On 23 January 2018, the Government agreed to a proposal to allow pensioners affected by the September 2012 changes in rate bands to have their pension entitlement calculated on a Total Contributions basis, including provision for up to 20 years of a new home caring credit.
The interim Total Contributions Approach for those who reached pension age after September 2012, called the Aggregated Contribution Method (ACM), resolves many of the anomalies arising from the “Yearly Average” calculation model, as the year a person commenced paying social insurance contributions is no longer a key determining factor for pension entitlement rate calculation. Instead, the totality of social insurance contributions paid and credited are central to the calculation. The new method also, for the first time, acknowledged home-caring periods prior to 1994.
This was an equitable approach as pension outcomes were more in line with the total number of contributions paid and credited, with significant provision for years of caring in the home.
Work began on the examining the social insurance records of over 90,000 pensioners in September 2018 and review outcomes, provided for under the Social Welfare, Pension & Civil Registrations Act 2018, began issuing from 13 February 2019 - the day after the necessary Regulations were signed.
Where the review resulted in an increase in the pensioner’s rate of payment, the increase was backdated to 30 March 2018 or the pensioner's 66th birthday, whichever was the later. As at the end of October 2019, with the project completed, 94,258 reviews were finalised. Of these, 53,092 (56%) were women and 41,166 (44%) were men.
Of the 53,092 women reviewed 28,528 (54%) received an increase while the rest remained on their existing rate. Of the 41,164 men reviewed, 9,956 (24%) received an increase and the remainder continue to receive their same rate of payment. No pensioner had their pension reduced as part of this review. For those who received an increase in their rate of payment, the average weekly personal rate increased by €20.27 per week (Women €24.23; Men €8.82).
From April 2019, all new State pension contributory applications are assessed under all possible rate calculation methods, including the new total contributions approach, with the most beneficial rate paid to the pensioner.
The estimated additional cost in the full 2019 year to the Exchequer from this review was circa €40.1 million and this included circa €0.9 million of increases for Qualified Adult payments, which increased in line with the pensioner’s personal rate of payment. The 2018 cost of backdating the increases awarded from end of March 18 to end of December 18 was circa €26.6 million, including circa €0.6 million for increases in respect of qualified adult increases.
As the Deputy is aware, a Commission on Pensions has been established to examine a range of issues of options for the Government to consider and specifically with respect to pension calculation methods, the Pensions Commission has also been asked to examine and consider options to meet the Programme for Government commitment to “Introduce a Total Contributions approach, aligning a person’s contributory pension more closely with the contributions they make". This will include a provision for credited contributions and homecaring periods, ensuring that people who take time off work to care for loved ones are not disadvantaged.
Once it has concluded its deliberations, it is hoped the Commission will report to Government by June of 2021. The Government has committed to taking action having regard to the recommendations of the Commission within 6 months of receiving the Commission's report.
I hope this clarifies the matter for the Deputy.