Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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389. To ask the Minister for Social Protection the progress which has been made on the 2010 national pensions framework proposals for the introduction of a total contributions approach to State pension (contributory) to replace the current averaging system from 2020; and if persons will have the option in the future to continue in employment beyond pension age to make up contribution shortfalls or defer drawing down their pension to enable them to receive an actuarially increased pension when they decide to retire (details supplied); and if he will make a statement on the matter. [34762/16]

Leo Varadkar (Dublin West, Fine Gael)
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The rate of payment for a recipient of the State pension contributory scheme is related to contributions made over the years into the Social Insurance Fund by the person concerned. As such, those with a stronger attachment to the workforce, and who have paid more into that fund, are more likely to be paid under this scheme. Under the scheme, entitlement is calculated by means of a ‘yearly average’ calculation, where the total contributions paid or credited are divided by the number of years of the working life. Payment rates are banded. 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 85% of the full rate. Where someone does not qualify for a full rate contributory pension, they may qualify for an alternative payment. 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), which amounts to 95% of the maximum contributory pension rate.

The National Pensions Framework (2010) proposed that a “Total Contribution Approach” (TCA) should replace the yearly average approach, for new pensioners from 2020. The aim of this approach is to make the rate of contributory pension more closely match contributions made by a person. Officials of my Department are currently working on the detailed development of the TCA with a view to making proposals for consideration in the first half of the New Year. It’s worth noting that this is a very significant reform with considerable legal, administrative, and technical elements in its implementation. An important element in the final design of the scheme will be the position of people who have gaps in their contribution records for various reasons, and this factor is being considered very carefully in developing this reform.

The Deputy should note that a pensioner can already claim a State pension contributory and continue in employment. In developing the TCA my officials are also examining flexibility options in both contributing to and drawing down State pension contributory. These include deferment of pension and/or payment of further reckonable PRSI contributions after State pension age. Decisions on whether and how to include these options will depend on a balance between costs, benefits for pensioners, demand for the options and practicality of administration.

It is important that the changes are 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.