Brendan Griffin (Kerry, Fine Gael)
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150. To ask the Minister for Social Protection if he will review State pension contributory average number of contributions per year requirement in view of the difficulty it is posing for the self employed and returning emigrants; and if he will make a statement on the matter. [31358/16]

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).

Social insurance contributions (Class S PRSI) were introduced for self-employed people on 6th April 1988. These contributions provide cover for self-employed people for long-term benefits such as State pension (contributory) and widows/widowers pension (contributory). In addition to the qualifying conditions above, a person must have paid self-employment contributions in respect of at least one contribution year prior to reaching age 66, and all self-employment contributions payable must have been paid in full.

There is also a State pension (contributory) half-rate pension for self-employed people. The legislation providing for this partial pension came into effect from the 9th of April 1999 to provide a basic payment for groups who would not otherwise qualify for a contributory social welfare pension, and who did not satisfy the means test for the State pension (non-contributory). In this case, the measure was designed to benefit self-employed people who were already over 56 years of age when compulsory self-employed social insurance was introduced in 1988, who had not paid other contributions (such as voluntary contributions, or other contributions while in employment), and who could not therefore satisfy the condition of having entered insurance 10 years before pension age. The pension requires a minimum of 5 years contributions and is payable at 50% of the standard rate. The pension was seen as a reasonable response to the position of the self-employed who were in their late 50s when Class S contributions were introduced, and I believe most would agree that it represents good value for the contributions made .

It is worth noting that the most recently published Actuarial Review of the Social Insurance Fund found that the self-employed achieve very good value for money from the fund.

EU Regulations provide for the inclusion of social insurance periods a person has incurred in another Member State(s), in a combined Irish/EU record, for the purposes of state pension contributory (SPC) eligibility. Taking the combined record into account, and subject to their satisfaction of the standard SPC eligibility conditions set out in domestic legislation, a claimant may qualify for a reduced-rate ‘pro-rata’ EU state pension (contributory) under EU Regulations. These arrangements apply to all countries covered by EU legislation, including EEA countries Norway, Iceland and Liechtenstein.

All such applications are first assessed under Irish legislation, on the basis of the claimant’s Irish contributions record only, then separately under EU legislation, using the pro-rata calculation method. If the eligibility conditions are satisfied, the most financially beneficial pension entitlement is awarded.

There are also a series of Social Security Agreements which apply to other countries not covered by EU regulations, including the United States of America, Canada, Australia, New Zealand, Japan, the Republic of Korea and Switzerland. These agreements protect the pension entitlements of Irish people who go to work in these countries and they protect workers from those countries who work in Ireland. They allow periods of Irish social insurance and depending on the legislation in the other country, periods of residence/contributions which are completed in the second country to be taken into account so that the worker may have his/her entitlement to a pension determined. They also include arrangements for posted workers who are sent on temporary work assignments from one country to the other by deciding which country's social security legislation will apply to the workers.

Where a person is unable to meet the qualifying conditions for a State pension (contributory), or is only eligible for a reduced rate of contributory pension, they may alternatively apply for State pension (non-contributory) amounting up to 95% of the maximum contributory pension rate which is subject to a means-test. Alternatively 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.

I hope this clarifies the matter for the Deputy.