Many of my clients are delighted to see zero as their tax liability at the end of the year. The last thing most people want these days is another bill..
But its all very well having no tax to pay, but if you have no PRSI to pay, and you dont make a voluntary contribution, you are losing out on your opportunity to pay into the state pension.
For as little as €253 you could clock up a fulls years contribution to the state pension.
And looking at the changes that have been made, the rules are getting tougher to meet the requirements.Note – Acting as a tax agent and accountants, I would advise clients on what they need to know in this area, but it is really down to you, to ensure you have enough contributions to qualify. Do not leave it until tomorrow !
Here is an extract from the citizens information web site and what those requirements are.
In order to qualify for a State Pension (Contributory) you must be aged 66 and have enough Class A, E, F,G, H, N or S social insurance contributions.
You need to:
Have paid social insurance contributions before a certain age
Have a certain number of social insurance contributions paid and
Have a certain average number over the years since you first started to pay
Paid insurance before a certain age
You must have entered social insurance before a certain age. For people currently under 66, they must have started to pay social insurance before the age of 56. The age limit is higher for people born before 1922.
Entry into insurance
Your entry into insurance means the date on which you first started to pay social insurance.
The rules that determine when you entered into insurance are quite complex for those with mixed insurance, that is, full social insurance for some of the time and modified at other times.
Normally the date of starting insurable employment is taken as the date of the first paid employment contribution. However for a person who has a mixture of full and modified rate contributions and paid his/her first full-rate employment contribution before 6 April 1991, the most favourable date of starting insurable employment is taken. This means, if you first started to pay full insurance before 6 April 1991 and before you reached 56 years of age, your entry into insurance can be the date on which you first started to pay the full-rate of insurance if that would be to your advantage.
If you started to pay full insurance after 6 April 1991, your entry into insurance is the time you first paid any social insurance.
There are also special entry into insurance rules for self-employed people. If you started to pay self-employed contributions on 6 April 1988 and had previously paid employee insurance at any time, then the date of entry into insurance can be either 6 April 1988 or the date on which you actually first paid insurance, whichever is to your advantage.
Number of paid contributions
If you reach pension age on or after April 6 2012, you need to have 520 paid contributions (10 years paid contributions). In this case, not more than 260 of the 520 contributions may be voluntary contributions. However, if you were a voluntary contributor on or before April 6 1997 and you have a yearly average of 20 contributions, you may meet the requirement if you have a total of 520 contributions (of which only 156 need to be compulsory paid contributions).
If you reached pension age on or after 6 April 2002, you needed to have 260 paid contributions (effectively 5 years contributions but they need not be consecutive).
If you reached pension age before 6 April 2002, you needed 156 qualifying paid contributions (a total of 3 years but they did not have to be consecutive). This meant that you must have paid full-rate contributions (that is, full stamp prior to 1979 and Class A,E,F,G,H,N and S since then.)
In some cases, contributions paid before 1953 into the then National Insurance Scheme may be taken into account in order to satisfy the requirement that you have 156 paid contributions. In fact, each 2 such contributions are counted as 3. But, if they are taken into account, the average must be measured from 1953. There is a special pro-rata pension for people with pre-1953 contributions.
Average number contributions per year
You must meet the average condition. This is probably the most complex aspect of qualifying for a State Pension (Contributory).
Normal average rule
The normal average rule states that you must have a yearly average of at least 10 appropriate contributions paid or credited from the year you first entered insurance or from 1953, whichever is later. An average of 10 entitles you to a minimum pension; you need an average of 48 to get the maximum pension.
Alternative average rule
This alternative average only applies to people who reach pension age on or after 6 April 1992.
It requires that you have an average of 48 Class A, E, F, G, H, N or S contributions (paid or credited ) for each contribution year from the 1979/80 tax year to the end of the tax year before you reach pension age (66). This average would entitle you to the maximum pension. There is no provision for a reduced pension when this alternative average is used.
So, if you reach the age of 66 on or after April 6 1992, your average will be looked at in two ways – the usual average will be assessed and the alternative average will be assessed. Most employed or formerly employed people will be able to meet the alternative average. The alternative average will probably be looked at first because it is easier to assess. If you do not have an average of 48 contributions from 1979 then the usual method of assessing the average will be looked at and you may get a reduced pension (if you do not meet the alternative average, it is virtually impossible for you to have an average of 48 using the normal average rule).
There are a number of pro-rata pensions, which were introduced because of the exclusion of some people from the social insurance system at particular times.
Pro-rata pension for intermittent insurance
The first group for whom pro-rata pensions were arranged were those who had been in and out of insurance because of the operation of the income limit on contributions. Prior to 1974, non-manual workers were obliged to pay social insurance contributions only if their income was below a certain level. From 1 April 1974, there has been no income limit. Many people paid social insurance for a period and then ceased to pay when their income went above the limit then came back into the insurance system in April 1974 because of the abolition of the income limit . They would not meet the usual average requirement because they ceased to pay for a while. On 14 October 1988, arrangements were made for them to qualify for a pro-rata pension.
Their average is measured in the usual way and if that average is 10 or more they get a pension in the normal way. However, if it is between 5 and 9 they may get a special partial pension which is one quarter of the maximum pension. This pro-rata pension is payable to people who meet the quite specific conditions outlined. That is, you must have a broken insurance record and have re-entered insurance in 1974 because of the removal of the income limit. If you re-entered insurance in that year for any other reason (for example, because you had previously been self-employed or out of the country), you do not meet these specific terms and you would not be eligible for this pro-rata pension.
If you qualify for this pro-rata pension you may also get the appropriate Increase for Qualified Adult for a dependent spouse, civil partner or cohabitant and an Increase for a Qualified Child.
This pro-rata pension is for State Pension (Contributory) and Widow’s, Widower’s or Surviving Civil Partner’s Contributory Pension only. Because it is easier to qualify for a Widow’s, Widower’s or Surviving Civil Partner’s Contributory Pension the numbers who need the pro-rata pensions are very small. This scheme does not apply to State Pension (Transition).
Pro-rata pension for mixed insurance
The second group for whom pro-rata pensions were introduced are those with mixed insurance records, that is, people who worked for some time in the public sector and for a time in the private sector. The rules governing these pro-rata pensions are different from those described above.
Mixed insurance arises when a person spends part of his/her working life in the public service paying modified insurance and part in the private sector paying Class A (or, since April 1988, self-employed and paying Class S).
There are many people who have had a career in both the public and private sector but do not have mixed insurance. This is because no insurance was payable by people whose incomes were above certain limits before 1 April 1974. Certain groups who are now insured were outside the scope of the system – Gardai are insurable from 1 April 1974; certain members of religious orders from 6 April 1988 and doctors and dentists in the civil service from 6 April 1988.
People with mixed insurance may have enough full contributions to enable them to qualify for a State Pension (Contributory). This depends on the exact circumstances of each case. It could happen that one person would qualify while another, who might have more contributions, would not qualify.
Since 1991, a State Pension (Contributory) may be payable on a pro-rata basis to people with mixed insurance. If you reach pension age on or after 6 April 6 2012, you need to have a total of at least 520 full and mixed contributions paid.
You must also have:
At least 260 paid contributions at the full rate since entry into insurance or 1953, whichever is later
A mixture of full and modified contributions, which when added together give you a yearly average of 10 (for the State Pension Contributory) from the time you first entered insurance or 1953, whichever is later, to the end of the contribution year before your 66th birthday.
Failed to qualify for a pension under EU regulations or under reciprocal arrangements with other countries or only qualified for a pension at a lower rate than this pro-rata pension would give you.
If you meet all these requirements, you may qualify for a pension proportionate to the number of contributions that you have at the full rate. To take a very simple example, if you worked for 40 years up to age 66 and 10 of those were in the private sector, you would get one-quarter of the normal pension.
What happens to people with mixed insurance is that all contributions at the full and modified rates are added together. The average is then measured in the normal way. If you have an average of at least 10 then you may qualify. Then the number of full contributions is divided by the total number of contributions to find out what proportion are full rate; you then get that proportion of the pension.
The Increase for a Qualified Adult payable with this pension is proportioned as well.
Pro-rata pension for self-employed people
The self-employed have been obliged to pay social insurance since 1988. Prior to that, some self-employed people were voluntarily paying insurance. Some self-employed people were already over the minimum age when they first started to pay contributions in 1988. In April 1999, a special pro-rata pension was introduced for them. Only people aged 56 or over on 6 April 1988 (born on or before 6 April 1932) qualify for this pension.
Pro-rata pensions for people with pre-1953 contributions
This pro-rata pension was introduced in May 2000. You may qualify if you have at least 260 full contributions, some of which must have been paid before 1953. Every 2 contributions paid before 1953 count as 3.
If you meet these conditions, you may get a pro-rata pension of half the normal maximum rate. The increases for a qualified adult and child are also at payable at half-rate. The increase for pensioners over 80 years of age is paid in full.
Working in the home and State pensions
In 1994, regulations were made that should make it easier for people who take some time off work to care for family members to qualify for pensions. The Homemakers’ Scheme is for people who have been carers since or after 1994. It does not affect people who were carers before April 1994 and it is not of much use to those who give up work permanently. It is of greatest importance for those who work outside the home for a number of years, then spend a number of years as carers and then return to the workforce. It applies equally to women and men.
From 5 April 1994, any contribution year spent as a homemaker may be disregarded in the calculation of the yearly average up to a maximum of 20 years. So, the fact that you do not have any contributions in those years will not affect your entitlement to a pension.
If you have worked in Ireland and one or more EU state your social insurance contributions from each EU state will be added to your Irish social insurance contributions to help you qualify for a social welfare payment. More information about combining your social insurance contributions to qualify for a state pension is available.
Increases for a qualified adult and pensioners over 80 years of age are calculated in the same way as the personal rate of pension. Increases for a qualified child are payable from one country only and, if from Ireland, are paid in full.
Bilateral social security agreements
Ireland has bilateral social security agreements with Canada, the USA, Australia, New Zealand, Switzerland, Austria, Japan and Quebec (which has a separate system from the rest of Canada). These agreements are broadly similar and they generally provide that social insurance paid in Ireland and the other country can be combined to help people qualify for old age and retirement pensions. Again, in general, the method of calculation is similar to the EU rules.
The Department of Social Protection has published Working it out – A Guide to State Pension (Contributory) which helps you to work out whether you qualify for a State Pension (Contributory).
State Pension (Contributory) in 2012:
PRSI contributions Rate per week Increase for a qualified adult (under 66) Increase for a qualified adult (aged 66 and over)
48 or over €230.30 €153.50 €206.30
20 – 47 €225.80 €153.50 €206.30
15 – 19 €172.70 €115.10* €154.70*
10 – 14 €115.20 €76.80* €103.20*
*Qualified adult rates apply to claims made from 6 April 2001.
The maximum rates are payable to people who have an average of 48 or more contributions. Reduced rates are payable to people who have between 10 and 47 contributions. Pro-rata rates can also be paid as described above.
The Living Alone Increase may be payable to people who live completely alone. You may also be eligible for other benefits. Find out more about medical cards and the Household Benefits Package.
You can get an increase in your payment for a qualified adult. Any income your adult dependant has from employment, self-employment, savings, investments and capital (for example, any property except your own home) is taken into account.
Your income is not taken into account, only your spouse’s, civil partner’s or cohabitant’s income is taken into account, in the assessment for a Increase for a Qualified Adult. If you have joint savings or investments only half is taken into account as belonging to your spouse, civil partner or cohabitant.
From 27 September 2007, if you are getting a State Pension (Contributory) the Increase for a Qualified Adult is automatically paid directly to your adult dependant. This only applies to applications for State pensions received by the Department on or after 27 September 2007.
You can also get an increase in your payment for any child dependants. From 5 July 2012, you will no longer be able to claim a half-rate Increase for a Qualified Child with your State Pension (Contributory), if your spouse, civil partner or cohabitant has an income of over €400 a week.
How to apply
You can check your social insurance record with the PRSI Central Records section in the Department of Social Protection. To do this, you need your PPS (Personal Public Service) Number. If you are over 60, the Pension Services Office also has a ‘Pension’s Forecast Pack’, this combined with a copy of your social insurance record can give you information about the social insurance contributions you may still need to make to get a State Pension (Contributory).
You can get a State Pension (Contributory) form (pdf) from your local post office and local offices of the Department of Social Protection.
You should apply 3 months before the age of 66. However, you should apply 6 months before reaching 66 if you have paid social insurance contributions in more than one country.
Currently, there are delays processing applications for State Pensions and it may take some time for the Department to process your claim. However, you may qualify for Supplementary Welfare Allowance while your claim is being processed by the Department.
From April 2012 late claims for contributory pensions can be backdated for a maximum of 6 months. This applies to State Pension (Contributory and Transition) and Widow’s, Widower’s or Surviving Civil Partner’s (Contributory) Pension. Read more in our document about late claims.
Where to apply
Questions about your eligibility for a State Pension (Contributory) should be addressed to your local social welfare office or:
Department of Social Protection
Social Welfare Services
Tel:(071) 915 7100
Locall:1890 500 000
You can email the State Pension (Contributory) section using the secure State Pension (Contributory) enquiry form.
Questions about your social insurance record should be addressed to:
Department of Social Protection
Tel:(01) 471 5898
Locall:1890 690 690