Seán Fleming (Laois, Fianna Fail)
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165. To ask the Minister for Social Protection if he will consider amending the regulations for persons applying for the State contributory pension; his views on whether examining a situation in which persons had contributions up to 47 to 48 years during that period but had no contributions resulting in their pensions being reduced, notwithstanding the fact that they could have easily had over 1,500 reasonable contributions during their lifetime is equitable; and if he will make a statement on the matter. [23715/17]

Leo Varadkar (Dublin West, Fine Gael)
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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.

At the moment, to qualify for the State pension (contributory) a person must have at least 520 paid contributions and satisfy a yearly average test (a yearly average of 48 contributions paid and/or credited is required for a maximum rate pension). The yearly average test has been in existence since 1961 when contributory pensions were first introduced. The scheme was designed with a view to ensuring that people could qualify for contributory pensions immediately and to suit a system where social insurance coverage was limited.

Entitlement is banded, with the maximum rate payable to those with a yearly average of 48-52 contributions, and the minimum rate payable to those with a yearly average in the range of 10-14 contributions per year. Even if someone has only 10 years (520 weeks) of paid reckonable contributions between their 16th and 66th birthdays, they would generally qualify for a State pension (contributory), although the rate payable would vary depending on their contribution record. As is generally the case with contributory pension systems, people with greater numbers of contributions tend to qualify for higher rates of payments, depending on their circumstances.

If a person started work at age 18, reaching pension age 48 years later at age 66 and had 1,500 contributions paid or credited (i.e. just under 29 years contributions over a period of 48 years), this would equate to a yearly average of approximately 31 contributions, and attracts a 90% pension. Had the same person a greater number of contributions in the same period, they might qualify for a higher rate of payment. Similarly, if they had fewer contributions over the same period, they might qualify for a lower rate of 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.

The National Pensions Framework (2010) proposed that a “Total Contributions 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 later in the year. This is a very significant reform with considerable legal, administrative, and technical elements in its implementation.

Following completion of the Actuarial Review of the Social Insurance Fund later this year, my Department will conduct a consultation of relevant stakeholders. Thereafter, I will submit a proposal to Government seeking approval of the new approach.

I hope this clarifies the matter for the Deputy.