Heather Humphreys (Cavan-Monaghan, Fine Gael)
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Further to clarification received from the Deputy’s office, it appears that this query seeks clarification in relation to the State Pension (Contributory) and the State Pension Age.

The State Pension (Contributory) was not paid at the age of 65 years in 2012. The State pension age was 66 years in 2012 and remains so. The Government will introduce legislation later this year to provide that the State pension age will remain at 66 years and not increase to 67 next year.

The State Pension (Contributory) is a PRSI-based pension, financed by contributions made by current workers and their employers, and paid to pensioners, at a rate based upon their PRSI record when working. A person is required to have a minimum of 520 paid reckonable PRSI contributions in order to qualify for the State Pension (Contributory). The actuarial value of the State Pension is estimated at well over €300,000 which requires people who claim a contributory pension to have made at least 10 years of paid contributions over 50 years of a working age life.

Payments under the State Pension (Contributory) are largely related to the number of contributions paid or credited over a working life. Under the Yearly Average approach the total number of contributions paid/credited at pension age is divided by the number of years between entering insurable employment and the last full year prior to pension age being reached. Entitlement is then banded, with a yearly average of 48 or more required for a full rate pension. One of the discrepancies of the Yearly Average system is that it is possible for a person to receive a full pension for only 10 years of contributions, while a person who paid contributions for 40 years over a 50 year period would not do so. That is because the yearly averaging system measures the frequency of contributions rather than the number of contributions.

When the Interim Total Contributions Approach was introduced in 2018, it included provision for the HomeCaring Periods Scheme which fundamentally changed the entitlement of many who spent time out of the workforce caring for others. It acknowledged, for the first time, home caring periods prior to 1994. Interim TCA provides for up to 20 years of home caring periods to be considered. Those who have a 40 year record of paid and credited social insurance contributions, subject to a maximum of 20 years of credits / homecaring periods, qualify for a maximum contributory pension where they satisfy the other qualifying conditions for the scheme. Arising from this initiative, the Department reviewed over 94,000 cases resulting in over 38,000 receiving an increased pension payment.

From April 2019, all new State Pension (Contributory) applications are assessed under all possible rate calculation methods, including the Interim TCA, with the most beneficial rate paid to the pensioner.

Those with few or no PRSI contributions paid over the years may alternatively qualify for the State Pension (Non-Contributory), the maximum rate of which is over 95% that of the maximum rate of the State Pension (Contributory). Alternatively, if their spouse is a State pensioner and they have significant household means, their most beneficial payment may be an Increase for a Qualified Adult, based on their personal means, and amounting up to 90% of a full contributory pension. The most advantageous payment for a pensioner will depend upon their individual circumstances.

The public policy and social issues in relation to funding a sustainable and adequate State pension system are complex. The Programme for Government “Our Shared Future” commits to the introduction of a Total Contributions Approach (TCA). This approach, when it is introduced, is intended to be a fairer and more transparent system aligning a person’s contributory pension more closely with the contributions they make over their working life. It is anticipated that the approach will include provision for people who take time off work to undertake caring duties.

The Programme for Government also commits to the establishment of a Commission on Pensions to examine a range of issues including contributions, calculation methods, sustainability, eligibility and intergenerational fairness. The Terms of Reference for the Commission on Pensions are currently being developed and options for its membership are being considered. Proposals will be brought to Government in that regard as soon as possible. Once it has concluded its deliberations, the Commission will report to Government by June of next year.

This Government is acutely conscious of the need to consider the sustainability of the State’s finances. The State Pension is the bedrock of the pension system in Ireland. It is extremely effective at ensuring that our pensioners do not experience poverty. The Government is committed to ensuring that this remains the case.

I hope this clarifies the matter for the Deputy.