Tuesday, 10 October 2006
Question 104: To ask the Minister for Social and Family Affairs his views on amending the Social Welfare Acts in order to allow the spouses of farmers and other self-employed persons to make voluntary PRSI contributions in order that they will ultimately be able to qualify for contributory pensions in their own right; and if he will make a statement on the matter. [31953/06]
Family members working together are generally not insurable under the Social Welfare Acts. Spouses of employed or self-employed contributors are specifically excepted from social insurance contributions in respect of their working activity with their spouses. However, there is scope within the provisions of social welfare legislation to enable spouses who are partners in an enterprise, or who work together in a legally incorporated business, to be insurable and thereby accrue entitlement to contributory pensions in their own right.
At the heart of the issue lies the fact that current social welfare provisions recognise that family members regularly support each other without having any intention of entering into formal contractual arrangements. Employment under a contract of service as an employee, or as a contract for services as a self-employed person, is, by its very nature and necessity, a formal agreement between two or more parties. All contracts bring with them rights and responsibilities that, in this instance, include compliance legislation relating to PRSI, taxes and employment rights.
In general, close family members must show an express agreement to overcome the presumption that parties did not intend to be bound in a legally binding contract. Evidence of a partnership between spouses or the incorporation of a business will overcome this presumption and establish liability for Class S contributions providing income is above the annual threshold of €3,174. These provisions apply to couples engaged in farming activities and other self-employment activities, for example in retailing or in providing professional services.
The exception of spouses from PRSI liability in respect of a shared occupation does not preclude them in certain circumstances from accessing the voluntary PRSI contribution scheme. Access to this scheme requires a minimum number of 260 paid contributions. Where a person has been previously insured as an employee or a self-employed person, is no longer compulsorily insured and is under 66 of age, he or she can opt to pay a voluntary social insurance contribution.
Voluntary contributions will maintain social insurance cover for pensions such as retirement, State, widow's and widower's pensions, guardian's payment and the bereavement grant, depending on the rate at which voluntary contributions have been paid. These contributions maintain pension coverage at the level equivalent to that for which the person was last compulsorily insured.
Additional information not given on the floor of the House.
The amount to be paid as a voluntary contribution is a percentage of annual income. For those who were previously self-employed, the voluntary contribution is paid at a fixed amount of €253 per annum.
The requirement to have 260 paid contributions to gain access to the voluntary contribution scheme ensures that the requisite number of paid contributions is in place to establish a contributory pension entitlement. While some spouses may not be able to accrue the paid contributions through farming, large numbers are now engaged in off-farm employment which enables them to accumulate the requisite number of paid contributions.
Under the existing social welfare provisions, where formal employment or partnership relationships are intended between spouses or assisting relatives, the legislation provides the scope necessary to allow parties to enter into arrangements that will enable them to gain access to social insurance coverage. On the voluntary contributions scheme, the requirement to have 260 paid contributions to gain access to the scheme is appropriate. I am always willing to consider possible improvements.
I thank the Minister for his reply. Let me articulate and propound the case of the cohort including farmers' and shopkeepers' spouses. They are declining categories of people across rural Ireland and in urban areas who are effectively forgotten or invisible in the social welfare code. They spend many hours at the shoulders of their spouses, trying to retain and build up businesses. They work extremely hard from early morning to late at night. They do not have the formal arrangements or contractual arrangements to which the Minister referred. They could in the case of legally incorporated businesses or partnerships, but that is the State effectively imposing a view on them. Why does this have to be done? Does the Minister agree that a significant anomaly exists within the social welfare code for farmers' and shopowners' spouses as well as other self-employed categories? Women are being classified as relative to the system and prevented from paying PRSI in their own right. As a result, they cannot qualify for contributory pensions in their own right.
Does he agree that the problem has been compounded since the introduction of a means test for the qualified dependant? Is it not the position that they are wiped out all together? They work extremely hard, rear families and give a service to many people across the country, whether on the farm, huckster or corner shop. Is this not effectively another form of discrimination?
The answer is to remit such people in these situations. I accept such an initiative would have to be subject to examination, restriction and regulation. However, they should be allowed to pay the PRSI contribution on a voluntary basis, as was done with the carers, provided they work a certain number of hours in the shop or on the farm. Let us say it would cost up to €500 per annum and they would need ten years' contributions to qualify. It would not be open season and would be subject to regulation. We all know that one cannot undermine the concept of the PRSI system, and we would not want to do so. However, we should recognise people who are making a major contribution but who are wiped out of the system and in statistical terms turn up with zero in this regard.
I appeal to the Minister as part of the multifaceted reviews going on in his Department to examine this situation. I am sure the farmers' bodies and self-employed associations will make robust submissions to the Minister in the context of recognising people's contributions, ensuring the independence of women and removing them from a sense of dependency which was introduced in the 1920s and 1930s and which should be eliminated.
This issue has been the subject of many reviews over the years. More recently, it was discussed under the partnership talks. The distilled wisdom of all the parties involved, at review level among employers, employees and, in so far as I can ascertain, farmers, is that while the system is not perfect and leaves people out of the loop, there is a solution by way of making formal arrangements so that the spouse becomes a business partner.
I will listen carefully to the farmer bodies in particular if they have another approach to the problem. However, all the reviews and the partnership talks have fallen back on the solution that is available, namely, formal relationships between partners as one might expect in any business. That would allow them into the contribution net.
I commented earlier on the availability of voluntary contributions. Access to that scheme required a minimum number of 260 paid contributions and I can foresee some difficulty in that area for these people. I understand the issue and I am sympathetic. It has been reviewed many times. Nobody in the Department has produced an easy solution to the problem. However, there is an answer for anyone who is doing this work, namely, to enter a type of formal business relationship. I am not sure that it has to be an extensive high-powered business relationship. A partnership of some type might meet the requirements. Nonetheless, I will take account of what the Deputy said.