Bernard Durkan (Kildare North, Fine Gael)
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225. To ask the Minister for Employment Affairs and Social Protection her preferred options to resolve the issue whereby women and some men fail to qualify for an adequate level of contributory State pension; and if she will make a statement on the matter. [2381/18]

Regina Doherty (Meath East, Fine Gael)
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There are three main State pensions. Firstly, the State pension non-contributory is a means-tested pension funded from taxation. Secondly, the State pension contributory, which is not means-tested, is paid from the Social Insurance Fund, via the PRSI system. Thirdly, the Widows/Widowers Contributory Pension is available to some people over 66.

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 the means-tested State pension non-contributory, which amounts up to 95% of the maximum contributory rate. Therefore, the State pension system ensures that those of State pension age do have an adequate standard of living, with a safety net under the non-contributory pension of €227 per week, plus additional payments such as Household Benefits, Fuel Allowance, and a Rent Allowance where required. While there is a means-test, there are generous disallowances which mean that over 70% of such pensioners qualify for that pension at the maximum rate. Therefore, people in receipt of reduced rate contributory pensions below the 98% rate would have significant additional means, over and above their State pension payment, as they would otherwise qualify for a non-contributory pension at a higher rate instead.

It is important to ensure those qualifying for the contributory pension, which is funded by the Social Insurance Fund and is based upon contributions to that fund, have made a sustained contribution to the Social Insurance Fund over their working lives. Such contributory pensions, with rates of payment linked to contributions made into a fund, are the norm across the world, and underpin the PRSI system in this country. To ensure that people can maximise their entitlement to a State pension, 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. This has the effect of increasing the yearly average of the pensioner, which is used to set the rate of his or her pension. Backdating it in respect of periods before its introduction in 1994 is estimated to cost €290 million per year, and this figure would rise at a faster rate than the overall cost of State pensions.

The State pension contributory rate bands introduced from September 2012 more closely reflect the social insurance contributions history of a person than those in place before that. The current rate bands still provide pensions to people which are very favourable in comparison with their level of contribution. For example, a person with only 20 years of contributions over nearly 50 years will still receive an 85% pension. It is estimated that, to revert to the previous bands with effect from January 2018, would result in an annual cost of well over €70 million extra in 2018, and this annual cost would increase by an estimated €10 to €12 million extra each following year.

When all payments across the State pension system are taken into account, the difference in the average direct payment to men and women is approximately 1% in Ireland. This would be very low by European standards, and as a result CSO figures show that poverty levels among those over 66 are very low for both men and women, and are at parity. In the latest figures, the rate of Consistent Poverty for men over 66 was 1.79% for men and 1.36% for women, compared to 8.3% for the general population.

I committed to examine in depth various options that may provide some relief to those who would have a higher contributory pension had the rate bands not been amended in 2012. Officials in my Department have completed a report on this matter, which I intend to bring to a cabinet committee later this week. Following that meeting, and subject to any necessary amendment or further discussions, I will then bring the report to Government for consideration.

I expect to start a consultation process shortly with stakeholders on the introduction of a Total Contributions Approach to replace the yearly average approach to State Pension calculation. Thereafter, a proposal to Government will be made.

I hope this clarifies the matter for the Deputy.