Dáil Éireann Debate, Tuesday - 19 June 2018
36. Deputy Willie O'Dea asked the Minister for Employment Affairs and Social Protection the reason under the total contributions approach to pensions that is due to replace the current averaging approach, the baseline for qualification is forty years despite previous indications that it would be 30 years; and if she will make a statement on the matter. [26410/18]
Amharc ar fhreagraI tabled this question to elicit some clarification on the Government's proposed total contributions system for contributory old age pensions. A baseline of 30 years was discussed initially but the recently published Government paper refers to a baseline of 40 years. I understand from some comments made by the Minister at a committee meeting that the matter has not yet been finalised. I seek clarification on the issue.
We intend to introduce a total contributions approach to establishing a level of entitlement for all new contributory State pensions from 2020 onwards. The Roadmap for Pensions Reform 2018-2023 sets out how it is intended to implement the total contributions approach, TCA, to calculating entitlement to the contributory State pension. 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 a few weeks ago, on 28 May, and which will remain open until 3 September. Issues the Deputy raises, such as the number of years required for a full pension, are addressed in the consultative questions and the accompanying documentation. The final details will not be decided upon until I have considered all the submissions received in this process. For this reason, it will be important to have industry commentators and representative bodies present at the launch of the public consultation. We also need to receive submissions from many other bodies and I hope to arrange some form of roadshow by September. I do not mean to be disrespectful to the people who attended, to whom I am grateful, but I want to speak to real people and the workers of today who will be pensioners after 2020. I want to speak to people aged over 55 years and those who will be genuinely affected by the new approach. I want to have a proper conversation to ensure that when we all sit down after September we can collectively decide, with the Oireachtas committee, what the new model will look like. We will then be happy to stand over the new system because it will be in the interests of the people. The public consultation is available on my Department's website and I genuinely encourage all interested stakeholders to participate in the survey and make a submission before 3 September.
It is reassuring that the final determination has not yet been made on whether the baseline will be 30 or 40 years. In view of the fact that the self-employed only started making pension contributions in 1988, no self-employed person will qualify for the full pension in the year in which the new system kicks in. Does the Minister accept that such a scenario would be unfair?
The Minister acknowledged that some people may lose out under the new scheme. Let us assume a baseline of 40 years is adopted. Under the current system, a person with 20 years of contributions could receive up to 85% of a contributory pension, whereas under a total contributions system with a baseline of 40 years, that person would only receive 50% of a contributory pension. The Minister stated such a person would have an option to remain in the current system if he or she was adversely affected and worse off under the new system. Would such an arrangement be transitional and, if so, for how long would it last?
Self-employed people came into our current social insurance system in 1988 and, accordingly, such a person would have a maximum of 32 years of contributions when the total contributions approach becomes operational in 2020. Depending on the final determination of the number of contributions required in our new full State pension, this may pose a challenge for some of the people who will retire around that time. I set out this scenario in the consultation paper and it is possible that a transition period will be needed. I have also included a number of specific questions on this matter, including how we believe we should deal with it, how long the transition period should be and who should be included in the transition period. I genuinely hope that self-employed people log on and subscribe to give us their views.
As the Deputy noted, when we make changes to systems, there are normally winners and losers. I would like the system to be designed in such a way that there are no losers. I know that is exceptionally ambitious and will cost us but we do not want to change to a new system which leaves people behind with a bad taste in their mouths. I want everybody to appreciate that the new system we are moving towards is fairer than the current system. The proof will be in the pudding, however, and we must ensure the new system is fair and no one is left behind. Nothing is prescribed. We need to consider everyone's views on how best we can deliver a new model in January 2020 that will see us through the next generations.
I simply made the point that a 40-year baseline would discriminate against the self-employed who only joined the contributory pensions system in 1988, as the Minister correctly noted. I have another question on an issue about which I and other Deputies are receiving queries. The first hurdle to overcome before qualifying for a contributory old age pension is to have 520 paid contributions. The figure previously was 260. Is the figure of 520 contributions set in stone or is it up for discussion? If it is intended that it will remain in place, will it be possible, when calculating contributions, to count the new credits that will be provided for people who are looking after children, sick people and so forth?
Under the current system, a person must have a minimum of 520 contributions before he or she can qualify for payment. I do not see that changing unless we get an overwhelming response in the consultation that it should change. Any extra credits, such as illness and homemaking credits, must be added after the 520 contributions apply.
They are only used in calculating the amount of a pension.
Once a person has made the minimum of 520 paid contributions, the caring, illness and working abroad credits and any other credits that may be available are added to the 520 contributions. Nothing is prescribed in the public consultation. We want to hear what people have to say and, after 3 September, we want to arrive at a solution that we can all stand over and we are all happy with in order that it will last for generations.
