Paul Connaughton Snr (Galway East, Fine Gael)
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Question 422: To ask the Minister for Social and Family Affairs the number of people who were over the age of 56 when they commenced paying contributions for the self-employed in 1988; if his attention has been drawn to the great dissatisfaction among the people concerned in view of the fact that they were not allowed to continue making contributions or to claim a reduced pension; and if he will make a statement on the matter. [5804/06]

Séamus Brennan (Dublin South, Fianna Fail)
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The social insurance or PRSI system is based on payment of compulsory contributions to the social insurance fund, in return for which, and subject to meeting the conditions prescribed, contributors become eligible for a range of income replacement benefits such as old age contributory pension. The rationale underlines the general principle that there should be a reasonable link between entitlement to benefit and participation in the labour force. This reflects the contributory principle and the pay as you go nature of the social insurance system in Ireland.

The scheme providing for compulsory social insurance contributions for self-employed workers was introduced in 1988. They had previously been excluded from compulsory social insurance. An estimated 61,500 of the almost 160,000 self-employed who were brought into social insurance coverage in 1988 were over 56 years. At that stage, it was recognised that many of those aged 56 years or over would be ineligible for old age contributory pension, as they would not satisfy the qualifying condition of having entered insurance ten years prior to attaining pension age unless they had been insured previously as employees. The possibility of making provisions to enable self-employed persons to continue paying contributions after age 66 until they had ten years of insurance completed was considered. However, the potential cost of this concession was found to be prohibitive.

In April 1999 a special old age contributory pension was introduced for self-employed people who were aged 56 or over in April 1988 and who have at least five years' contributions paid since then. Payment is at a flat rate of 50% of the standard maximum rate with equivalent increases for adult and child dependants, where applicable.

Social welfare legislation also provides for the return of the pension element, 53%, of PRSI paid to insured persons who entered into insurable employment after they had attained the age of 56 years and do not have entitlement to old age contributory pension, old age non-contributory pension or retirement pension, with interest on these refunds of contributions by reference to the consumer price index.

I am aware of ongoing issues in relation to the self-employed and contributory pensions. However, in considering proposals for changes or enhancements to the pension system it is necessary to uphold the contributory principle that underpins qualification for pensions and benefits. In this regard I consider that the special arrangements introduced in 1999 represent a positive and reasonable response to the issues raised in relation to this particular group of people, but the situation is being kept under continuous review.