Parliamentary Question for the Minister for Social Protection (Joan Burton TD)
To ask the Minister for Social Protection if she will consider implementing a homecarer’s credit for the purposes of calculating pension contributions for persons who spent time out of work to raise a family; and if she will make a statement on the matter.
The homemaker’s scheme was introduced in 1994 to make qualification for State pension (contributory) easier for those who take time out of the workforce for caring duties. It does this by disregarding years spent outside the workforce on such duties when calculating the average contributions per year on the pensioner’s record.
To be eligible for the homemaker’s scheme, a person must:
– Permanently live in the State (exception may be made where EU regulations apply),
– Be aged under 66,
– Have started insurable employment or self-employment before the age of 56,
– Not work full-time, although for the purposes of this scheme, a person can work and earn less than €38 gross per week,
– Care for a child (under 12) or an incapacitated person on a full-time basis.
The scheme allows up to 20 years spent caring for children under 12 years of age, and/or an incapacitated person, to be disregarded when a person’s social insurance record is being averaged for pension purposes.
However, it is important to note that the scheme will not, of itself, qualify a person for a pension. The standard qualifying conditions, which require a person to enter insurance ten years before pension age, pay a minimum of 520 contributions at the correct rate and achieve a yearly average of at least 10 contributions on their record from the time they enter insurance until they reach pension age, must also be satisfied. For those who do not satisfy these conditions, and have an income need, a means-tested State pension may be available.
The introduction of homemaker credits would be an alternative approach. Instead of disregarding years outside the labour market, reducing the duration of the insurance record, and thereby increasing the average number of contributions paid per year, a homemakers credits scheme would involve the award of credits for the period(s) spent outside the labour market in a caring capacity. A homemaker credit would improve the likelihood of qualifying and of receiving a higher rate of pension for those affected.
However, the introduction of homemaker credits raises a number of issues, most notably cost. If they were awarded from a current date, the cost initially would likely be low, at less than €100,000 per annum, based on 2010 estimates. Costs in relation to current homemaker’s disregard scheme are expected to increase in the coming years due to the 20% increase in female employment rates between 1994 and 2008.
A further factor impacting on possible costs would be the date from when such credits were effective. The 2007 Green Paper on Pensions indicated that to back-date the current homemaker’s disregard scheme to 1953, the year when the unified system of social insurance was introduced, would cost the Exchequer some €160 million per annum.
Consideration would also need to be given to the number of possible eligible people previously employed in Ireland, who are now resident in other countries such as the UK and for which no estimates are available but which could add significantly to costs, given the general increase in female employment.
It is planned that a total contributions approach to pension qualification will replace the current average contributions test for State pension (contributory). The proposed date for the introduction of this change is 2020, but this may be subject to change.
The total contributions approach (whereby the pension payment will be based on the number of contributions paid and credited) will remove the current anomaly whereby people can achieve a higher average contribution rate, and thus a higher level of pension, even where they have a lower total number of contributions paid. This move will bring transparency and fairness to the eligibility for pension. Issues such as the introduction of homemaker’s credits will be considered in the context of this reform.