Mick Wallace (Wexford, Independent)
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24. To ask the Tánaiste and Minister for Social Protection further to her reply to Parliamentary Question No. 57 of 16 December 2015, if she will introduce measures to ensure equality in the calculation of contributory pension entitlements, for example, by speeding up the introduction of the promised yearly average system with a total contributions approach and by allowing such a system to apply retroactively; and if she will make a statement on the matter. [1135/16]

Joan Burton (Dublin West, Labour)
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The Irish pensions system is comprised of a number of schemes, based on criteria such as contributions paid, income need, and other factors. These ensure that people have an adequate income in old age. This range of supports has resulted in very similar outcomes for male and female pensioners in Ireland. Consistent poverty rates for women and men over 65 have effectively been at parity over a number of years, despite many women having lifetime lower earnings than men.

The State pension contributory is one of the State pension schemes, and its rate of payment is related to contributions made over the years into the Social Insurance Fund. As such, those with a stronger attachment to the workforce, who have paid more into that fund, are more likely to be paid under that scheme.

Entitlement to the contributory pension is determined by means of a ‘yearly average’ calculation, where the total contributions paid or credited are divided by the number of years of the working life. Payment rates are banded. For example, someone with a yearly average of 48 contributions will qualify for a full pension, whereas someone with a yearly average of 20 will qualify for a pension at the 85% rate.

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 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. This new method will provide greater benefit for some, but not all, future pensioners than they would have had under the current system. It is not anticipated that the changes will apply to existing pensioners. Any reforms are required to contribute to the ongoing sustainability of the pensions system and not increase costs.