Bernard Durkan (Kildare North, Fine Gael)
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52. To ask the Minister for Social Protection the extent to which progress has been made in addressing the issue whereby women, for one reason or another, are deprived of contributory pensions having retired from the workplace while raising their families or due to the marriage ban and that have made a major contribution to society in the course of their working lives; if their cases will be re-examined with a view to crediting them with sufficient contributions to enable them qualify for State or retirement pension; and if he will make a statement on the matter. [2763/17]

Martin Heydon (Kildare South, Fine Gael)
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53. To ask the Minister for Social Protection his plans to address pension reform in 2017 and, specifically, the way this might impact on many women who having left the workforce to raise families only qualify for reduced State contributory pensions; and if he will make a statement on the matter. [2778/17]

Bernard Durkan (Kildare North, Fine Gael)
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My question, as does my colleague’s, relates to those women who, for one reason or other, had to leave the workforce either to raise a family or because of the marriage ban. As a result, they find themselves in a position of qualifying for a lower amount of a pension or, in some cases, no pension at all. It might be said their spouses might qualify but that is not the issue. There is also the other related issue whereby in the case of partners in a household, whether they be small shopkeepers, small business owners, small farmers or whatever, only one partner qualifies for a pension.

Martin Heydon (Kildare South, Fine Gael)
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I have raised the issue with the Minister and his predecessor on several occasions in the past about contributions to the State contributory pension and how it has impacted out, particularly the whole area of averaging. I know the Department is undertaking a review of this. It has had an impact on women who worked in the home, were self-employed, were affected by the marriage ban or spent time raising families. I have some examples to give to the Minister after his initial response.

Leo Varadkar (Dublin West, Fine Gael)
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I propose to take Questions Nos. 52 and 53 together.

The State pension is a valuable benefit and is the bedrock of the pension system. There are two State pensions. First, the State pension non-contributory is a means-tested pension funded from taxation. Second, the State pension contributory, which is not means-tested and is paid from the Social Insurance Fund. Accordingly, it is important to ensure those qualifying have made a sustained contribution to the Social Insurance Fund over their working lives. To ensure that the individual can maximise their entitlement to a State pension, all contributions, paid or credited, over their working life from when they first enter insurable employment until pension age are taken into account when assessing their entitlement and the level of that entitlement.

The homemaker's scheme makes qualification for a higher rate of State pension contributory easier for those who take time out of the workforce for caring duties. The scheme, which was introduced in and took effect for periods from 1994, allows up to 20 years spent caring for children under 12 years of age, or caring for incapacitated people over that age, to be disregarded when a person’s social insurance record is being averaged for pension purposes, subject to the standard qualifying conditions for State pension contributory also being satisfied. This has the effect of increasing the yearly average of the pensioner, which is used to set the rate of his or her pension.

The marriage bar describes a rule that existed in most of the public service, and some private sector employments, where women were required to leave their employment upon marriage. It never applied to self-employment and the practice was abolished in 1973 when Ireland joined the EEC. As it was a rule rather than law, married women could either return to work or take up other work, and many did. It is worth remembering that public servants recruited prior to 1995 paid and still pay a reduced PRSI rate of 0.9% with no contribution from the employer. Accordingly, they are not entitled to the State pension, regardless of gender and marital status. In these cases of public servants recruited prior to 1995, had they not got married, they still would not be entitled to a State pension. This also applies to men. In such cases, therefore, the marriage bar would not generally have impacted on State pension entitlement, as they would not have qualified for that payment had they remained in public sector employment. Instead, by impacting upon their continuing public service employment, the marriage bar’s pension implications, where they exist, more generally relate to a person’s eventual entitlement to a public service pension. Any questions regarding this issue are a matter for the Minister for Public Expenditure and Reform.

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. Alternatively, they may qualify for a means-tested State pension non-contributory, which amounts up to 95% of the maximum contributory rate.

I have confirmed my intention to develop, publish and commence the implementation of an action plan for the reform of pensions. This action plan will include a roadmap for the reform of the State pension. It is planned that a total contributions approach will replace the yearly average approach from around 2020. The position of homemakers will be carefully considered in the context of that reform.

Bernard Durkan (Kildare North, Fine Gael)
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I thank the Minister for his reply. There are several issues which slipped through the net but which we have discussed in the past. There is a question about the methodology of the calculation of an entitlement to a contributory pension. It is meant to be over the years within which a person worked, starting from the beginning to the conclusion. Take the case of people who may have worked for five years at the beginning of their working life, took a gap of 15 years and went back to work afterwards. Often, they may have actually worked longer than some of those who qualify for a full pension. However, by virtue of the methodology in the calculation, they find themselves having a reduced pension or, in some cases, a very much reduced pension, depending on the extent to which they have had contributions.

Another issue relates to the business sector. Take the case of a shopkeeper. Under the 1998 Act, the shopkeeper would have been eligible to make contributions and entitlement would have followed to a contributory pension. However, the partner in the business, say the spouse, in many cases is refused on the basis that he or she could not prove a partnership.

5 o’clock

There are two categories that need to be looked at very carefully.

The final point relates to the marriage bar. We know the situation in respect of people affected by the latter. It should be noted that many of those public servants got refunds of contributions when they married and withdrew the public service and that this ended their entitlement to anything.

Martin Heydon (Kildare South, Fine Gael)
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I will give the example of a constituent who started working in 1966 and has an average of 25 contributions, which means she is on a reduced rate of €196 per week. She was self-employed for a number of years which means she does not have the maximum contributions and believes this is unfair in view of the fact that others who did not work for as long are in receipt of pensions at a higher rate. I will touch on a point that was made previously. One can argue that she was disadvantaged in a way that is true for many cases with which I deal. Somebody who worked for a couple of years early in life and then went on to raise a family would probably have ended up much better off if those first three or four years had not been worked because the average would have only been based on the time after the family was reared and the person when into employment. Those first few years, in the cases I have come across, tended to involve quite low-paying jobs but the person went out at 17, 18, 19 or 20 to get into the workforce and it ended up costing them a great deal in terms of their pensions. That makes averaging a particularly harsh and unfair mechanism.

I will look at some elements. Farming families are impacted upon here, as are small businesses. There are examples that show there is a need for change. We are mindful that whatever change is made, the knock-on impact on other pension holders has to be considered as well.

Leo Varadkar (Dublin West, Fine Gael)
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There are a couple of points. If someone was a partner in a business, it should be easy enough to establish whether that person paid PRSI. If an individual did not pay PRSI, he or she is not entitled to a contributory pension. People do not get contributory pensions unless they pay PRSI. That is how a contributory pension works. It should be easy enough to establish their record if they paid PRSI. We have very good records in that regard. Once one has been paying PRSI for ten years, one is entitled to a contributory pension. If one did not pay, one is not entitled.

On the issue of the marriage bar, any public servant, male or female, recruited before 1995 is not entitled to a contributory State pension. Whether they are male, female, married or single, they are not entitled to it. A person might be entitled to a pension from the Department of Education and Skills - if he or she was a teacher or - the HSE or the Civil Service. However, a public servant recruited before 1995 is not entitled to a contributory State pension, whether they are a man or woman, married or single. The system was totally different then. They did not pay PRSI at the full rate. Therefore, they are not entitled to a contributory State pension.

Most contributory pensions work over a period of 40 years. If one worked two years, one gets two fortieths; if one worked ten years, one gets ten fortieths; and if one worked 40 years, one gets the full pension. The contributory State pension is very odd. One can get a full State pension after ten years, if one worked the right ten years, which is too little time. That is one anomaly. Conversely, one can lose out very badly if one started working very young, worked for a number of years and then had a big gap before going back to work again for a number of years. One might, having worked 20 years, get a lower pension than somebody who worked ten. Those are two anomalies and we will have to address them at the same time. One group will lose and another will win. I need to present the detail of those proposals to the House before we agree to implement them.

Bernard Durkan (Kildare North, Fine Gael)
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The Minister clearly understands the implication of the situation and the complicated issues that are involved. We are trying to encourage him to change the system to accommodate the people to whom we refer. In the case of the employment, it is not as easy to establish the existence of a partnership as it was. At the beginning of the downturn in the economy, changes were made that mean it is virtually impossible to establish it even though both partners worked in the business. It should have been taken into account - and previously was taken into account - in the determination of an individual pension for each partner on the basis that there was a partnership. The problem was to prove that the partnership existed. With regard to those women who do not qualify for a pension at all, it can be said that the non-contributory pension is available. However, if the spouse qualifies for a pension, there is the old story that the household resources are not distributed evenly in every household. We need to keep account of that.

Martin Heydon (Kildare South, Fine Gael)
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I thank the Minister for his detailed response. I will come back on one point. The current system of credits was not in place when decisions were being made. Some of these individuals did not have the option look after their pension entitlements in the same way people can do now. I am not sure if the Minister's Department has looked at costings around retrospectively giving back credits to deal with some of the people caught by this anomaly. Does he have any idea what the cost would be for such a move?

Leo Varadkar (Dublin West, Fine Gael)
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We have various possible costings and projections but I would have to know exactly which anomaly the Deputy is referring to because there are a number of things that people describe as anomalies in the pension system. With regard to partnerships, unless I misunderstand Deputy Durkan, it is not a case of proving whether a partnership existed, it is a question of proving that somebody made PRSI contributions. Since PRSI was introduced 30 or 40 years ago, people have had to make contributions in order to get contributory pensions. If one did not make PRSI contributions, one does not get a contributory pension. That is the way it has always worked. PRSI is paid into the social insurance fund and out of that comes the State contributory pension. The test is whether a person can establish that he or she made PRSI contributions. If a person was not making PRSI contributions and was not paying tax, it is difficult to see how that individual would be entitled to a contributory pension. Such a person might be entitled to apply for a non-contributory State pension but a means test would apply.