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

It is important to remember the Social Insurance Fund, out of which contributory pensions are paid, is back in surplus this year for the first time since 2008. As it stands, we do not need to increase employee's or employer's PRSI or have recourse to the general taxpayer. It is important, however, that we keep it that way.We all know the consequences of underfunded pension schemes and an underfunded Social Insurance Fund are that people do not get the benefits or pensions that they had expected to get on their retirement which is why it is important that we, as law makers, always have regard to the fact that anything we propose that may increase liabilities and costs has to be met by contributions on the other side. Having got the Social Insurance Fund back into surplus, I am determined that it should not go back into deficit because we need some headroom to prepare for the next time unemployment goes up, and all the other developments with an ageing population.

The amendment put down by Senator Higgins deals with two aspects of the voluntary contribution system. First, it is proposed that the deadline for applying to become a voluntary contributor should be increased from the current 12 months after the contribution year in which the individual had paid or credited a PRSI contribution to five years from the end of his or her last paid or credited contribution. On a technical point, the amendment refers only to extending the period of five years from the last credited contribution, whereas current arrangements relate to the period from the last paid or credited contribution. It is essential that access to voluntary contributions continues for those who leave employment or self-employment and is not confined, as proposed in the amendment, to those who had a credited contribution.

However, the appropriate time period for application to become a voluntary contribution is something that has been under examination by my Department for some time. We agree with the Senator's contention that the current period is too tight and that there should be more flexibility for all those who cease employment or self-employment. As the Senator rightly pointed out, this is a particular difficulty for those who are self-employed and who make their final returns for the year after each year of assessment etc.

Accordingly, while this amendment has been ruled out of order, I have decided to extend the period available for application to five years from the date of the last paid or credited contribution in line with the Senator's proposal. I can do this by way of regulation at the earliest possible date. This will enable those who give up work for one reason or another in the last five years to now decide whether they wish to become a voluntary contributor.

The second aspect of the voluntary contribution scheme which this amendment addresses is the reduction in the minimum paid contribution threshold for access to the scheme from 520 paid contributions or ten years in a working life of 40 or 50 years to 260 paid contributions, which would be five years in a working life. It has always been a condition of the voluntary contribution scheme that people can only become voluntary contributors if they satisfy the essential first condition for the receipt of a contributory State pension, namely, to have paid 520 contributions in either employment or self-employment or a combination of same. This is a condition for access to the voluntary contribution scheme and has changed in line with the minimum contribution conditions of the State pension scheme. The State pension condition increased the number of paid contributions to 520 in 2012, in line with the original legislation from 1997, and the voluntary contributions increased in line with that.

To answer Senator Norris's question, it is not retrospective. It only applies to those who are applying for their pension now and those who had already received their pension do not have it reassessed and reduced. I do not know how that relates to Trinity, however, as Trinity would be a different pension scheme. It is not the State contributory pension; it is a private or public sector one.