How to qualify for the State Pension
There are two different State Pensions systems, namely the Social Insurance system and the Social Assistance system.
In this article we are going to look at the State Pension (Contributory) which falls under the Social Insurance System and as outlined above is based on an individuals PRSI contributions over their lifetime.
We hope to outline below the conditions which must be satisfied in order to qualify for this pension by addressing the main questions which will arise for individual’s looking to qualify for this benefit. Please note that this article is for guidance purposes only and individuals should get clarification of their own entitlements from the Department of Social Protection.
For the purpose of this article we have looked at this matter from the point of view of an individual who has not yet reached age 66. This article does not cover any other social welfare payments/allowances.
Who Qualifies for the State Pension (Contributory)?
In order to qualify an individual must have a certain minimum “yearly average” number of weekly PRSI contributions in the appropriate PRSI class
In order to qualify for some level of benefit an individual must satisfy the following conditions
1. They must have started paying PRSI before age 56, and
2. They must have paid at least 520 weekly contributions, of which no more than 260 of the 520 may be voluntary contributions (a lower limit for voluntary contributions applies if a person commenced making voluntary contributions before 6th April 1997), and
3. An individual must satisfy the average yearly contribution limit which can be satisfied where:
i) They have paid a yearly average of at least 48 paid credited or full-rate contributions from 1979 to the end of the tax year before they reach age 66.
or
ii) They have paid a yearly average of 10 or more credited or full-rate contributions weekly contributions from 1953 (or the time they started insurable employment, if later) to the end of the tax year before they reach age 66.
For the purpose of calculation the average contribution for full year is 52 weeks.
What age can benefit’s be accessed?
The benefit is payable from a retirement age as determined by the Department of Social Protection. This retirement age has been increased in recent years and could yet be subject to further increases in the future. The situation as things stand is that for those born in the years prior to and including 1954 the benefit is payable from the date of their 66th birthday, for those born between 1955 and 1960 the benefit is not payable until they reach age 67 and for all those born in 1961 and thereafter the benefit is not payable until their 68th birthday.
How is the benefit to be paid currently calculated?
The State Pension (Contributory) is payable in three distinct elements.
• A personal amount.
• An increase for a qualified adult.
• An increase for each dependent child.
The personal amount of the State Pension (Contributory) varies by the yearly average number of PRSI contributions (paid or credited) by the individual over their working lives.
The table below sets out the rates of pension payable based on the yearly average of PRSI contributions.
State Pension (Contributory) rates in 2017
Yearly average PRSI contributions Personal rate per week, Increase for a qualified adult (under 66), Increase for a qualified adult (over 66),
48 or over €233.30 €155.50 €209.00
40-47 €228.70 €147.90 €198.60
30-39 €209.70 €140.80 €188.40
20-29 €198.60 €131.70 €177.30
15-19 €152.00 €101.30 €135.70
10-14 €93.20 €61.80 €84.10
There are also increases in this payment for each dependent child. There are also extra amounts paid when you reach age 80.
How is the “Yearly Average” calculated?
This calculation should be done by first determining the number of contribution years, beginning with the year the social insurance contributions commenced and ceasing on the last full contribution year before reaching age 66.
These are referred to as ‘Total Contribution Years’.
Full rate paid contributions and credits over the same period are then counted. These are referred to as ‘Contributions and Credits’.
The ‘Yearly Average’ is calculated as follows:
Yearly Average = Contributions and credits Total contribution years
The yearly average is used to get the rate band and the corresponding weekly rate of pension as set out in the table.
Example:
A person has paid social insurance since 1st January 1967. They reach age 66 on 12th March 2017. The last full contribution year before they turn 66 is 2016.
In this example the individual has a total of 1,260 contributions and credits which count towards the State pension (contributory).
Total Contribution Years = 50 (1967 to 2016 inclusive)
Contributions and Credits = 1,260
Yearly Average = Contributions and credits = 1260 = 25 Total contribution years 50
In this example using the rates table from above table, this would qualify a person to a weekly personal rate of €198.60.
How to confirm eligibility and benefits under the State Pension Contributory System?
Individuals should first request a copy of their social insurance record as currently held by the Department.
This can be posted out to individuals who request a copy:-
• online via welfare.ie
• by telephoning LoCall 1890 690 690 or + 353 1 471 5898 from outside the Republic of Ireland, or
• by writing to:
The Department of Social Protection Client Eligibility Services McCarter’s Road Ardarvan Buncrana Co. Donegal
Going Forward – Issues and Concerns with the State Pension System
It is important to note that State pension entitlements will be assessed on the basis of the eligibility conditions applicable on the date the claimant reaches pension age.
Under the National Pensions Framework, it is proposed to change the PRSI “yearly average” contribution test to a “total contributions approach”.
It had been suggested that this new approach would allow for benefits to be calculated on an N/30ths basis for clients qualifying for the State Pension (Contributory). In other words 1/30th of the maximum rate of pension would be payable for each full year of PRSI contributions paid or credited, with a full pension payable only to those with 30 years PRSI contributions paid or credited.
This new approach is currently being designed by the Department of Social Protection. It is expected that the “total contributions approach” will replace the current “yearly average” approach by 2020.
The hope is that under this new approach the number of PRSI contributions recorded over a working life will be more closely reflected in the rate of pension received *
*Please note that the provision of this advise does not require licensing, authorisation, or registration with the Central Bank and, as a result, it is not covered by the Central Bank requirements designed to protect consumers or by a statutory scheme.