Brendan Griffin (Kerry, Fine Gael)
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96. To ask the Minister for Social Protection if he will review the average number of contributions per annum requirement for the State pension, contributory, in view of the difficulty it is posing for some persons, particularly the self-employed, women and returning emigrants; and if he will make a statement on the matter. [35713/16]

Leo Varadkar (Dublin West, Fine Gael)
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The rate of payment to a person of the State pension contributory is related to contributions made over the years into the Social Insurance Fund by the person. 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.

Social insurance contributions (Class S PRSI) were introduced for self-employed people on 6 April 1988. These contributions provide cover for self-employed people for long-term benefits such as State pension (contributory) and widows/widowers pension (contributory). 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 9 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 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.

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 the 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. 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.

Prior to the introduction of the Homemakers scheme in 1994, there was no provision for the recognition of periods of homemaking. This scheme introduced such recognition of periods going forward from that date as the costs for backdating it would have been very considerable. I am advised that if the Homemakers scheme was to be backdated to all dates prior to 1994, for payments from January 2017, the net cost to the Exchequer could be expected to amount to approximately €290 million in 2017, and this annual cost would rise at a faster rate than the overall cost of State pensions.

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.

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

I hope this clarifies the matter for the Deputy.