Thursday, 9 October 2014
Topical Issue Debate
I wish to discuss with the Minister for Social Protection the possibility of addressing issues in the budget that discriminate against persons. One issue that affects women in particular - even though it is not against them, that is just the way it happens - concerns those who take career breaks to look after and care for their children. When they return to work some years later, they find there is an issue regarding the PRSI contributions they have paid. This is because of the way in which the contributory pension works at present, which is that it goes from the day on which one started work and is averaged out over the number of years one has worked right up to the point at which one retires. If one takes 20 years out during the intervening period when no contribution is paid, it means one's contributory pension is affected, whereas if one only started work at 50 or 55 and worked for ten years, one would get one's full contributory pension without having worked for 30 or 40 years.
This has really affected women, especially from a historical point of view because back in the 1970s, women were forced to give up work in the public service when they got married. At that stage, women once married had to resign from their positions. As the ban ended in 1973, women in this position were able once again to make up contributions to the Social Insurance Fund, which would eventually award them a contributory pension. In such a scenario, these women were able to make up for lost contributions when they retired. However, new regulations were introduced in 2012 by the Department of Social Protection. This new system aligned pension contributions with the average number of weeks worked. This charge affected up to 50,000 people at the time, mostly women. In certain cases, this means that women who spent a substantial part of their lives working and paying contributions would have been better off had they not worked at all and simply claimed the non-contributory pension. This contradicts two basic principles to which the Government has committed, namely, removing obstacles that might prevent women returning to work and, second, the commitment not to do anything that would reduce basic social welfare payments.
This also raises another question which is dealt with under the scope section of the Department of Social Protection. The employment status group was set up under the programme for prosperity and fairness. This group was set up due to growing concern that an increasing number of individuals were categorised as self-employed when the indicators were that employee status would have been more appropriate. While this area is very complex, certain outcomes have rightly and justifiable been arrived at where a partner, usually a women, who worked all his or her life on the family farm or in a family business without a separate income has been deemed eligible to share in his or her partner's PRSI contributions, therefore allowing him or her to qualify for a full contributory pension. In this case, one must apply to the scope section and a substantial payment of up to €10,000 or €15,000 often is required, which also is a concern for people. This is because in most cases, income was assessed on the husband's income, whereas PRSI contributions are assessed individually. Therefore, if one does not have the contributions, one is not entitled to one's contributory pension. It is then difficult to understand why women or partners who stays at home to care for children, an act which allows their spouses to continue working, should not also benefit from a share of their partners' PRSI contributions during this period of their lives. This can also apply to men, as the world changes and increasing numbers of men remain at home. Were a system like this in place, the averaging system introduced in 2012 would not discriminate against women who broke their employment record merely to facilitate the family and society as a whole. If such a system cannot not be universally introduced at present, the least the Minister and the Government could do is to revert to the older system where people in this position were allowed to make up for lost contributions when they retire.
This is a major issue as far as women are concerned. It is now adversely affecting older women who were banned from working because they decided to get married and a marriage ban was in place if one worked in the public service. It also affects mainly lower-paid women who now are retiring and who had worked on and off in the private sector over the years. I hope the Minister will give due consideration to this complex issue in the context of upcoming budget.
I thank the Deputy for raising this matter. The priority of the Government since entering office has been to maintain fully the core weekly rates of payment for pensioners and it has done that successfully over the past three budgets. The Irish pensions system is made up of a number of schemes, based on a number of criteria such as contributions paid, income need and other factors. These ensure that people have an adequate income when they retire. The range of supports has resulted in similar outcomes for male and female pensioners in Ireland. Poverty rates for women and men over 65 have been, in statistically-significant terms, the same over a number of years despite many women having lower earnings than men during their working lives. It should also be noted that the consistent poverty rate for those over 65 is approximately one third of that for those aged between 18 and 64 and roughly a quarter of the rate for those aged 17 and under.
The State contributory pension is one of a number of schemes and the pension is related to contributions made over the years into the Social Insurance Fund by the person. As such, those with a stronger attachment to the workforce and who have paid more into that fund are more likely to be paid under this scheme. The home-maker's scheme was introduced in 1994 to make qualification for the contributory State pension easier for those who take time out of the workforce for caring duties. The scheme allows up to 20 years spent looking after children under 12 years or people with a caring need, to be disregarded when a person’s social insurance record is being averaged for pension purposes. However, it is important to note that the scheme will not, of itself, qualify a person for a pension. The standard qualifying conditions must also be satisfied. For those who do not satisfy these conditions, a means-tested State pension may be available.
Costs in regard to this scheme, under the current rules, are expected to increase in the coming years due to the increase in female employment rates since 1994. The 2007 Green Paper on Pensions indicated that to backdate this scheme to 1953, the year when the unified system of social insurance was introduced, would cost the Exchequer approximately €160 million.
In regard to women and social insurance payments, it is worth noting that the Actuarial Review of the Social Insurance Fund in 2012 confirmed that the fund provides better value to female rather than male contributors. This is due to the distributive nature of the fund. The review also examined the changes in the contribution rules and the associated rates of payment which were to be introduced in September 2012. The review found that those with lower earnings and those with shorter contribution histories still obtain the best value from their contributions.
The Deputy has raised an important issue which we need to examine. I would be happy to sit down with her after the budget to scope out the details and consider a proposal that may be able to address the issue she has identified.
I appreciate the Minister of State's offer and I will certainly take him up on it. This is a complex issue. It often only comes to light when people approach retirement age and it may be difficult for them to check back on their contributions during their working life. We need to deal with the issue in terms of the women who were forced to give up work when the marriage ban was in place as many of those women have reached retirement age. We need to make the process simple and to give people choices. It does not seem fair that the pension contributions of a person who began work at the age of 20, continued working until the age of 32 or 33 and then took a break of 15 or 20 years, are averaged out over the whole of their working life. I appreciate the point the Minister of State made about the scheme allowing for a provision up to 20 years in that respect. If a person only began work at the age of 55, he or she would qualify for a contributory pension on retirement at the age of 65 or 66. There is definitely inequality in the system.
I appreciate the timeline factor in that the budget will be announced next week. The issue is complicated and it needs to be examined and practically-proofed, if I can put it that way. It is a little like the idea of the theory and the practice. We should have a group think-in on it and also include the contribution of some members of society who could assist in this.
The Deputy has made the point she raised well. There is a need to scope out exactly what the problem is and identify the blockages. When a man or a woman decides to take time out of work to mind their children at, say, 30 years of age, the last thing they think of is the effect that break in their employment service will have on their income on reaching 65 years of age. There is an important job of work to be done in this area. It could possibly be done through the finance committee. I am happy to sit down with the Deputy to scope out exactly what the problem is, ascertain if there are solutions to it and what the cost implications would be. It is an important and relevant issue. It would not be practical to say to the Deputy that we would take it into consideration for this budget when it will be literally introduced next week. We could work through the issue over a number of months and identify all the problems and the consequences or unintentional consequences of changing the pensions set-up. I thank the Deputy again for raising this issue.