Written answers

Tuesday, 3 October 2017

Department of Employment Affairs and Social Protection

State Pension (Contributory)

Photo of Joan CollinsJoan Collins (Dublin South Central, Independent)
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575. To ask the Minister for Employment Affairs and Social Protection the estimated amount it would cost to retrospectively apply the homemaker's scheme to 1973 in order to ensure equitable access to the State pension and benefit older women. [41573/17]

Photo of Regina DohertyRegina Doherty (Meath East, 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.

The homemaker's 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 his or her pension.

In practice, there are a number of factors that make it impossible to be 100% precise regarding the cost of backdating the Homemaker’s scheme. For example, much of the data used in the operation of the scheme at present for periods from 1994, notably child benefit records, is not readily available in computerised form going back to 1973.

However, it is clear that such a backdating would entail a significant and ongoing cost to the Social Insurance Fund. It is estimated that backdating it in respect of periods before its introduction in 1994 would cost some €290 million per year, and this figure would rise at a faster rate than the overall rise in the 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. Alternatively, they may qualify for a means-tested State pension non-contributory, which amounts up to 95% of the maximum contributory rate.

The Actuarial Review of the Social Insurance Fund in 2012 confirmed that the Fund provides better value to female rather than male contributors. This is due to the redistributive nature of the Fund. The average pension payments made by my Department to men and women over 66 years of age are within approximately 1% of each other.

Work is under way to replace the yearly average system with a Total Contributions Approach. Under this approach, the rate of pension paid will more closely reflect the total number of contributions made by people, not when they paid them. The position of homemakers is being carefully considered in developing this new system of calculating the State Pension (contributory).

It is hoped that this approach to pension qualification will replace the current one from 2020. Following completion of the current actuarial review of the Social Insurance Fund, a refined proposal will be developed. My Department will conduct a period of consultation with relevant stakeholders, including interest groups, representative bodies and the Oireachtas. Following the consultation period, I will submit a proposal to Government seeking approval for the new approach, and then proceed to introduce legislation to give effect to this reform.

I hope this clarifies the matter for the Deputy.

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