Dáil Éireann Debate, Tuesday - 11 July 2023
446. Deputy Michael Ring asked the Minister for Social Protection the progress to date on introducing a total contributions approach with respect to the State pension (contributory) applications; when he expects this to be in place; and if she will make a statement on the matter. [33824/23]
Amharc ar fhreagraIt is worth noting that, since 2018, the Total Contributions Approach has been used in the calculation of State Pension (Contributory) payments, alongside the Yearly Averaging approach which was introduced in 1961, with the applicant receiving the better of the two calculations.
One of the landmark reforms to the State Pension system I announced last September is a ten-year phased transition to the Total Contributions Approach and the abolition of the Yearly Average method, as recommended by the independent Pensions Commission following its in-depth analysis of the State pension system.
This fairer system, which removes existing anomalies with the Yearly Averaging system, will calculate pension payments based on the number of social insurance contributions made by a person over his or her working life, with significant pension credits granted to people who have taken time out of the workplace for caring responsibilities.
During the transition period, individual pension rates will be based on the best of the Total Contributions Approach, or a rate based on a mix of the Yearly Average and Total Contributions Approaches, with the proportion accounted for by Yearly Average reducing from 90% to zero over 10 years and the proportion accounted for by the Total Contributions Approach increasing commensurately.
Officials in my Department are currently working on the legislation and systems to support the introduction of this change, which will be effective from 2024.
I hope this clarifies the matter for the Deputy.
