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

Expenditure on pensions, at approximately €7 billion, is the largest block of expenditure in my Department, representing some 35% of its expenditure. Demographic change alone increases this by about €200 million a year. Maintaining the rate of the State pension is critical to protecting older people from poverty. Entitlement levels are 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 so, 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 their record is being averaged for pension purposes.

The cost of extending the homemaker's scheme to allow people to avail of the full 20 years currently allowed under the scheme, encompassing periods prior to 1994, is estimated at a potential cost some €290 million in 2017. The cost of any such backdating would have to be borne by existing PRSI contributors, that is, working people aged under 66 and their employers - by increasing PRSI.

Where someone does not qualify for a full rate contributory pension, they may qualify for an alternative payment. If his or her spouse has a contributory pension, he or she may qualify for an increase for a qualified adult amounting to 90% of a full-rate pension, which by default is paid directly to them. Alternatively, he or she may qualify for a means-tested State pension, which amounts up to 95% of the maximum contributory rate.

It is planned that a total contributions approach will replace the yearly average approach from around 2020, and the position of homemakers will be carefully considered in the context of that reform. Officials from my Department are currently working on the detailed development of the total contributions approach with a view to making proposals for consideration in the first half of next year.

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