IFA Farm Family and Social Affairs Chairperson, Maura Canning, has called for the current averaging system to be moved to a total contributions system for the purposes of calculating a person’s Contributory State Pension payment rate in the 2018 Budget.
Speaking following last week's Social Protection Pre-Budget Forum, Maura Canning said, “The current averaging system discriminates against a small group of individuals, particularly woman who left the social insurance system for a number of years to raise a family.”
She said the system also discriminated again farmers who may have worked within the PAYE system when they were younger, then started farming but who were not eligible to make contributions until 1988 when PRSI was introduced for the self-employed as well as farmers who were on Farm Assist prior to 2007 and were excluded from making PRSI contributions.
“The introduction of additional band rates based on yearly average contributions in 2012 have increased the inequity in the system and resulted in more woman and farmers receiving a lower contributory pension payment,” she noted.
The yearly averaging system calculates personal payment rates by counting the total number of contribution years, beginning with the year you first started paying PRSI up to and including the last full contribution year before you reach the age of 66, this is called your Total Contribution Years. Then the full rate paid contributions and credits over the same period are counted to get Contributions and Credits. The yearly average is calculated by dividing the Contributions and Credits by Total Contribution Years.
“The inequities in the current averaging system have been highlighted by the IFA repeatedly in recent years and must be addressed in the upcoming budget or provisions made to allow for farmers who were ineligible to make contributions for a period have these years disregarded in calculating contributory pension payment rate."