Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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250. To ask the Minister for Social Protection if he will consider disallowing casual or short term work early in a person's life that causes a large gap in their work history and therefore bringing down the yearly average of PRSI contributions in respect to contributory pensions; and if he will make a statement on the matter. [29319/16]

Leo Varadkar (Dublin West, Fine Gael)
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The State pension (contributory) is one of the State pension schemes, and its rate of payment is related to contributions made over 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. There are a number of criteria which must be satisfied in order to qualify for a State pension contributory. 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 of paid contributions. Since 1961, when contributory pensions were first introduced, 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). 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.

Working part-time does not generally reduce entitlement, as part-time workers also pay weekly PRSI contributions, and these will generally be of equal value to the more expensive contributions paid by full-time workers. Once someone has worked some insurable hours in the course of a given week, they will be liable for a weekly contribution for that week, regardless of the amount of hours involved, and that weekly contribution will be equal in value to that of someone working full time and paying much more into the Social Insurance Fund. In the event that they are casual workers and have worked no hours that week at all during that particular week, they will generally be eligible for a credited contribution, which again is of equal value to a paid contribution, when calculating the level of pension payment (although a minimum total of 520 paid weekly contributions are required to have any level of entitlement).

If someone does not 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. While this payment is means-tested, it has significant income and capital disregards.

I hope this clarifies the matter for the Deputy.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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252. To ask the Minister for Social Protection if he will retrospectively apply home-maker's credits to persons who were home makers pre-1994 in view of the fact that a group of persons are being discriminated against in respect of their pensions and PRSI contributions; and if he will make a statement on the matter. [29322/16]

Leo 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.

One of the conditions of the State pension contributory is that a person needs a minimum of 520 weekly contributions (i.e. 10 years) paid since entering insurable employment. If a person does not have this minimum number of contributions paid, they will not generally have an entitlement to this particular pension, either at a full or reduced rate. Since 1961, when contributory pensions were introduced, the average contributions test has been used in calculating the rate of pension entitlement.

Entitlement is banded, with the maximum rate payable to those with a yearly average of 48-52 contributions, and the minimum rate payable to those with a yearly average in the range of 10-14 contributions per year. Even if someone has only 10 years (520 weeks) of paid reckonable contributions between their 16th and 66th birthdays, they would generally qualify for a State pension (contributory), although the rate payable would vary depending on their circumstances, and it will not always be their most advantageous payment to claim.

The homemaker’s scheme was introduced in 1994 to make qualification for State pension contributory (SPC) easier for those who take time out of the workforce for caring duties. The scheme allows up to 20 years spent caring for children under 12 years of age, or incapacitated people, to be disregarded when a person’s social insurance record is being calculated for pension purposes. The effect of this is to reduce the number of years by which the person’s contributions are divided, thereby increasing their yearly average, making it easier for them to qualify for a maximum rate SPC. It does not, therefore, involve the award of credits.

The cost of expanding 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. This figure would increase in subsequent years.

Where people who were unattached to the labour market during most of their adult lives cannot 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. Therefore, 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.