John Brady (Wicklow, Sinn Fein)
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269. To ask the Minister for Employment Affairs and Social Protection the estimated full cost of reversing the changes introduced in 2012 to the State pension system by reducing the number of bands from six to four. [28437/18]

Regina Doherty (Meath East, Fine Gael)
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The reversal of the rate bands for post 2012 pensioners to the 2000-2012 rate band percentages would carry an estimated cost of some €73 million in 2018 (including inflows from other payments such as the State Pension non-contributory and Increases for Qualified Adults), rising at a rate of €10m to €12m extra per annum (i.e., an extra €85 million approx. in 2019 and an extra €97 million in 2020).

The Government is not proposing to reverse the rate band changes, and instead intends to introduce a more progressive proposal. On the 23rd January the Government agreed an interim Total Contributions Approach (TCA) solution for those affected by the 2012 rate-band changes. Under this approach, a person who reached pension age after 1 September 2012 (i.e. who is among those affected by the new ratebands introduced from that date) and who has a 40 year record of paid and credited social insurance contributions, subject to a maximum of 20 years of credits, will qualify for a maximum contributory pension where they satisfy the other qualifying conditions for the scheme. Those with lesser records may qualify for a pro-rata amount.

Up to 20 years of HomeCaring credits, and / or 10 years of other qualifying credits, for example when unemployed or ill, may be used, subject to the total number of credits not exceeding 20 years.

This approach is expected to significantly benefit many people, particularly women, whose work history includes an extended period of time outside the paid workplace, while raising families or in a caring role. It will make it easier for pensioners assessed under the yearly average model, to qualify for a higher rate of the State Pension (contributory). This interim TCA will ensure that the totality of a person’s social insurance contributions - as opposed to the timing of them - determines a final pension outcome.

It should also be noted that taking this approach – TCA with up to 20 years of homecaring credits for periods both before and after 1994 – is more advantageous to women who cared in the home, and who were the most affected by the 2012 changes, than a simple reversion to the status quo before 2012, which would have created new inequitable outcomes. A simple reversal along those lines would, in many cases, have resulted in a smaller increase for such women, but a bigger increase for people who did not have such caring duties and who, in many cases, would have significant income from foreign pensions, in addition to their Irish pension.

Work is underway to draft legislation to enable implementation of these arrangements. In line with the legislation, IT solutions must be developed to implement the changes. Accordingly, in the final quarter of this year, the Department will begin inviting impacted recipients of the State Pension (contributory) to seek a review of their pension calculations, with the first payments being made in the first quarter of 2019, backdated to the 30th March 2018.

This interim TCA solution is distinct from the one which will apply for all new pensioners from 2020, and which is currently subject to a public consultation. The final design of that TCA model will be proposed to Government before the end of this year.

I hope this clarifies the matter for the Deputy.