Written answers

Wednesday, 23 March 2022

Department of Employment Affairs and Social Protection

State Pensions

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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123. To ask the Minister for Employment Affairs and Social Protection the extent to which she expects to be in a position to address the pensions issue for persons that have gaps in their contribution record for any reason with a view to ensuring the availability of a payment including pro-rata payment; and if she will make a statement on the matter. [15379/22]

Photo of Heather HumphreysHeather Humphreys (Cavan-Monaghan, Fine Gael)
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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). As the actuarial value of the State Pension is currently estimated at approximately €380,000, it is reasonable to require people claiming a contributory pension to have made at least 10 years of paid contributions over the term of their working life.

Where a person enters the social insurance system over the age of 56 they will not be able to make sufficient social insurance contributions to be awarded a State Pension (Contributory) on reaching 66 years of age because it has a minimum contribution requirement of 520 contributions (i.e. 10 years). In such cases a level of social insurance refund may be applicable.

Subject to the standard qualifying conditions for State Pension (Contributory) also being satisfied, the State pension system already provides significant recognition to those whose work history includes an extended period of time outside the paid workplace, often to raise families or in a full-time caring role.

This is provided through the award of credits and/or the application of the Homemaker’s Scheme (under the Yearly Average method for payment calculation) and/or the application of HomeCaring Periods (under the Aggregated Contribution Method, also known as the interim Total Contributions Approach).

Details of these are –

- Credits – PRSI Credits are awarded to recipients of Carer’s Allowance (and Carer’s Benefit) where they have an underlying entitlement to credits. Credits are also awarded to workers who take unpaid Carer’s Leave from work.

- The Homemaker’s Scheme - The scheme, which was introduced with effect from 1994, is designed to help homemakers and carers qualify for State Pension (Contributory). The Scheme, which allows periods caring for children or people with a caring need to be disregarded (from 1994), can have the effect of increasing a person's Yearly Average.

- HomeCaring Periods – HomeCaring Periods may be awarded for each week not already covered by a paid or credited social insurance contribution (regardless of when they occurred) to a maximum of 20 years. HomeCaring Periods can only be used under the Aggregated Contribution Method (also known as the Interim Total Contributions Approach) of pension calculation.

Since April 2019, all new State (Contributory) Pension applications are assessed under all possible rate calculation methods, including the Yearly Average and the interim Total Contributions Approach, with the most beneficial rate paid to the pensioner. The elements which make up each method are set out in legislation.

It should be noted that if a person does not satisfy the conditionality to qualify for State Pension (Contributory), s/he may qualify for the means-tested State Pension (Non-Contributory), the maximum rate of which is over 95% of the maximum rate of the State Pension (Contributory). Alternatively, an Increase for a Qualified Adult (IQA) is paid, generally, where a pensioner has an adult dependent (e.g. a spouse, civil partner or cohabitant who is financially dependent upon him/her), who does not have enough contributions to claim a maximum rate State Pension (Contributory) in his/her own right. The payment rate for the IQA is up to 90% of a full contributory pension. The most advantageous payment for a pensioner will depend upon their individual circumstances.

The Pensions Commission was established in November 2020 to examine the sustainability of the State Pension system and the Social Insurance Fund, in fulfilment of a Programme for Government commitment. The Commission was an independent body comprised of knowledgeable and experienced academics, pension experts, members of civil society and representatives of workers and employers. Once it completed its work and fulfilled its obligations, the Commission was dissolved. The Commission's Report was published on 7th October 2021. The report, Technical Sub-Committee's working papers and submissions made to the Pensions Commission are available on the website, pensionscommission.gov.ie.

The Commission’s Report is a comprehensive report that takes account of an assessment of various analyses of population, labour force and expenditure projections; an examination of international approaches; and responses to an extensive consultation process. It has unambiguously established that the current State Pension system is not sustainable into the future and that changes are needed, and it has set out a wide range of recommendations in this regard - including the full transition to a Total Contributions Approach (TCA) model, phasing out of the Yearly Average approach, allowing a person to continue paying PRSI contributions past State Pension Age to improve their social insurance record for State Pension (Contributory) purposes and measures to enhance pension provision for long-term carers (in excess of 20 years).

The Government agreed in October 2021 that the Commission’s report and recommendations would be referred to the Joint Oireachtas Committee on Social Protection, Community and Rural Development and the Islands and also to the Commission on Taxation and Welfare for its views. The Committee published its views on the 2nd February 2022 and the Commission on Taxation and Welfare submitted its comments on the PRSI related recommendations at the end of February. The various views will be considered carefully as part of the Government’s deliberations over the coming weeks.

In the interests both of older people and future generations of older people, the Government intends to consider the comprehensive and far reaching recommendations in the Commission’s Report very carefully and holistically. My officials are currently examining each of the recommendations and are consulting across Government through the Cabinet Committee system. I think it is really important that we complete that work before reaching conclusions on any specific recommendation. In this regard, I intend to bring a holistic recommended response and implementation plan to Government in April.

As the bedrock of the pension system in Ireland, the State Pension is very effective at ensuring that our pensioners do not experience poverty. This Government is committed to ensuring that this remains the case for current pensioners, those nearing State Pension age and today’s young workers including those who are only starting their careers.

I hope this clarifies matters for the Deputy.


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