Clare Daly (Dublin Fingal, Independent)
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525. To ask the Minister for Social Protection the number of pensioners who have accumulated the required number of full PRSI contributions that should entitle them to a full State pension (contributory) within the required timeframe, but who are being paid reduced pensions as a result of the averaging tool being applied to their contributions; and if he will make a statement on the matter. [10160/16]

Leo Varadkar (Dublin West, Fine Gael)
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The rate of payment under the State pension (contributory) scheme is related to contributions paid over the years into the Social Insurance Fund, and credited contributions where applicable. As such, those with a stronger attachment to the workforce, who have paid more into that fund, are more likely to be paid at a higher rate under that scheme, than those with more intermittent contributions made during their working life.

There are a number of criteria which must be satisfied in order to qualify for a State pension contributory, whether at full or reduced level. These include that the person must be aged 66 or over, and that they have at least 520 paid contributions, i.e., a minimumof 10 years. Provided a person satisfies allthe relevant conditions, they may qualify for a State pension contributory, the minimum personal rate of which is €93.20, and the maximum personal rate of which is €233.30.

The Deputy should note that there is no fixed amount of paid and/or credited contributions required which will qualify a person for a full-rate State pension (contributory). The total amount of contributions a person will require also depends upon the duration over which they made these contributions, as both of these figures are used to calculate a person’s ‘yearly average’ contributions, upon which their rate of entitlement is based. The payment of 520 contributions in itself does not, therefore, qualify someone for a 100% pension - rather it is the case that failure to have at least that many contributions paid will mean they will not qualify for a State pension (contributory) at any rate.

Since the contributory pension was introduced in 1961, the ‘yearly average’ contributions test has been used in calculating the level of pension entitlement, where the total contributions paid or credited are divided by the number of years of the working life (from their entry into insurable employment up to the year prior to their reaching State pension age).

Payment rates are banded. For example, someone with a yearly average of 48 contributions will qualify for a full pension, whereas someone with a lower yearly average of 40 will qualify for a pension at the 98% rate. Someone with a yearly average of only 10 may qualify for the minimum rate of €93.20. Averages are rounded up, e.g. where someone has a yearly average of 47.5, it is rounded up to 48.

It should also 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.

It is expected that the total contributions approach to pension qualification will replace the yearly average contributions test for State pension (contributory) for new pensioners from 2020. This is a very significant reform with considerable legal, administrative, and technical elements 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 affected to include the new factors into their retirement planning.