Martin Heydon (Kildare South, Fine Gael)
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36. To ask the Minister for Social Protection his plans to expand the provision of the homemaker's credit scheme and the volunteer development worker scheme which commenced in 1994 and 1983 respectively to allow more persons to avail of credits for periods working at home or volunteering abroad before these years when calculating their average annual contributions for pension purposes; and if he will make a statement on the matter. [25935/17]

Martin Heydon (Kildare South, Fine Gael)
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This is an issue that I raised with the Minister on a number of previous occasions, about the difficulties that people - particularly women - face when applying for the State pension since changes were introduced in 2012 by the Minister's predecessor, Deputy Joan Burton. Difficulties arise for those who started work early in life. A gap in contributions occurs, often due to family and child-minding duties. The homemaker's credit scheme introduced in 1994 does not address this issue for women who worked in the home before 1994. I wonder if the Minister's Department has costings on extending it to take care of that group of people who are affected by this from before 1994.

Leo Varadkar (Dublin West, Fine Gael)
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Entitlement levels to the contributory State pension 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 to reflect a person’s contribution history. Volunteer development workers who work abroad in developing countries are exempt from paying social insurance contributions while abroad. They may, however, be awarded credited contributions - or credits - for the duration of their absence, up to an aggregate of 5 years.

The homemaker’s scheme makes qualification for the contributory State pension easier for those who take time out of the workforce for caring duties. The scheme, which was introduced in 1994, allows gaps of up to 20 years spent caring for children under 12 years of age or incapacitated people to be disregarded when a person’s social insurance record is being averaged for pension purposes. The scheme does not involve the award of credits. Pensioners who qualify for one of these schemes still need to fulfil the eligibility requirements of the contributory State pension, notably they must have paid at least 520 weekly contributions. That is roughly ten years working out of a potential 50.

Any proposals to extend the scope of the homemaker's scheme or the volunteer development worker scheme would have very significant cost implications, and would have to be considered in the context of future budgets. When someone does not qualify for a full-rate contributory pension, that person may qualify for an alternative payment, such as an increase for a qualified adult, where his or her spouse has a contributory pension or a means-tested non-contributory State pension. My Department is currently working on the development of a total contributions approach to replace the current yearly averaging system for the calculation of the contributory State pension. An important element in the final design of the scheme will be the position of people who have gaps in their contribution records for various reasons, and this is being considered very carefully in developing this reform. To answer the Deputy's question, the estimate that we have if we were to leave the scheme as it is and backdate or allow time before 1994 to be reckoned is that the cost would be €290 million every year.

Martin Heydon (Kildare South, Fine Gael)
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I thank the Minister for his response and am mindful that any changes made to pension entitlement have a knock-on impact and an ever-increasing budget would be needed to address that without having to make cuts in other areas. The homemaker's credit scheme in 1994 was to make qualification easier for those who took time out for caring. It allows for up to 20 years spent caring for children under 12 or those incapacitated, and for that time to be disregarded for pension purposes. In effect, it has reduced the number of years a person's contribution is divided by. It does not actually confer any extra credits. The 20 years spent caring have to be after 1994, so somebody who is 66 in this year, 2017, and is retiring would have been 43 back in 1994, and much of that person's caring would have been done already. That cohort of people is affected, many of which are my constituents. Many are female. If one looks at the State pension, two thirds of recipients of the contributory payment are male, at 64%, compared to one third being female, at 36%. Yet those in receipt of full payment are 79% male and 21% female, showing that the impact is very much on women who took that time out.

Leo Varadkar (Dublin West, Fine Gael)
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The scheme was introduced in 1994 by the then Minister, former Deputy Michael Woods, and was a very progressive measure at the time. I imagine when it was introduced that the decision not to make it retrospective was due to the enormous cost that would arise from doing so. Using €290 million from the social protection budget in any given year would be very difficult. A consequent decision would have to be made, for example, not to increase pensions at all for a year in order to allow for reform of that scale. I am not sure how well that would be received, if at all. The distributional effect would tend to benefit better-off retired couples rather than the least well-off retired couples, if it were to be done. How we calculate the contributory State pension, which has a number of anomalies as it stands, is something that we will have to consider as part of the overall reform.

Martin Heydon (Kildare South, Fine Gael)
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I thank the Minister. I accept his answer now that I see the scale of what we are talking about here. If one talks about the impact of people, it is two-fold. It is an impact on women, generally, who started work early and who then took time out to care for a family. If somebody did not work before that person took care of his or her family and then went to work afterwards, in his or her 40s, and did 20 years, it seems unfair that that person is entitled to a bigger pension than somebody who started working at 17 or 18, maybe had a family in his or her 20s, and then went back to work afterwards. That is an anomaly. Similarly, with the volunteer development worker scheme that was introduced on 6 April 1983, I have an example of a constituent who took time out before 1983 to volunteer abroad for a couple of years. That person feels penalised now and is on a lesser pension than if that person had stayed at home. It is a smaller cohort of people, but another anomaly that kicked in once a time date was put on these issues.

Leo Varadkar (Dublin West, Fine Gael)
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I take the Deputy's point and understand the arguments he is making. I have a degree of sympathy for them. The difficulty with any programme the Government brings in is that, if it is made retrospective, the cost of doing implementing it can make it prohibitive, and decisions made in 1994 and 1983 were not to make them retrospective, precisely for that reason.

The cost would have been so high that it would not be possible to do it at all. Unfortunately, it is a public policy dilemma we face constantly, that one can change something for the better going forward but to apply new rules retrospectively can be prohibitive in terms of cost.

It is not something I am ruling out. I am merely pointing out the cost of it and the kind of alternative choices that would have to be made if it was done.

Jim Daly (Cork South West, Fine Gael)
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There are two and a half minutes left. Deputy Connolly has 30 second to introduce her question.