Written answers

Wednesday, 18 April 2012

Department of Social Protection

Pension Provisions

10:00 pm

Photo of Terence FlanaganTerence Flanagan (Dublin North East, Fine Gael)
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Question 545: To ask the Minister for Social Protection the position regarding the reduction in contributory pensions for those with incomplete PRSI contributions (details supplied); and if she will make a statement on the matter. [18173/12]

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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A core principle of sustainable social protection systems in advanced economies is that citizens receive benefits in proportion to their contributions.

Recognising that the State pension contributory is a very valuable benefit, it is important to ensure that those qualifying have made a sustained contribution to the Social Insurance Fund over their working lives thereby ensuring equity in the social welfare system. This has always been part of our pensions system and changes to State pension provision which were announced in Budget 2012 put an increased emphasis on this and protects the future sustainability of our pension system. Recipients of the State pension contributory who have contributed more will receive a more generous pension. For example, currently a person with an average of between 20 and 47 PRSI contributions per year over their working life receives a weekly State pension of only €4.50 less than a person with a yearly average of 48 or more PRSI contributions. This is neither fair nor equitable. To address this, a change to the rate bands is one of the reform measures announced in Budget 2012. The rate of State pension contributory paid to new applicants will be proportionate to the rate band appropriate to the average number of contributions paid. Those who have fewer contributions will receive a lower rate of pension.

With effect from September 2012, the rate band of between 20 and 47 (24 and 47 for State pension transition) yearly average contributions will be replaced with new rate bands of between:-

(i) 40 and 47 yearly average contributions

(ii) 30 and 39 yearly average contribution and

(iii) 20 and 29 yearly average contributions.

Therefore, the rate of State pension transition or State pension contributory paid to new applicants will be appropriate to the average number of contributions paid over a working life. Those who have fewer contributions will receive a lower rate of pension. The maximum rate is unchanged as is the rate for those with yearly average contributions of between 40 and 47. While existing pension recipients are unaffected, the changes proposed will apply to new claimants from September 2012.

The measures outlined support the social contract between the State and the individual whereby those who pay most in a working life benefit most in retirement.

For those who take time out of the workforce for child rearing or caring, the Homemakers Scheme may be available to them. For those who are eligible for the Homemakers Scheme, a higher rate of pension will be payable. Furthermore, the Increase for Qualified Adult or the means-tested State pension non-contributory may be available to people who have an income need. In relation to the person concerned, I understand no communication has been received in my Department in relation to her pension provision. Should the person concerned wish to check her contribution record , a copy of this record can be obtained from the Central Records Section of my Department or a copy can be requested via my Department's website, www.welfare.ie under the topic PRSI.

For rate bands changes, see chart.

Changes to Rate Bands

New State pension transition rates
Yearly Average ContributionsPersonal RatePer Week€
48 or over230.30
40-47225.80
30-39207.00
24-29196.00
New State pension contributory rates
Yearly AverageContributionsPersonal RatePer Week€
48 or over230.30
40-47225.80
30-39207.00
20-29196.00
15-19150.00
10-1492.00

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