How can I find what my likely State pension will be?
DSP advise repeatedly that this is done six months prior to applying for the old-age pension but I need to know now, as I plan to retire at 60 and can't risk not qualifying for the maximum OAP.
Is it possible to have my UK contributions transferred and combined into my Irish record now?
Ms SC
READ MORE
I'm a big fan of planning ahead but I wish you luck if you think you can strong-arm the Department into changing its structures to accommodate you. However, that does not mean that you cannot get an understanding of what State
pension
you will ultimately be able to get.
The
Department of Social Protection
is set up to address people's likely State pension in the months running up to the point at which the qualify – currently when they turn 66 years of age.
As I understand it, the legislation allows the Department determine when application should be made for the contributory state pension and the Department has determined that it will entertain applications only six months before a person reaches retirement age. As recent legislation allows people defer pension drawdown, that date is not necessarily when we are 65 but, for most people, it is likely to be.
Why? There is little point, as they would see it, in telling people definitively what their State pension position will be several years hence when they have no clarity on whether you will or won't work here or elsewhere in that time.
You say you are retiring next year but I have come across many people who do that only to find they miss work for one reason or another – not always financial – and go back part-time or on a consultancy basis here or in another country.
All of that will affect your entitlement and, as importantly, the calculation of the impact of any UK contributions.
However, there is nothing stopping you at any time getting details of your Irish
PRSI record
up to the end of the most recent tax year. And, given you are going to have to calculate your future entitlement for yourself, this is a necessary first step.
If you have a MyGovID, the easiest way of doing this is via
mywelfare.ie
. If you don't have a MyGovID or do not wish to sign up for one, you can contact the PRSI records team at Department of Social Protection, McCarter's Road, Ardaravan, Buncrana, Co Donegal, or by phone at (01) 471 5898 or 0818 690690
PRSI and pension
It doesn't help that the whole system is currently in a period of transition.
There are two ways of calculating your pension entitlement. The newer one is called total contributions and simply tots up your paid and credited contributions, including for up to 20 years of homecaring if appropriate. You need 2080 (40 years of weekly PRSI payments) for a full State pension.
If you fall short of that figure, you get a reduced pension calculated strictly on a pro-rata basis.
The old system is called yearly averaging. It starts the clock on the date you first pay PRSI (possibly as a student). It tots up all your weekly PRSI payments and divides it by the number of years from your first payment to the end of the tax year before the year in which you will turn 66.
You do not get credited contributions for homecaring; instead, under what it calls homemakers, it will take up to 20 years as appropriate out of the equation to cover years out of the workforce caring four young children so that your average is worked out over a shorter number of years.
If at the end of the day, you average is greater than 48, you get the full pension. Below that number, you get a reduced pension in a system that runs in bands. Anyone with an average of between 40 and 47 gets a pension that is just over €5 a week less but the figure drops more sharply for those with average contributions per year of between 30 and 39, 20 and 29, 15 and 19 and, finally between 10 and 14.
Over recent years, the Department calculated your entitlement under both systems and paid you on the basis of whichever one delivered a better pension. From this year, the yearly average is being phased out.
What does that mean? The Department will still calculate your entitlement using both systems and if the more modern total contributions pays better, great. If not, they will pay you a pension based on a blend of your entitlement under both systems.
For instance, in 2025, the pension paid would be base don 90 per cent of what you would get under yearly averaging and 10 per cent of your total contributions entitlement.
By 2033, it will be 10 per cent yearly average and 90 per cent total averaging and from the following year yearly averaging will not count at all.
For you, hitting 66 in 2032, your entitlement will be measures under total contributions and, separately, on the blending of 20 per cent of your yearly average record and 80 per cent total contributions.
The UK impact
Having spent some years in the UK, there will clearly be gaps in your Irish pensions record. That will obviously impact the yearly average over your working life and most likely reduce the chance of you hitting 2,080 stamps under the total contributions approach.
This is where your UK record comes in. To understand how your UK record will affect your ultimate State pension, you need to multiply something called a 'notional rate of pension' (A) by the number of Irish contributions (B) as per your PRSI record updated to when you will finish work next year and then divide that by the total of all contributions – Irish and UK (C).
The tricky bit here is the notional pension, which is the pension you would get if all your social insurance contributions in Ireland and Britain were treated as Irish PRSI payments.
To get this figure, you add all the contributions from your time here and in the UK and then divide that figure by the number of years between the year you first paid PRSI and the last year before the year in which you turn 66.
If you turn 66 in 2032, the last year for notional pension is 2031. Let's say you started work in 1986 when you were 19 or 20. That will be a working life of 46 years.
For illustration purposes lets assume you have 1,500 PRSI stamps and 268 UK national insurance stamps built up over five-plus years working in Britain.
That gives you 1,768 stamps all told which, divided by 46, which comes to 38.43 – between 30 and 39 on the state pension rate of payment under yearly averaging. With the current maximum state payment being €289.70, the payment for those with an average in the thirties is €260.10 a week.
So 260.10 is your notional rate of pension (A). Multiplied by B (your 1,500 Irish contributions), you get 390,150. Dividing this by C (all your 1,768 contributions in Ireland the UK), you come to a figure of €220.67 which would be your pro rata weekly pension.
That's modestly higher than the €206.80 you'd get on a total contributions approach of just your Irish PRSI, and fractionally higher than the €217.50 you'd get under the transitional yearly average/total contributions regime.
Clearly, that's just an example but it shows you how you can calculate your future pension.
One final thing. You could boost your pension by paying voluntary PRSI stamps from when you retire next year even though you are not working as long as you have at least 10 years of paid PRSI in Ireland and apply with 60 months from the end of this year – so before the end of 2030 – using Form VC1 which you can find
here
.
If you work in the PAYE sector, you will have to pay 6.6 per cent of your income in the previous tax year in voluntary PRSI contributions, subject to a minimum of €500. Civil and public servants employed before April 6th, 1995, pay at a rate of 2.6 per cent. People who were self-employed pay a flat rate of €650 a year.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to
dominic.coyle@irishtimes.com
, with a contact phone number. This column is a reader service and is not intended to replace professional advice
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