishing level of entitlement for all new state pension contributory claims from 2020 onwards. This is distinct from the interim TCA model being made available as an option for those affected by the 2012 rate band changes.
I understand that the Deputy’s question may be based on an inaccurate report in a national newspaper last month. There is no basis to state that all workers retiring from 2020 will only get a full State pension if they made PRSI contributions for 40 years. The criteria required for a full pension under that new approach have not yet been determined, and are currently subject to a public consultation which I launched on 28th May. Issues such as the number of years required for a full pension, transitional arrangements and treatment of the self-employed are addressed in the consultation questions, and in the accompanying documentation.
Additionally, I outlined at the launch that these final details will not be decided upon until I have considered the submissions received in this process, a point which was re-emphasised by two of my officials, in their presentations to stakeholders and press who were present. It was explicitly stressed in those presentations that, whatever the final model, it would have to accommodate those who were self-employed before 1988.
It might be noted that if such matters had already been decided upon, there would be little point in conducting a public consultation on the design of the final system.
This public consultation is available on my Department’s website and I would encourage all interested stakeholders to contribute to the survey there. The materials included as part of the consultation examine issues such as the extension of compulsory PRSI for self-employed in 1988, and seeks the views of stakeholders on how best to ensure they are not disadvantaged as a result of this reform.
The position regarding part-time workers is complicated. As in most countries, there are thresholds below which employees and self-employed persons are not compulsorily covered for pensions under the PRSI system. Generally, the people below these thresholds receive lower pay than can be received while on Jobseekers benefit, and so they will often be either in receipt of a jobseekers payment (and credited contributions) in respect of the days they do not work, or they will be people who would not qualify for a jobseekers payment.
In April 1990, the threshold for employees changed from being based on time worked (i.e. less than 18 hours in a week) to a monetary amount. Some were affected by this change at that time but many others were not. However, over time this monetary amount has been very significantly eroded by inflation, and is now only €38 in a given week.
It is not the case that this reform disadvantages part-time workers. Most of those who fell below the PRSI threshold in the past (and who do not have credited contributions for those periods), whether in the 1990s or today, generally have significant gaps which result in reduced entitlements under the current Yearly Average system. In most cases, such workers facing a reduced pension under the current system are expected to fare significantly better under the TCA approach.
I hope this clarifies the matter for the Deputy.