Written answers

Tuesday, 31 March 2015

Department of Social Protection

State Pension (Contributory) Eligibility

Photo of Willie O'DeaWillie O'Dea (Limerick City, Fianna Fail)
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234. To ask the Minister for Social Protection if he is aware that persons are losing out on a significant portion of their contributory pension as a result of changes implemented by her Government in 2012; her views that persons should lose out on pension entitlements because they worked part-time jobs when they were students; and if she will make a statement on the matter. [13203/15]

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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The State pension contributory is a very valuable benefit and is the bedrock of the Irish pension system. Therefore, it is important to ensure that those qualifying have made a sustained contribution to the Social Insurance Fund over their working lives. To ensure that the individual can maximise their entitlement to a State pension, all contributions paid over their working life from when they first enter insurable employment until pension age are taken into account when assessing their entitlement and the level of that entitlement.

As provided for in Budget 2012, from September 2012, new rate bands for State pension were introduced. These additional payment rate bands more accurately reflect the social insurance history of a person and ensure that those who contribute more during a working life benefit more in retirement than those with lesser contributions.

Those with lower earnings and those with lesser contribution histories continue to obtain the best value for money from the Social Insurance Fund. Even for those with an average of only 20 contributions per year (i.e. 38% of the maximum), reduced rate State pensions of €196 are now paid, i.e., a higher rate than the full rate in 2007, so that those retiring after September 2012 who are being paid a reduced amount under the new bands are still receiving more, in real terms, than the maximum rate of pension that was payable for pensioners during most of the period of their working life.

Work has commenced on replacing the current averaging approach with a total contributions approach, where the difficulties raised by the Deputy would not arise. It is expected that this approach to pension qualification will replace the current average contributions test for State pension (contributory) from 2020, although that date is subject to change, as it is a very significant reform with considerable legal, administrative and technical challenges to be overcome in its implementation. It is my intention that changes would be announced well in advance of their introduction, to allow workers factor this into their retirement planning.

For those with insufficient contributions to meet the requirements for a State pension (contributory), they may qualify for a means tested State pension (non-contributory) which has a maximum personal rate of €219, or just over 95% of the maximum rate of the State pension (contributory). Alternatively, if a person’s spouse or civil partner is in receipt of a State pension (contributory) they may instead qualify for an Increase for a Qualified Adult of up to €206.30, which is just less than 90% of the maximum personal rate of the State pension (contributory).

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