Heather Humphreys (Cavan-Monaghan, Fine Gael)
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Currently applicants for the State Pension (Contributory) have their entitlement assessed under two separate criteria, the Yearly Average (YA) method and the Total Contributions Approach (TCA).

The YA method has been in place since the introduction of the contributory pension in 1961. - The YA method sees all paid and credited contributions divided by time spent in the social insurance system to give an average of Social Insurance contributions per year with payments made on a banded basis. A yearly average of 48 reckonable contributions is required to qualify for the maximum rate. In 1994, provision for Home making was introduced where those who had left the work force to care for children under 12, or others who required full time care, could see those years disregarded in the yearly average calculation.

The TCA was introduced with effect from 2018. It removes the time spent in the Social Insurance system as a factor and simply adds paid and credited contributions together. 2080 contributions (equivalent to 40 years) are required for a full rate payment with pro-rata payments for those who have the minimum required 520 paid contributions, but less than 2080. Provision for home caring is included in the calculation with up to 20 years HomeCaring Periods awarded for time spent caring for children under 12 or others who require full time care. Unlike the Homemaker’s Scheme, HomeCaring periods can apply to periods before 1994.

Following the recommendations of the Commission on Pensions report, I intend to transition away from the use of the Yearly Average method towards the full introduction of the TCA from January 2025. Over the next ten years, the yearly averaging method of calculating State Pension (Contributory) will be phased out and replaced by TCA. During this transition period, pension rates will be based on best of the TCA, or a rate based on mix of Yearly Average and TCA, with the proportion accounted for by Yearly Average reducing from 90% to zero over 10 years and the proportion accounted for by the TCA increasing commensurately.

I trust that this clarifies the matter for the Deputy.