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Dublin: 15 °C Thursday 13 August, 2020

The government will spend €40 million closing the 'pensions gap'

The people impacted, mainly women, lose out on around €30 per week under the measures.

Image: Shutterstock/ratmaner

THE PENSION ANOMALY which has seen nearly 40,000 pensioners who spent time working in the home paid less than others will be addressed.

Social Protection Minister Regina Doherty announced today that €40 million will be spent to bring those who lost out on money due to band changes in 2012 into line with others.

The people impacted, mainly women, lose out on around €30 per week under the measures.

A new Total Contribution Approach (TCA) will be available from 30 March to pensioners affected by the 2012 changes, and will include up to 20 years of a new home caring credit. The scheme will see increase for those, particularly women, whose work history includes an extended period of time outside the paid workplace, while raising families or in a caring role.

Doherty said that the 40,000 people affected will be contacted in the autumn and offered the chance to move to TCA from the state pension system – but all pensioners will be allowed stay on the rate which leaves them best off. Those who have an absence in their records will be asked to sign a statutory declaration.

Pensioners do not need to contact the Department or do anything else until written to by the Department nearer the end of the year.

“In recent months, many people expressed concern about their pension rates, which were affected by rate band changes in 2012. We listened and we worked on a solution.”

The scheme will cost around €40 million this year and money owed will be paid in a lump sum to pensioners in the first quarter of next year.

However, Doherty said that it was not legislatively possible to pay money that people had lost in the years since 2012. She said that because legislation could not be retroactive, the payments could only be considered from the end of March.

The Department uses the example of a 69-year-old named Anne. In their example, she was born in 1948 and worked from 16 to 22. She then had three children and returned to the workforce in 1996 and paid PRSI until 2013.

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Under the current system, her pension is paid on the years she made PRSI contributions and comes out with €202.80 a week.

With the new system, she gets 18 years of PRSI credits for the time spent raising her children and comes out with €238.30 a week.

The TCA will replace the “yearly average” approach for all new State Pension (contributory) applicants from around 2020 onwards.

Justin Moran, Head of Advocacy and Communications with Age Action, said: “We’re disappointed that the Government has decided not to reverse the 2012 pension cuts, which is the simplest way to fix this injustice and deliver a fair State Pension.

“But we appreciate that Minister Doherty’s solution can make a very real difference in the incomes of thousands of men and women who were punished by the pension system for rearing their families.”

Explainer: Why has a big post-Budget row erupted over women’s State pensions?

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