Eoin Hayes (Dublin Bay South, Social Democrats)
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148. To ask the Minister for Employment Affairs and Social Protection the assessment his Department has done of the impact of the transition to the TCA for the State contributory pension across different income levels; and if he will make a statement on the matter. [62248/25]

Dara Calleary (Mayo, Fianna Fail)
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Following enactment Social Welfare (Miscellaneous Provisions) Act 2023 in December 2023, a 10 year transition away from Yearly Average (YA) to full implementation of Total Contributions Approach (TCA) began in January 2025.

During the transition period, a person will have their entitlement calculated using TCA and a separate transition rate made up of a proportion of the YA and TCA rates, with the person receiving the most beneficial rate of payment (i.e., transition rate or TCA-only rate). In 2025, 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 each year until YA is removed fully in 2034.

To get a maximum pension payment under the TCA approach requires 2080 contributions, equivalent to 40 years. The TCA approach includes provisions for up to 10 years of PRSI credits, and up to 20 years of HomeCaring periods with a cap of 20 years (1040) combined PRSI credits and homecaring periods.

TCA is a fairer and more transparent method for calculating the State Pension (Contributory) (SPC). TCA resolves the anomalies arising from the YA calculation as the year a person commenced paying social insurance contributions will no longer be a key determining factor for pension entitlement rate calculation. Instead, the totality of social insurance contributions paid and credited will be simply added together. This is an equitable approach as pension outcomes are more in line with the total number of contributions paid and credited. The principle of higher contributory entitlements for those who contribute more frequently into the social insurance fund is central to contributory pensions around the world.

In 2023, the Department commissioned the ESRI to conduct an analysis on the impact of the move to TCA for SPC. The ESRI published its report on the 12th of June 2024. The ESRI report showed that 87% of future claimants will see their rate of payment improve or stay the same. While 13% would see their rate of payment decrease, those decreases would be relatively small and in line with their contributions to the Social Insurance Fund. One third of women are expected to receive an increase in their rate. More women will qualify for the maximum pension rate under the TCA (rising from 54% to 75%) due to the removal of anomalies associated with the YA.

I hope this clarifies the matter for the Deputy.