Cork East Fine Gael TD and Minister of State at the Department of Justice & Equality, David Stanton has highlighted the changes to be introduced to the State Pension (Contributory). These changes to how calculations are made should benefit a large number of people, in particular homemakers and carers, who were negatively affected by the rate band changes in 2012.
“The new system will come into effect on 30 March 2018. Later this year the Department will invite over 40,000 pensioners, currently assessed under the 2012 rate band changes, to have their pensions recalculated under TCA. As it will take time to design and set up administrative processes, and the necessary IT systems, the Department expects to send out the invitations from Q4 of 2018. Pensioners do not need to contact the Department or do anything else until written to by the Department nearer the end of the year. The first payments will be made from early 2019, with payment backdated to the 30 March 2018.
“The new Total Contributions Approach (TCA) marks a move away from the old ‘averaging rule’ system whereby a person’s PRSI contributions were added up and then averaged over the number of years they had been in employment. Now pension entitlement will be based on the total number of contributions a person has made over their working career only. There will also be provision for a new Home Caring Credit of up to 20 years to assist workers who took time out to raise families.
“In recent months, many people expressed concern to me about their pension rates, which were affected by rate band changes in 2012. I have been in regular contact with my colleague, Minister for Employment Affairs and Social Protection, Regina Doherty on this issue, highlighting my constituents’ concerns and am pleased that changes have been made.
“Anyone who qualifies for a higher rate of pension under the new system will then move to the revised rate with the payment being backdated to 30 March 2018. However, anyone who would be in a worse position financially under the TCA approach will retain their entitlement under the old system. Both of these systems will work in tandem until 2020 when all new applicants will be assessed under the news TCA approach only.
“This new approach is expected to significantly benefit many people, particularly women, whose work history includes an extended period of time outside the paid workplace, while raising families or in a caring role. The new Home Carer Credit and TCA approach will ensure that the totality of a person’s social insurance contributions – as opposed to the timing of them – determines a final pension outcome.