Niamh Smyth (Cavan-Monaghan, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

1146. To ask the Minister for Employment Affairs and Social Protection the status of measures to address anomalies in the homemaker’s scheme for those who provided the majority of their caring prior to 1994; and if she will make a statement on the matter. [40522/21]

Heather Humphreys (Cavan-Monaghan, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Since its inception, the State Pension (Contributory) has been calculated using the Yearly Averaging approach (i.e., a person's contributions are divided by the number of years from the year they first paid social insurance to the year before their 66th birthday) and the pension they receive is determined by this average amount. A policy to introduce a new Total Contributions Approach (TCA) to pensions calculation was adopted by Government in the National Pensions Framework in 2010 - with a possible implementation date of 2020.

In January 2018, the Government introduced an interim Total Contributions Approach (TCA) to the calculation of State Pension that allows pensioners who reached pension age from September 2012 (i.e., those born on or after 1 September 1946), to have their pension entitlement calculated by reference to the totality of their social insurance contributions - as opposed to the timing of them or the averaging of them over the years spent in the social insurance system. This interim TCA includes up to 20 years of new HomeCaring Periods which can be claimed for any year in which they occurred - they are not limited to years since 1994. As a consequence, this interim TCA has significantly benefited 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.

Separately, under the Yearly Averaging approach to pension calculation, 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. This 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. A detailed exercise conducted in 2017 to estimate the cost of backdating it in respect of periods before its introduction in 1994 concluded that it would cost c.€290m in 2017 and would grow considerably every year from its introduction. At that time, that cost represented circa 4% of annual pension spend – which would suggest that for 2021 it would cost in the region of €353m based on the Revised Estimates Allocation for Pensions spend in 2021 of €8.8257 billion.

People whose pensions were decided under the 2000-2012 rate bands (i.e., those born before 1 September 1946) were subject to a significantly more generous payment regime than those who qualified after 1 September 2012, as a Yearly Average of only 20 contributions per year (out of a maximum of 52) could attract a 98% pension. Therefore, if pre-2012 pensioners were also allowed avail of HomeCaring Periods, their arrangements, as a group, would continue to be significantly more generous than those of post-2012 pensioners. There would also be a very significant cost which would be expected to be of the order of several hundred millions of euros each year - similar to an expansion of the Homemaker's Scheme. This in turn could significantly impact funds for future pension increases with consequential implications for pensioner poverty.

For those with insufficient contributions to meet the requirements for a State pension (contributory), they may qualify for a means tested State pension (non-contributory), the maximum personal rate for which is €237 (over 95% of the maximum rate of the contributory pension). This rate of payment does not include rent allowance, household benefits or fuel allowance. 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.

I hope this clarifies the matter for the Deputy.