Bernard Durkan (Kildare North, Fine Gael)
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399. To ask the Minister for Social Protection further to previous parliamentary questions in this regard, his proposals to address issues whereby persons who opted out of the workforce to rear their children or for whatever reason, who now find themselves short of the required contributions to avail of a reasonable pension and who by virtue of their contribution to the economic well-being of the country should now be qualified for the maximum possible pension; and if he will make a statement on the matter. [18339/17]

Leo Varadkar (Dublin West, Fine Gael)
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The State pension contributory is one of a number of pensions the State pays to people over 66. The rate of payment to a person is related to the number of contributions made over the years into the Social Insurance Fund by the person. To ensure that the individual can maximise their entitlement to a State pension (contributory), 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.

Entitlement levels are 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.

The home-makers scheme makes qualification for a higher rate of State pension (contributory) easier for those who take time out of the workforce for caring duties. The scheme, which was introduced in and took effect for periods from 1994, allows up to 20 years spent caring for children under 12 years of age (or caring for incapacitated people over that age) to be disregarded when a person’s social insurance record is being averaged for pension purposes, subject to the standard qualifying conditions for State pension contributory also being satisfied. This has the effect of increasing the yearly average of the pensioner, which is used to set the rate of their pension.

My Department has estimated that the annual 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 some €290m in 2017, and this figure would rise at a faster rate than the rate of the overall cost of State pensions. This is a very significant cost, and the main beneficiaries would be people who already have significant household means, and who do not therefore qualify for a means-tested payment.

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. Alternatively, they may qualify for a State pension (non-contributory), which amounts up to 95% of the maximum contributory rate. While this payment is subject to a household means-test, there are very significant disregards which mean that over 70% of such pensioners qualify at the full rate.

Following on from the proposal in the National Pensions Framework (2010) that a “Total Contributions Approach” (TCA) should replace the yearly average approach, for new pensioners from 2020, officials of my Department are currently working on its detailed development, 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 people who have gaps in their contribution records for various reasons, and this factor is being considered very carefully in developing this reform.

I hope this clarifies the matter for the Deputy.

Bernard Durkan (Kildare North, Fine Gael)
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400. To ask the Minister for Social Protection the extent to which he can address the anomalies of the situation whereby persons with a mixture of PAYE and self-employed contributions may find themselves entitled to only a reduced rate of pension arising from the 1988 Act which now apparently does not enable the applicant to choose the most beneficial basis on which to claim a pension; and if he will make a statement on the matter. [18340/17]

Leo Varadkar (Dublin West, Fine Gael)
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All applications for state pension (contributory) must be assessed under the eligibility conditions set out in social welfare legislation. This provides thatwhere anapplicant for state pension (contributory) became a self-employed contributor on 6 April 1988 and, at any time before that date, was an employed contributor, the date on which they first entered insurance, or 6 April 1988, whichever is the more favourable, shall be regarded as their date of entry into insurance for the purposes of the application of the ‘yearly-average’ assessment.

As the person concerned did not become a self-employed contributor from 6 April 1988, the standard eligibility conditions for state pension (contributory) apply, and his date of entry into insurance was taken as 8 April 1967. According to the records of the Department, he has a total of 1,575 reckonable paid and credited contributions from that date of entry into insurance to end-December 2016 (the last complete contribution year prior to reaching pension age). This gives a yearly average of 32, which qualifies him for a reduced-rate state pension (contributory) of 90% of maximum rate, with effect from 8 April 2017.

I hope this clarifies the matter for the Deputy.