Kildare South Fine Gael TD Martin Heydon has said that he will continue to raise the concerns of many women now in receipt of lower pensions due to time that they took out of the workforce in their earlier careers.

“In the last four years many women have reached retirement age only to discover to their surprise that they were not entitled to the full contributory pension, even though they have worked for many years.  This is because the current averaging of contributions over a person’s working life works against those who started work when they were very young and subsequently took time out of work, often to care for families.

The current system means that someone who only took up work later in life can often be better off than a person who commenced work much earlier as their total contributions are spread over a shorter working life.

“In 1994 a homemakers credit scheme was introduced which allowed those who were caring for families in the home to continue to be able to get credits for pension purposes which alleviated the problem, however the difficulty now lies with those years pre 1994 when no such scheme was in place.

“I have raised this issue with previous Minister’s for Social Protection who had sympathy for those affected but highlighted the cost of up to €290m per year that any change would cost.  This week I had the opportunity to raise it with current Minister Regina Doherty who explained that a review of the pension system is underway.  I welcome her confirmation that the position of homemakers is being considered carefully as part of this review.

“This is an issue that affects many in Kildare and I will continue to push for a fair resolution to it.”


For Written Answer on : 20/09/2017
Department: Employment Affairs and Social Protection

To ask the Minister for Employment Affairs and Social Protection her plans to review the calculation basis for the contributory old age pension in view of the impact the averaging system is having on many women in particular, that for different reasons took breaks from work and are now receiving lower pensions; and if she will make a statement on the matter.

– Martin Heydon.

* For WRITTEN answer on Wednesday, 20th September, 2017.


Minister for Employment Affairs and Social Protection (Regina Doherty T.D.):

The State pension is a valuable benefit and is the bedrock of the pension system. There are two State pensions related to State pension age. The State pension (non-contributory) is a means-tested pension funded from taxation, whereas the State pension (contributory) is not means-tested and is paid from the Social Insurance Fund. Accordingly, it is important to ensure those qualifying for the latter have made a sustained contribution to the Social Insurance Fund over their working lives. To ensure that the individual can maximise their entitlement to a State pension (contributory), all contributions, paid or credited, over their working life from when they first enter insurable employment until pension age are taken into account when assessing their entitlement and the level of that entitlement.

The homemaker’s scheme makes qualification for a higher rate of State pension contributory easier for those who take time out of the workforce for caring duties. The scheme, which was introduced in and took effect for periods from 1994, allows up to 20 years spent caring for children under 12 years of age, or caring for incapacitated people over that age, to be disregarded when a person’s social insurance record is being averaged for pension purposes, subject to the standard qualifying conditions for State pension contributory also being satisfied. This has the effect of increasing the yearly average of the pensioner, which is used to set the rate of his or her pension.

Where someone does not qualify for a full rate contributory pension, they may qualify for an alternative payment. If their spouse has a contributory pension, they may qualify for an increase for a qualified adult, amounting up to 90% of a full rate pension. Alternatively, they may qualify for a means-tested State pension non-contributory, which amounts up to 95% of the maximum contributory rate.

The Actuarial Review of the Social Insurance Fund in 2012 confirmed that the Fund provides better value to female rather than male contributors. This is due to the redistributive nature of the Fund. The average pension payments made by my Department to men and women over 66 years of age are within approximately 2% of each other.

Work is under way to replace the yearly average system with a Total Contributions Approach. Under this approach, the rate of pension paid will more closely reflect the total number of contributions made by people, not when they paid them. The position of homemakers is being carefully considered in developing this new system of calculating the State Pension (contributory).

It is hoped that this approach to pension qualification will replace the current one from 2020. Following completion of the actuarial review of the Social Insurance Fund this year, a refined proposal will be developed. My Department will conduct a period of consultation with relevant stakeholders, including interest groups, representative bodies and the Oireachtas. Following the consultation period, I will submit a proposal to Government seeking approval for the new approach, and then proceed to introduce legislation to give effect to this reform.

I hope this clarifies the matter for the Deputy