Social Protection | Self-employed contributors pension
To ask the Minister for Social Protection the number of self-employed contributors who do not have sufficient contributions to warrant the payment of a pension; if she might undertake a review of the situation with the possibility of making a pro-rata payment in line with their particular contributions or alternative; and if she will make a statement on the matter.
The State Pension (Contributory) (SPC) 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.
Social insurance records include people who have paid contributions at various classes (e.g. Class S and Class A). They also include people who have not contributed for many years or who may now be living abroad. As such, it is not possible to accurately provide the data requested by the Deputy.
A person is required to have a minimum of 520 paid reckonable PRSI contributions in order to qualify for the SPC. 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, before qualifying for a payment. PRSI for self-employed people was introduced in 1988.
I do not, therefore, propose to undertake a review regarding the possibility of a pro-rata payment for people with less than the minimum requirement for the SPC i.e. 10 years’ paid contributions.
It should be noted that, if a person does not satisfy the conditionality to qualify for a contributory State Pension, he or she may qualify for the means-tested State Pension (Non-Contributory), the maximum rate of which is over 95% of the rate of the SPC.
Alternatively, an Increase for a Qualified Adult (IQA) is paid, generally, where a pensioner has an adult dependent who does not have enough contributions to claim a maximum rate SPC in his or 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.
In September, I announced a series of landmark reforms to the State Pension system in response to the recommendations from the Pensions Commission. The set of measures represent the biggest ever structural reform of the Irish State Pension system.
One of the key measures is the introduction of a flexible pension system in Ireland. Under this new system, from January 2024, people will still be able to retire at 66 and draw-down their pension in exactly the same way as they can today. In addition, there will be new flexibility so that people can choose to defer their pension, work longer and receive a higher pension payment.
The flexible State Pension system is about providing people with choice. People will decide for themselves what best suits their needs and circumstances. For example, in the case of a person who reaches age 66 and does not have sufficient contributions to qualify for a full pension, they will now have the option to work for longer to build up additional entitlements. If a person has less than 10 years PRSI reckonable paid contributions, they can use this period to establish entitlement. A person will also have the option to continue working between age 66 and 70 and receive an actuarially based increase in their weekly payment rate.
I hope this clarifies matters for the Deputy.
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