Should I pay voluntary PRSI contribution?

S

Sea Horse

Registered User
Messages
12
I am 55 and was employed up to Jan 2016 as a PAYE worker.

I have a small business, so self employed since March 2017 and more or less since then have been a carer, it's become 24/7 since March 2020. I am currently applying for Carers Allowance (I know I should have done that previously - that's on me).

I recently completed tax returns for years 16-22, I was below taxable income levels for all years and had to pay PRSI for 3 years, plus €50 penalty pa. What I want to know is should I pay voluntary PRSI for the years I did not need to pay.

I have 1500+ weeks/stamps.

What benefit is there of paying, or potential issues if I don't. I phoned Social Welfare office and they didn't seem to know, or at least wouldn't tell me if I should or not. (I know you can only go back 5 years)

TIA.

PS, First time posted, long time browser.
 
You will gain an extra 1/40th of the contributory pension for each extra year of Prsi contributions.
Each extra year of voluntary contributions will increase your yearly pension by 345 euro.
Provided you live beyond age 68 you will gain from voluntary contributions.

2080 Prsi contributions will qualify you for the maximum pension.
You should calculate whether you can reach this level using your current income up to age 66. If you can reach the 2080 level, you will not gain any benefit by making extra voluntary contributions.
 
Last edited:
My understanding is that you need 2080 weeks of contributions, you only have 1500 at the moment and the next ten years will add another 520
So you're going to short 60, so you need to buy at least two years but if it was me I'd buy the others just to be safe
 
You mention that you already have 1500+ PRSI contributions which - assuming that they are all RECKONABLE contributions* - would entitle you to receive approx. 72% of the full contributory state pension.

* You say that you were a PAYE worker so I assume that you would have paid Class A PRSI which is reckonable - but you should really check.

As Cervelo advises, if you pay reckonable PRSI (Class S as you're self-employed) or make voluntary contributions (Class V) for the next decade, then you'll end up with another 520 credits; giving you a total of 2020+. That's approx 97% of the full pension.

As S Class has advised, you will get another 2.5% of the pension for every year that you purchase. Meaning that if you purchase 1 extra year, then you'll have 2072+ contributions and thus be eligible for over 99.6% of the full pension.

So whether or not you should purchase an extra year really depends on the value of the "+" that you mentioned in your OP [I have 1500+ weeks/stamps] and if it's more than 7 then I wouldn't bother!
 
When checking your Prsi record, bear in mind that your 2022 self employment Prsi contributions might not yet be added. Also add in your pre entry credits. These are not shown on your Prsi record, but are counted towards the 2080 target.
 
Last edited:
Thanks for the detailed responses, much cleared than what I got on the phone from SW. I didn't get the exact number as SW could not give me the exact number, they said it was over 1500, but a statement I get in the post will confirm exactly. So hopefully that arrives soone.

Just one query from the replies, what are "pre entry credits"?
 
Sea Horse said:
Just one query from the replies, what are "pre entry credits"?
Click to expand...

They are reckonable PRSI credits that don't appear anywhere on your record but are added to it when your pension is calculated.
You are given one for every week of the year when you first "entered" the PRSI system before you started to pay PRSI.

For example, if you first started paying PRSI on 1 July then you would be given 26 pre-entry credits in respect of the 26 weeks of the year that had passed before you started to pay PRSI.
 
Last edited:
Marsupial said:
They are reckonable PRSI credits that don't appear anywhere on your record but are added to it when your pension is calculated.
You are given one for every week of the year when you first "entered" the PRSI system before you started to pay PRSI.

For example, if you first started paying PRSI on 1 July then you would be given 26 pre-entry credits in respect of the 26 weeks of the year that had passed before you started to pay PRSI.
Click to expand...
Not quite correct as tax year used to start in April so it will depend on the year they started employment.
 
Sea Horse said:
Thanks for the info on pre entry credits. I started fulltime PAYE in June 1988.
Click to expand...

If that's the first time ever that you paid PRSI then, depending on when in June your employment commenced, you'll have at least 7 weeks' PECs in the system. (In 1988, the PRSI year would have started on 6 April).
 
Yeah I suspect the same. Would be nice to have a definitive answer if anyone on the inside knows.
 
Two people start employment on their 16th birthday which is the 1st July.

Person 1 is self employed and earns 5000 euro up to 31st December.
As they have earned 5000 euro for the year and are aged over 16, they are presumably liable to pay 500 euro Prsi and would then be entitled to 52 class S contributions.

Person 2 is a PAYE employee. They make 26 paid class A Prsi contributions up to 31st of December.

If the presumption that the self employed person is required to pay Prsi for the year is correct, this would set a presedance that it is possible to gain 52 Prsi contributions in the year of their 16th birthday.

It would then seem plausible that the PAYE employed person should be entitled to pecs back to the start of their employment year.
 
You must log in or register to reply here.
Back
Top