Saturday 19 January 2019

Explained: Why women are losing out on their pension payments

(Stock picture)
(Stock picture)
Charlie Weston

Charlie Weston

Changes to the way the State pension payment is calculated were introduced in 2012. The rules hit women hard. They are typically losing €35 in payments. They will not get the full €5 rise in the State pension announced in the Budget.

Why are people annoyed about State pension rules?

Many people who have been reaching retirement age in the past few years are finding they are getting smaller pensions than they had been banking on. People who worked and made pay related social insurance (PRSI) contributions, or stamps, feel cheated.

How many women are affected?

Some 35,000 pensioners are suffering from these pension cuts, and 23,000 of them are women, says Age Action. Those who retired before 2012 are not affected.

What was the change?

The State pension is calculated by adding up the total number of PRSI contributions you make. This figure is then divided by the number of years between when you started work and when you are entitled to the pension. But many older women can find themselves punished by this system for taking time out of the workforce to raise a family. This is mainly because the weekly pension rate is calculated on the average number of contributions made over a working life.

Explain that.

Before 2012 there were four payment bands used to calculate how much of a State pension you get. Those with 48-plus yearly averaged contributions received the top pension rate. Those with between 20 and 47 contributions received 98pc, etc. In Budget 2011, then social protection minister Joan Burton increased the number of bands to six. Those in the lowest band, with 20 to 29 averaged contributions, got just 85pc of the maximum payment.

Which groups lost out?

The two groups of pensioners this change affects the most are those with between 20 and 29 yearly averaged contributions and those with between 10 and 14 such contributions. For those in the 20 to 29 contributions group, the changes mean a difference of €35 per week.

But women were not supposed to lose out for raising a family?

The Homemakers' Scheme partly addresses gaps in employment due to caring responsibilities. The scheme provides a disregard of up to 20 years for those who take time out of the workforce to care for children or a person with a disability. It only applies to periods of caring from 1994.

Tell me about the averaging rule?

It is where the number of PRSI contributions is divided by the number of years between the first day of work and retirement. This means someone who worked for a few months in the 1960s and then went back to work in 2000 gets a smaller pension than someone of the same age who just started work in 2000.

Irish Independent

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