Thursday, 26 April 2018
Department of Employment Affairs and Social Protection
State Pension (Contributory)
221. To ask the Minister for Employment Affairs and Social Protection her plans to remove the anomalies in the method of calculation of entitlements to the State pension, contributory, with particular reference to the need to reverse the changes that were introduced in 2012; when the necessary legislative measures will be introduced; and if she will make a statement on the matter. [18476/18]
A policy to introduce the Total Contributions Approach (TCA) to pensions calculation was adopted by the then Government in the National Pensions Framework in 2010, as was the decision to base the entitlements of all new pensioners on this approach from 2020.
On the 23rd January earlier this year, the Government agreed to allow pensioners affected by the 2012 changes in rate bands to have their pension entitlement calculated under a total contributions approach which will include up to 20 years of a new HomeCaring credit.
The TCA will ensure that the totality of a person’s social insurance contributions - as opposed to the timing of them - determines their final pension outcome. In particular it will benefit people whose work history includes an extended period of time outside the paid workplace, while raising families or in a full-time caring role. Crucially, unlike the proposed Homemaking Credits which was proposed in 2010 as part of the National Pensions Framework, the HomeCaring Credit will apply to periods both before and after 1994, as for most people reaching pension age between 2012 and 2019, such periods, where they had them, occurred before 1994, and provisions restricted to periods after then are of little or no benefit to them.
This approach will make it easier for many post-2012 pensioners affected by the 2012 rate band changes who are currently assessed under the yearly average model, to qualify for a higher rate of the State Pension (contributory). A person who reached pension age after 1st September 2012 and has a 40 year record of paid and credited social insurance contributions, subject to a maximum of 20 years of the new HomeCaring credits, will qualify for a maximum contributory pension where they satisfy the other qualifying conditions for the scheme. Up to 10 years of other credits, for example, awarded when on Jobseekers or Illness Benefit, may also be used, subject to the total credits not exceeding 20 years.
So, for example, a person might receive a maximum pension based on 20 years paid PRSI contributions, 5 years jobseeker credits, and 15 years HomeCaring Credits (before or after 1994), over a 50 year period and qualify for a maximum rate pension, despite additional gaps of up to 10 years. Those with fewer contributions will have a pro-rata entitlement. For example, someone with 18 years PRSI contributions and 18 years homecaring may qualify for a 90% contributory pension.
Legislation has to be drafted and enacted to enable implementation of these interim arrangements and IT solutions must be developed. Accordingly, it is planned that the reviews will commence in Q4 of this year, with the first payments being made in Q1 2019.
I hope this clarifies the matter for the Deputy.