Dara Calleary (Mayo, Fianna Fail)
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314. To ask the Minister for Social Protection the number of old age pensioners whose weekly State pension payment is affected by his Department's practice of averaging contributions; his views on whether it is grossly unfair that some persons receive the full State pension with considerably less contributions than some persons that receive a reduced rate pension; the steps being taken to rectify this unfair anomaly; and if he will make a statement on the matter. [11495/17]

Leo Varadkar (Dublin West, Fine Gael)
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At present, entitlement to the contributory pension is determined 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 (i.e. the period between when they first entered insurable employment and the year pension age). The yearly average test has been in existence since 1961 when contributory pensions were first introduced. Payment rates are banded, e.g., someone with a yearly average of 48 or more contributions will qualify for a full pension, whereas someone with a yearly average of 20-29 will qualify for a pension at the 85% rate.

In most cases people will have a working life of between 40 and 50 years. However there would be a small number of cases where someone first entered employment in their early 50s, make 10 years of paid PRSI contributions, and manage to qualify for a full rate pension if their yearly average is 48 or higher. As the Deputy suggests, this is an anomaly, and has been inherent in the contributory pension since its introduction over 50 years ago.

The switch to a Total Contributions Approach is one of a number of planned reforms to State pensions set out in the National Pensions Framework (NPF) commissioned by the then Government and published in March 2010, and this will remove this anomaly. The aim of the total contributions 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 Total Contributions Approach with a view to making proposals for consideration later in the year. 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 women who have gaps in their contribution records as a result of caring duties, and this factor is being considered very carefully in developing this reform. When data becomes available from the Actuarial Review of the Social Insurance Fund which is currently underway, it will be used to draft material for use in the consultation phase of this reform. This is expected in the middle of this year.

For those with insufficient contributions to meet the requirements for a State pension (contributory), they may qualify for a means tested State pension (non-contributory), the maximum personal rate for which is €222 (95% of the maximum rate of the contributory pension). This will rise by €5 this month.

I hope this clarifies the matter for the Deputy.