Róisín Shortall (Dublin North West, Independent)
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179. To ask the Minister for Social Protection if she is aware of the financial impact the changes to the average contribution bands have made to persons who were approaching retirement and who were in one of the middle band categories; and the steps, if any, she proposes to take to address this. [21472/15]

Joan Burton (Dublin West, Labour)
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The State pension (contributory) is a very valuable benefit. Therefore, with increased numbers of people living longer, it is important to ensure that those qualifying for State pension (contributory) have made a sustained contribution to the Social Insurance Fund over their working lives. As provided for in Budget 2012, from September 2012, new rate bands for State pension (contributory) were introduced. This resulted in one of bands (in respect of those with a yearly average of 20-47 contributions), being replaced with three bands (in respect of yearly averages of 40-47, 30-39, and 20-29 respectively). These additional 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.

Prior to these changes, someone with a yearly average of 47 contributions qualified for the same rate of payment (98% of the maximum rate) as someone with a yearly average of 20 contributions, despite generally their much more significant PRSI record, and regardless of their means. Given the requirement to make savings in recent years, I considered it more equitable to address this disparity than to reduce the rate of payment for all pensioners by an across the board cut in payment rates.

The effect of this change has been to reduce the personal rate paid to those with 30-39 contributions (i.e., 57-75% of the maximum) to €207 (90% of the maximum rate), and to reduce the rate paid to those with 20-29 contributions (i.e., 38-56% of the maximum) to €196 (85% of the maximum rate). The reduced rate of €196 is still higher than the maximum rate that applied in 2007.

For those with insufficient contributions to meet the requirements for a full rate 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).

Róisín Shortall (Dublin North West, Independent)
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180. To ask the Minister for Social Protection her views, if any, on moving to a system whereby weekly pension rates are determined by total contributions, or to otherwise change the system so that social insurance contributors who commenced contributions early in their life are not disadvantaged, as at present. [21473/15]

Joan Burton (Dublin West, Labour)
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The State pension 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 and the reform measures introduced to date go somewhat toward that goal. 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.

Since 1961, when contributory pensions were first introduced, the average contributions test has been used in calculating pension entitlement. Work has commenced on changing this to a total contributions approach, where anomalies arising with the current method would not occur. Under the total contributions approach, the number of contributions recorded over a work life will more closely reflect the rate of pension payment received. It is expected that the total contributions approach to pension qualification will replace the current average contributions test for State pension (contributory) for new pensioners from 2020, although that date is subject to change, as this is a very significant reform with considerable legal, administrative, and technical challenges to be overcome in its implementation. When proposals are agreed, legislation will be brought forward to underpin the necessary changes.

I believe that it is important that the changes be announced well in advance of introduction, to enable those workers affected to include the new factors into their retirement planning.