Willie O'Dea (Limerick City, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

654. To ask the Minister for Employment Affairs and Social Protection the estimated cost of backdating the homemaker's scheme to 1970 in incremental steps of five years from 1994; and if she will make a statement on the matter. [42532/17]

Regina Doherty (Meath East, Fine Gael)
Link to this: Individually | In context | Oireachtas source

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.

While the Deputy has requested the estimated cost of backdating the homemaker scheme to 1970 in incremental steps of five years from 1994, there are a number of factors that make it difficult to estimate that cost for specific year bands. In the first instance, it should be noted that there are twenty methods by which someone can qualify for a contributory pension depending upon their PRSI record, and so the impact of incremental changes to the Homemakers scheme is not possible to estimate without doing an analysis of the actual contribution records of potential claimant groups.

There are further data-related issues which make it even more challenging. For example, much of the data (e.g., child benefit records) used in the operation of the scheme at present for periods from 1994, is not readily available in computerised form for periods prior to 1984. Any projection, therefore, has to make assumptions regarding the composition of gaps in contribution records.

Costing multiple partial backdatings over a range of years would require very detailed analysis of the distribution of gaps in individual records during particular periods, an estimation of which gaps were driven by child rearing and which are a result of alternative reasons, and then re-calculation of those individual entitlements under the various qualification rules.

While no analysis of the particular proposal contained in the Deputy’s question has been conducted, it is clear that any 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. Limiting that backdating to 1970 would moderate that cost somewhat. However, it is unlikely to have a significant impact as the bulk of the cost would likely arise in the years immediately prior to 1994 and would decrease the further back the backdating was taken.

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.

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 publication 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.