Leo Varadkar (Dublin West, Fine Gael) | Oireachtas source

I thank the Deputy for raising the issue. I am taking the debate on behalf of the Tánaiste and Minister for Social Protection, Deputy Joan Burton, who is elsewhere on Government business.

The Irish pensions system is made up of a number of schemes based on criteria such as contributions paid, income need and other factors.

These ensure that people have an adequate income when they retire. This range of supports has resulted in very similar outcomes for male and female pensioners in Ireland. Poverty rates for women and men over 65 have effectively been at parity over a number of years, despite many women having lifetime lower earnings than men. It should also be noted that, according to the most recent figures, the consistent poverty rate for those over 65 is a quarter of that for working age adults and a sixth of that for children.

The State pension contributory is one of a number of schemes and the rate of payment is related to contributions made over the years into the Social Insurance Fund by the person concerned. As such, those with a stronger attachment to the workforce who have paid more into that fund are more likely to be paid under the scheme. Under the scheme, entitlement is calculated by means of a yearly average calculation, where the total contributions paid or credited are divided by the number of years of the working life. Payment rates are banded. For example, someone with a yearly average of 48 contributions will qualify for a full pension, whereas someone with a yearly average of 20 will qualify for a pension at 85% of the full rate.

The homemaker’s scheme was introduced in 1994 to make qualification easier for those who took time out of the workforce for caring duties. It allows up to 20 such years in the period since its introduction to be disregarded when the PRSI record is being averaged for pension purposes. Where someone does not qualify for a full rate contributory pension, they may qualify for an alternative payment. If their spouse has a contributory pension, they may qualify for an increase for a qualified adult, amounting up to 90% of a full rate pension, which by default is paid directly to them. Alternatively, they may qualify for a means tested State pension, non-contributory, which amounts to 95% of the maximum contributory pension rate.

Work is under way to replace the yearly average system with a total contributions approach. Under this approach, the rate of pension paid will more closely reflect the number of contributions recorded over a working life. It is expected that this will replace the current system for new pensioners from 2020, although that date is subject to change, as this is a very significant reform with considerable legal, administrative and technical challenges to be overcome in its implementation. When proposals are agreed, legislation will be brought forward to underpin the necessary changes.

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