Regina Doherty (Meath East, 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. 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. As provided for in Budget 2012, from September 2012, the current rate bands for State pension (contributory) claims were introduced. These did not change the rate of payment for those who would have qualified for a maximum rate pension under the old rate bands, nor those with a yearly average of 40-47 who continue to qualify at the 98% rate of payment.

Those affected, therefore, are all pensioners with a yearly average of less than 40 contributions. In response to the Deputy’s direct question, none of these would have qualified for a full contributory pension had they retired under the old rate bands.

I am informed that some 557 pensioners currently resident in Wexford are paid under the new rate-bands at a somewhat lower percentage rate than applied under claims made in 2000-2012. It is important to note that these pensioners would not have qualified for a full rate pension under the previous rate bands either.

The current rate bands replaced previous rates introduced in 2000 and more accurately reflect the social insurance contributions history of a person. Where people who were unattached to the labour market during most of their adult lives cannot qualify for a contributory pension in their own right as they have paid few or no contributions, or cannot qualify for a full rate as a result of an intermittent PRSI record, the social protection system provides alternative methods of supporting such pensioners in old age. 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), amounting up to 95% of the maximum contributory pension rate.

There are very significant income and capital disregards in respect of both of those payments, and the large majority of recipients of the non-contributory pension and the IQA payment on a contributory pension are paid at the maximum rate. Those who are alternatively paid lower amounts under the State pension (contributory), therefore, will generally be people with access to significant means (e.g. private pensions), for whom that payment remains more advantageous, and maximises their total income.

I hope this clarifies the matter for the Deputy.