Mattie McGrath (Tipperary, Independent)
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467. To ask the Minister for Social Protection to outline his plans to review the qualifying conditions for the contributory state pension, particularly in respect of the yearly average and the effect that a low-year average has on an pension in the case of a break in contributions; and if he will make a statement on the matter. [22677/16]

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 minimum of 10 years. Provided a person satisfies all the 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.

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).

The home-makers scheme makes qualification for a higher rate of State pension (contributory) easier for those who take time out of the workforce for caring duties. The scheme, which was introduced in and took effect for such periods from 1994, allows up to 20 years spent caring for children under 12 years of age (or caring for incapacitated people over that age) to be disregarded when a person’s social insurance record is being averaged for pension purposes, subject to the standard qualifying conditions for State pension contributory also being satisfied. This has the effect of increasing the yearly average of the pensioner, which is used to set the rate of their pension.

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, although that date is subject to change, as 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.

I hope this clarifies the matter for the Deputy.