Seán Fleming (Laois, Fianna Fail)
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584. To ask the Minister for Employment Affairs and Social Protection if she will re-examine the situation whereby women who were in the workforce and left in earlier years for family duties are not in a position to get the full State contributory pension when they reach retirement age; and her plans to address this situation. [43881/17]

Niamh Smyth (Cavan-Monaghan, Fianna Fail)
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593. To ask the Minister for Employment Affairs and Social Protection her plans to reform the pension system, which it is perceived discriminates against persons, mainly women, who took time out of the workforce prior to 1994 to care for children or elderly relatives; and if she will make a statement on the matter. [44029/17]

Regina Doherty (Meath East, Fine Gael)
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I propose to take Questions Nos. 584 and 593 together.

There are three main pensions paid by my Department to people over 66, the rates of payment of which vary depending on the scheme and the circumstances of the pensioner. Entitlement levels to the State Pension, contributory (SPC), which is financed by PRSI on a pay-as-you-go basis, 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 intention of this, as in the contributory pensions which exist in other European countries and elsewhere, is to incentivise and reward contributions into the fund which finance that pension, by means of higher pension entitlements. Those with relatively lower contributions are more likely to be paid under alternative pensions, where they will attract a higher rate of payment.

The homemaker's scheme makes qualification for a higher rate of SPC 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. It is estimated that backdating it in respect of periods before its introduction in 1994 would cost some €290 million per annum in 2017, and this figure would rise at a faster rate than the overall rise in the cost of State pensions.

Where people do not qualify for a maximum-rate SPC in their own right, the social protection system provides other ways of supporting such pensioners in old age. Where 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. This is paid directly to them, and is subject to a personal means-test. Alternatively, they may qualify for a State Pension (non-contributory), based on their household means, amounting up to 95% of the maximum contributory pension rate. There are very significant income and capital disregards in the means tests for these payments, which result in the large majority of payees – most of whom are women – being paid at the maximum rate. Where a person is a widow/widower, they will generally qualify for a full 100% rate pension, based on either their own PRSI or on that of their late spouse or civil partner.

The average pension payments made by my Department to men and women over 66 years of age are within 1% of each other approximately, and this results in very similar outcomes for older men and women in avoiding poverty. The most recent CSO figures for Consistent Poverty indicated that 2.6% of women over 65, and 2.9% of men over 65, are in consistent poverty, which is less than a third that of the general population. Eurostat figures also show that men and women over 65 are less likely to be at risk of poverty and social exclusion in Ireland than in the EU as a whole, with the gap in outcomes between men and women being significantly narrower in Ireland than most countries.

It is expected that the “Total Contribution Approach” (TCA) will 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. 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 women who have gaps in their contribution records as a result of caring duties, and this factor is being considered very carefully in developing this reform.

Officials in the Department are currently working on the detailed development of the TCA proposal. It is then intended to have a public consultation later this year, and this will provide an opportunity for people to submit their views on the priorities in the design of this proposal. 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 Deputies.