Dáil Éireann Debate, Tuesday - 21 February 2023
448. Deputy Bríd Smith asked the Minister for Social Protection her proposals to remedy the discrimination suffered by homemakers whose time out of the workforce prior to 1994 is not taken into account, and who have not qualified for a State pension (contributory); and if she will make a statement on the matter. [8090/23]
Amharc ar fhreagraThe current State Pension (Contributory) system gives significant recognition to those whose work history includes an extended period outside the paid workforce, often to raise families or to provide another full-time caring role.
Applicants for the State Pension (Contributory) have their entitlement assessed under two separate criteria, receiving a payment based on which method is most beneficial to the person. The Yearly Average (YA) method has been in place since the introduction of the contributory pension in 1961. The YA method uses all paid and credited contributions divided by time spent in the social insurance system to give an average of Social Insurance contributions per year with payments made on a banded basis.
Under the Yearly Average method, applicants can apply under the Homemaker's Scheme for those years since 1994 spent caring for children under 12 or other dependent relatives to be disregarded in the calculation. Up to 20 years disregard can be applied. This means the pension average does not disadvantage an applicant for the time spent caring.
In January 2018, an interim Total Contributions Approach was introduced which removed the time spent in the Social Insurance system as a factor and simply added paid and credited contributions together. Homecaring periods can be claimed for providing full time care to children under 12 or people aged over 12 who require an increased level of full-time care. Up to 20 years of Homecaring Periods can be claimed. This reform fundamentally changed the entitlement of many who spent time out of the workforce caring for others. It, for the first time, acknowledged home caring periods prior to 1994. The Interim Total Contributions Approach arrangement results in a fairer and a more transparent system, as the person’s lifetime contribution is reflected in the State Pension (Contributory) payment received.
Where a person reaches State Pension age and does not satisfy the conditions to qualify for a SPC or qualifies for less than the maximum rate, he/she may qualify for the means-tested State Pension (Non-Contributory), the maximum rate of which is over 95% of the rate of the State Pension (Contributory). Alternatively, an Increase for a Qualified Adult (IQA) is paid, generally, where a pensioner has an adult dependent who does not have enough contributions to claim a maximum rate State Pension (Contributory) in his or her own right. The payment rate for the IQA is up to 90% of a full contributory pension. The most advantageous payment for a pensioner will depend upon their individual circumstances.
Last September, I announced a series of landmark reforms to the State Pension system. The measures are in response to the Pensions Commission’s recommendations and represent the biggest ever structural reform of the Irish State Pension system. One of the reforms agreed by Government is a phased 10-year full transition to the Total Contributions Approach and the abolition of the Yearly Average approach to commence from January 2024.
I hope this clarifies the matter for the Deputy.
