Written answers

Friday, 16 September 2016

Department of Social Protection

State Pension (Contributory) Expenditure

Photo of Tommy BroughanTommy Broughan (Dublin Bay North, Independent)
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810. To ask the Minister for Social Protection the cost to the Exchequer to reform the homemakers scheme to make it more equitable; and if he will make a statement on the matter. [26128/16]

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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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. 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. Since 1961, when contributory pensions were introduced, the average contributions test has been used in calculating pension entitlement. Once over 16 years of age, the date a person enters into insurable employment is the date used for averaging purposes. In this context, even if someone has only 10 years (520 weeks) of paid reckonable contributions between their 16th and 66th birthdays, they may qualify for a State pension (contributory), although the rate payable would vary depending on their circumstances.

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 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.

The cost of reforming this scheme would depend on what changes were made to it. Policy options would include backdating the period from which the scheme took effect from (i.e. to an earlier date than 1994), and/or converting to a system of credits.

Officials in my Department have estimated that the cost of extending the Homemakers scheme to allow people to avail of the full 20 years currently allowed under the scheme, encompassing periods prior to 1994, could cost €286m in 2017, and this figure would rise at a faster rate than the overall cost of State pensions.

Where people who were unattached to the labour market during most of their adult lives may not qualify for a contributory pension in their own right as they have paid few or no contributions, or cannot qualify for a full rate as a result of an intermittent PRSI record, the social protection system provides alternative methods of supporting such pensioners in old age. 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.

I hope this clarifies the matter for the Deputy.

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