Seán Kyne (Galway West, Fine Gael)
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To ask the Minister for Social Protection if consideration is being given to introducing an option of permitting self-employed persons to voluntarily pay the proportion of PRSI for themselves that is usually paid by employers on behalf of employees and facilitates entitlement to the various supports of the social welfare system; and if she will make a statement on the matter. [54458/12]

Joan Burton (Dublin West, Labour)
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In general the current system of social insurance operates on a mandatory basis only and does not provide for voluntary participation on the part of contributors. Self-employed persons are liable for PRSI at the Class S rate of 4% which entitles them to access long-term benefits such as State pension (contributory) and widow's, widower's or surviving civil partner's pension (contributory). Ordinary employees who have access to the full range of social insurance benefits pay Class A PRSI at the rate of 4%. In addition, their employers make a PRSI contribution of 10.75% in respect of their employees, resulting in the payment of a combined 14.75% rate per employee under full-rate PRSI Class A. (For employees earning less than €356 per week, the rate of employer’s PRSI is 4.25%).

The third Actuarial Review of the Social Insurance Fund, as at 31 December 2010, was completed by consultants KPMG in June 2012 and laid before each House of the Oireachtas on 24 August 2012. The Review covers a 55 year period from 2011–2066 and builds on the findings of the 2000 and 2005 Actuarial Reviews of the Fund.

One of the issues examined in the 2010 Review was the long-term cost implications to the Social Insurance Fund (SIF) and the break-even contributions rates required to provide invalidity pensions to the self-employed and to provide jobseeker’s benefit for self-employed workers. The report found that the effective annual rate of contribution, or the required contribution as a percentage of salary, needed to provide the core full-rate State pension (contributory), which is the benefit currently available to self-employed contributors, is approximately 15%. This compares favourably with the 4% rate currently paid by the self-employed. An incremental increase in contribution rates from approximately 15% to 16% would be required if jobseeker’s benefit in addition to core State pension (contributory) is provided. The average contribution rate required for the core State pension (contributory) plus jobseeker’s benefit and the invalidity pension is estimated to be in the region of 17.3%.

Last year I established the Advisory Group on Tax and Social Welfare to meet the commitment made in the Programme for Government. The Advisory Group will, inter alia, examine and report on issues involved in providing social insurance cover for self-employed persons in order to establish whether or not such cover is technically feasible and financially sustainable.

Any proposals to extend such social insurance entitlements, whether through the charging of the proportion of PRSI that is usually paid by employers on behalf of employees or otherwise, will have to be considered in a budgetary context, taking account of the finding of the Actuarial Review that the self-employed achieve very good value for money compared with the employed – when the comparison includes both employer and employee contributions in respect of the employed person.