Noel McCarthy (Cork East, Fine Gael)
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1420. To ask the Minister for Employment Affairs and Social Protection if he is considering any changes to the current averaging system of Class S PRSI contributions towards the determination of a contributory pension rate; if there is a possibility of early student and summer holiday employment being disregarded in the calculation of the rate; and if he will make a statement on the matter. [47188/25]

Dara Calleary (Mayo, Fianna Fail)
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The Yearly Averaging (YA) method of calculating the rate of pay for the State Pension (Contributory) has been in use since the introduction of a contributory pension in 1961.  It has long been established that the method, which uses time spent since entry into insurable employment as a divisor, can lead to some anomalies.

In January 2018, an interim Total Contributions Approach (TCA) to calculating the rate of pension was introduced.  This removed time spent in insurable employment as a factor and simply added all PRSI contributions, paid and credited, to establish the rate of pay.  2,080 contributions (40 years) was required for a full rate contributory pension.  All those who reached State Pension Age since September 2012 could avail of both calculation methods (YA and TCA), and receive the most beneficial rate of payment.

The Commission on Pensions in its 2021 Report proposed that the Yearly Averaging method should be gradually removed and replaced fully with the Total Contributions Approach.  It proposed that the existing 2,080 contributions required for a full rate should remain.

Following enactment Social Welfare (Miscellaneous Provisions) Act 2023 in December 2023, a 10 year transition away from YA to full implementation of TCA began in January 2025.  For this year a transition rate made up of 90% of YA and 10% of TCA can be paid.  In 2026 it will be 80% YA and 20% TCA and so on until YA is removed fully in 2034.  A person will still have their entitlement calculated using the TCA method alone, and will receive the most beneficial rate of payment (i.e., Transition rate or TCA-only rate).

As the TCA removes the element of time from the calculation, there is no need to introduce additional disregards as suggested.

I trust this clarifies the matter for the Deputy.