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Work 40 years to qualify for full State pension – report urges

14/09/2021 Posted by IAPF | Comments(0)

Workers must make 40 years of social insurance contributions to get a full State pension in a new plan, the Government will be told.

A draft Commission on Pensions report recommends that an “interim” way of calculating the payment should now become the “definitive” method.

It says this should mean 40 years – or 2,040 contributions – are required at State pension age to qualify for a maximum rate pension.

However, it allows periods of ‘credited’ contributions including for home caring to be factored into the calculation.

A draft executive summary of the report that has not yet been published recommends that a “full transition” to this method of assessing entitlements known as the total contributions approach “should be implemented as soon as possible”, pending legislation and IT system changes.

It says the current method should be abolished.

Under current arrangements, people can qualify for a full pension after 10 years. The amount they get is based on average yearly contributions.

For those better off with the current method, the report endorses a phased transition over a 10-year period.

It notes that since 2019 both calculation methods have become available, and the better rate of the two is paid.

“This has created further anomalies and unfairness in the system, whereby people with fewer contributions are still able to qualify for higher levels of payment,” it says.

The commission says this increases the cost of the contributory State pension “at a structural level”.

The Irish Congress of Trade Unions previously rejected a proposal for 40 qualifying years.

A spokesperson said it will not comment until the report is published.

However, a submission it made on the issue three years ago said a 30 qualifying years requirement was more “equitable and appropriate”.

It said it is possible in the current system to qualify for a full pension based on as little as 10 years’ contributions.

The union body argued that the 40-year target failed to recognise that some older workers’ – including part-time staff and the self-employed – may have reduced contribution records as they have insurance coverage less than 30 years.

It noted the impact of the marriage bar on women, and said the qualifying years needed for a full State pension was reduced to 30 in the UK.

Chief executive of the Irish Association of Pension Funds Jerry Moriarty said the new method is quite a big change.

“They are making it harder for people to qualify, if this is adopted,” he said.

“They are fixing an anomaly in terms of caring but are making it more difficult to get the full pension.” He said the timeframe for contributions is not unreasonable as most people’s working lives are around 40 years.

According to the report: “In terms of the specific design of the total contributions approach, the commission recommends that the current interim TCA (total contributions approach) should become the definitive TCA, ie 40 years – or 2,040 contributions – required at State pension age to qualify for a maximum rate pension.

“This includes 10  years of credited contributions and 20 years of HomeCaring periods, but with a cap of 20 years combined credited and HomeCaring periods,” it says.

Meanwhile, the report says long-term carers should get access to the pension by the State making retrospective contributions to cover gaps in their contribution history.

It also says allowing those with a long contribution record of 45 years who want to retire at 65 receive a full pension is an option for the Government to consider. But it says this is cost increasing and may need to be reviewed as the pension age increases.

The report calls for the “early introduction” of a long-promised auto-enrolment scheme.

Its key recommendations include a delay in increasing the State pension age from 66 to 67 for 10 years. This is part of a plan to fund the system that includes PRSI hikes and a yearly Exchequer contribution.

Read the original article here

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