Michael Creed (Cork North West, Fine Gael)
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100. To ask the Minister for Social Protection the value on the merit of credited contributions for the purpose of the calculations made in respect of the entitlement to a State pension (contributory), which stipulates that there is a requirement of 520 paid full-rate social insurance contributions; if credited contributions are not valid for this calculation, the purpose of credited contributions in these circumstances; and if she will make a statement on the matter. [5971/16]

Joan 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. There are a number of conditions which must be met in order to qualify for a State pension (contributory). One of these is the condition mentioned by the Deputy, that they should have a minimum of 520 paid contributions. However, it is not the only condition which must be met. To ensure that the individual can maximise their entitlement to a State pension, all contributions paid or credited 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.

A credited contribution is a pay related social insurance (PRSI) contribution awarded to an insured person under certain circumstances, such as proved unemployment. PRSI credited contributions are an integral part of the social insurance system. For the most part they are linked to having an underlying entitlement to a social welfare payment while temporarily detached from the labour force or having entitlement to statutory leave. The primary purpose of PRSI credits is to secure social welfare benefits and pensions of employees by covering gaps in insurance where they are not in a position to pay PRSI such as during periods of unemployment, illness, etc. Credits ensure that a person’s insurance record is maintained and can be helpful at a later stage to qualify for other social welfare benefits, such as pensions.

If someone qualifies for a State pension (contributory), their rate of entitlement is calculated by the ‘yearly average’ system, where the total number of contributions paid or credited by the pensioner during his or her working life is divided by the number of years of the person’s insurance record. In calculating the yearly average, the number of reckonable contributions paid and/or credited since entering insurable employment (after the age of 16) are counted up to the end of the tax year before reaching pension age (66), and this total is divided by the duration (in years) of their record up to that point. For example, 1,800 contributions over a period of 45 year duration might attract a yearly average of 40 (i.e. 1,800 divided by 45), depending on the circumstances of the pensioner.

There are six banded rates of the State pension (contributory), ranging from the maximum personal rate of €233.30 (paid to pensioners with a yearly average of 48 or more contributions) to the minimum personal rate of €93.20 (paid to pensioners with a yearly average of 10-14 contributions). Such entitlements are subject to satisfying the qualifying conditions of this pension, including the minimum 520 paid contributions criterion.

It should be noted that, where people cannot qualify for a full rate contributory pension as a result of an intermittent PRSI record, the social protection system provides alternative methods of supporting such people in old age. For example, if their spouse has a contributory pension, they may qualify for an Increase for a Qualified Adult amounting up to 90% of a full rate pension, which by default is paid directly to them. Alternatively, they may qualify for a means-tested State Pension (non-contributory), amounting up to 95% of the maximum contributory pension rate.