Old aged pension for self employed 54 year old

[Susie2017]

A self employed 54 yr old business man has paid PRSI continuously since 1987/88 as follows;
5 years 52 K1
3 years 52 J1
1 year 52 J0
3 years 52 J
4 years 52 M
1 year 52 A
2 years 52 M
3 years M and S, these are listed as 104 M, 52 S for two of those years, not sure why.
12 years x 52 S
So the DSP has stated he has 16 years reckonable paid contributions of 52 weeks each year. If he works 10 more years and retires at 65 he will have 26 years reckonable. Will he get a full contributory pension ? I think not but would ask the advice of experts on here. His accountant was entrusted with prsi deductions. Is there any way to improve his situation ? Any help appreciated.

 

[Marsupial]

My understanding is that, as things stand, he'd get 65% of the full OAP on the basis of 26 years' reckonable contributions; the calculation being:
26/40 = 0.65

Currently, the State Contrib OAP is paid from age 66 (this was meant to increase to 67 this year, but the government funked it when FF, SF and some other parties kicked up a fuss). So if we assume that it remains at 66 for the next decade then rather than retiring at 65 he could work for another year or he could apply to pay voluntary PRSI, either option would bring him up to 27/40 = 67.5% of the full pension.

Do you believe that his accountant may have made mistakes in the past regarding his PRSI class? (For example, if he was self-employed throughout, then it's hard to understand why he paid Class A PRSI in one of those years). If so, then he would need to contact SCOPE section of the DSW and make a case to them to have each year re-examined. I have no idea how this works, maybe Citizens Information could help.

 

[Early Riser]

My understanding is that, as things stand, he'd get 65% of the full OAP on the basis of 26 years' reckonable contributions; the calculation being:
26/40 = 0.65

Not quite.
As things stand, his eligibility would be assessed using both the Total Contributions Approach (as you have outlined) and the Averaging Approach. He would be awarded the pension based on whichever was the more favourable. I reckon he would do better on the Averaging Approach. However, whether this option will still be there in 10 years time is another matter. It was meant to be phased out before now but still remains. Either way, it is unlikely that he will qualify for the full pension rate.

The current dual system (and how to calculate what would be payable under the Averaging Approach) is outlined here: https://www.citizensinformation.ie/...etired_people/state_pension_contributory.html

 

[Susie2017]

Thank you. It's hard to understand why the accountant kept changing his PRSI rates. There was no apparent reason to do so. He was working for the family business from the start. Can anyone shed light on the SCOPE system. Is it an appeals mechanism ? How does he get advise on this ?

 

[Marsupial]

Thank you. It's hard to understand why the accountant kept changing his PRSI rates. There was no apparent reason to do so. He was working for the family business from the start. Can anyone shed light on the SCOPE system. Is it an appeals mechanism ? How does he get advise on this ?

My view - as an outsider, knowing only what you have posted in this thread.

Presumably he's been paying his accountant to file correct tax (and PRSI) returns for him for the past 34 years, so maybe start by asking the accountant to explain - in writing - the various PRSI classes that he has been categorised under over the years, given that he believes that his employment category hasn't ever changed. (send the accountant a copy of the PRSI record received from Social Welfare).

Then, if the accountant can't provide a good reason for the various changes in Class, then it's likely that he (or whatever junior employee did the donkey work) may have made a dog's dinner of the PRSI returns! That being the case, the accountant should be firmly instructed to take whatevers steps are necessary to rectify the mistake. (Note however that if his recorded earnings "through the books" were very low in some years, then he may have correctly been returned as being in another PRSI category - so if there was a 'cash in hand' policy in the family firm, then it may have come back to haunt him!)

In passing I note that you wrote " He was working for the family business from the start" which suggests that he may have been classed as an employee rather than self-employed for some of that time. You/he needs to be quite clear as to what his employment status was for each of the years for which Class S PRSI wasn't paid.

Finally, please note that I'm emphatically not a PRSI expert but I believe that I have a reasonable understanding of the system.

 

[Cervelo]

Then, if the accountant can't provide a good reason for the various changes in Class, then it's likely that he (or whatever junior employee did the donkey work) may have made a dog's dinner of the PRSI returns!

It's a long time since I've had anything to do with payroll but I seem to remember in the 80's and 90's and IIRC back then certain employees namely directors had a choice as to which PRSI class they wanted to pay and not all classes had the same benefits
I know when I was made a director in 92 of the family business the accountants advised us to keep paying PRSI at the standard rate simply because of the entitlement to the OAP

 

[Susie2017]

This gentleman has been running the business for 20 years now, particularly since the development of his fathers final illness which meant he could no longer do it. His mother is 86 and despite the fact that her now ddeceased husband ran a successful business as well as a farm she never received an old aged pension. The 54 year old is paying her the amount of the old aged pension for her keep. The same family accountant has done accounts for as long as the 54 year old son can remember. Yes I suppose he was an employee of his fathers for some years but he was on the books and surely that meant his PRSI contributions should have been paid in such a manner to credit him for the state pension. He will write to the accountant to see what has happened.

 

[Susie2017]

Is it possible to rectify mistakes at this point in time ? Anyone any experience of this predicament ?

 

[Marsupial]

Why not have a look at this link - in particular the references to "family employment" and "prescribed relatives" and the section regarding "Family Employments that Are Not Covered for Social Insurance (PRSI)". As you will see, it's a complex area.

 

[Clamball]

It may be the case that his mother is entitled to a non contributory old age pension but that is assessed on her means, which may not entitle her to any if she still owns the farm and or the business.

My dad was not entitled to the OAP either because he was a farmer and still had means.

 

[NoRegretsCoyote]

He was working for the family business from the start.

Could you give us more of an idea about the nature of business and his employment patterns?

It seems odd that he paid so many PRSI classes.

Class J seems to be for people with income <€38 a week.

 

[Susie2017]

I cant give anymore detail to preserve confidentiality. I see class M is for people under the age if 16 even though he was much older than that when the accountant used this rate. His income exceeded the minimum wage at all times. Will need to look back to see exactly what he earned. There seems to be no logic to the changing between rates. A dogs dinner sounds about right. But is there any angle of recourse. Can you report your accountant to a professional body ? In relation to his mother she does not own the farm. She got no old age pension. The farm was divided between two other sons. Incidentally I have two aunts who both got state pensions ? Non contributory even though they were farmers wives who never worked outside the farm/ home setting. How did they manage to get them but yet this gentleman's did not ?

 

[Marsupial]

I cant give anymore detail to preserve confidentiality. I see class M is for people under the age if 16 even though he was much older than that when the accountant used this rate. His income exceeded the minimum wage at all times.

I think that the conditions for some PRSI Classes including M may have changed over the years. (My missus paid at Class M for a number of years when her only income came from correcting Leaving Cert scripts - and she was well over the age of 16!)

There seems to be no logic to the changing between rates. A dogs dinner sounds about right.

Agreed - but before condemning the accountant, we need to know all of the facts.

But is there any angle of recourse. Can you report your accountant to a professional body ?

Yes - but it's the nuclear option! First establish the facts and then decide on what action is required.

In relation to his mother she does not own the farm. She got no old age pension. The farm was divided between two other sons. Incidentally I have two aunts who both got state pensions ? Non contributory even though they were farmers wives who never worked outside the farm/ home setting. How did they manage to get them but yet this gentleman's did not ?

To answer that in respect of an 86 year old woman, I'd need to know the conditions that applied to the State Contributory and non-Contributory Pensions from 21 years ago, as well as the eligibility criteria that applied to the widow's pension (if she applied for one) whenever her spouse died. I'd also need to know what means information she provided and what reasons the DSW gave for not awarding her a pension.
Did her spouse get the Contributory OAP? Did he apply for the Qualified Adult payment? If not, why not? And so on.

In short, you can't expect comprehensive answers without providing comprehensive information.

As for the other two ladies, that's a red herring, but presumably the means information that they provided in their applications to DSW meant that they satisfied the criteria for the payment of the N-C pension.

The 86 year old could, if she wishes, make an FoI application to the Department for a copy of the file dealing with her pension application file (or files, if she also applied for the widow's), which she or you could study at your leisure.

 

[Early Riser]

I see class M is for people under the age if 16

That is not quite right. Class M applies to "People with no contribution liability such as: employees under age 16,................."

As has already been suggested by Shirazman, your first port of call would seem to be a conversation with the Accountant to establish why the different PRSI categories were applied at different times. Show him a copy of the PRSI record with the different categories and ask for an explanation.
If the DEASP record does not correspond to the deductions and submissions made by the Accountant then you can appeal to the DEASP. If they do correspond then it is up to the Accountant to explain how/why these categories were applied. It may all be perfectly legitimate. However, there may also have been some "creative accounting" in past years. Apart from incorrect PRSI deductions, this may also raise questions about tax deductions. This issue may rest with the Accountant, the family business, or both. When you pull at this string it could possibly lead in unforeseen directions.

In any event, it would seem premature to look at "reporting the accountant to the professional body" until you establish the basic facts.

In the event that you cannot resolve matters via the Accountant and/or the PRSI records office, there is an outline of the function and operation of the DEASP Scope section here: https://www.gov.ie/en/publication/25300e-operational-guidelines-scope-insurability-of-employment/

 

[Susie2017]

Ok. Thank you for all the advice. He has written to the accountant and I will update with further information if it is provided. It would seem from the last link that a lot hinges on contracts of employment. This gentleman would have had no written contract. It was just understood that he was taking over the family business in the future so he I did not work outside of that role since leaving school. The accountant was entrusted with all tax matters.

 

[NoRegretsCoyote]

3 years 52 J
4 years 52 M

I don't know the full historical situation but on the basis of today's eligibility it's hard to know why an adult was paying J and M PRSI.

It's hard to understand why the accountant kept changing his PRSI rates.

Was it literally the same accountant in ever single tax year since 1987?

This gentleman has been running the business for 20 years now

But what was he doing before that? It's very hard to give advice if we don't know the nature of the man's employment. Was he doing other work on his own account? Did he ever have other employment, etc?

His income exceeded the minimum wage at all times.

There was no minimum wage before 2000.

Anyway you've made several posts but the key details are to me quite vague. In general you would have to provide a lot more detail about the nature of the man's employment and who he was working for. It appears to be some kind of family arrangement involving faming. There is a lot more you can tell us without in any way making this man identifiable.

As a general rule I would take @Early Riser 's point that there may have been some creative accounting in the past to reduce this man's or his employer's tax or PRSI liability. Think very carefully before unpicking this knot as it might not have the outcome you would like. No one official is going to look into events of 10+ years ago unless you go asking them too.

 

[Susie2017]

He did no farming whatsoever. I'm not sure what creative accounting is but the number of prsi classes used is very odd. He is awaiting feedback from the accountant.

 

[NoRegretsCoyote]

I'm not sure what creative accounting is but the number of prsi classes used is very odd.

What could have happened is that he his income was under-declared, or the nature of his work was not correctly reported. This could have happened without his knowledge.

I don't know the historical rules for Class J, but it seems to be for people earning below €38 a week, or people with another job . You say he never earned that little, and if he'd had another job he would have had Class A payments, and he only has one year of those.

So for the Class J years he either:

1. Earned an extremely low wage in the family business and was correctly classified as Class J;
2. Had another job which didn't report him for PRSI, while working part-time for the family business which correctly classified him as Class J;
3. Earned a normal wage in the family business and was reported as earning very little to minimise his and the family business's tax and PRSI liability;

It if it's 3 you will want to be very careful.

 

[Susie2017]

He was an employee of the family business, on at least 100 pounds a week since 1990 as he recalls. All his income was documented with the accountant for tax purposes. He received his income via business cheques signed by his father the stubbs of which were all returned yearly to the accountant, together with other business related outlays. To clarify there was no other employment whatsoever during all those years. and yes the accountant is the same one during all this time. There would be a tax record on all of his income with revenue. Is there anyone he could go to to get an independent opinion on the overall situation ? His accountants verbal reply to date is 'sure you will have a business to sell when you retire if you ever need money'. Not good enough, in my view.

 

[NoRegretsCoyote]

All his income was documented with the accountant for tax purposes.

Was this the business's accountant? His own accountant? Both?

He was an employee, on at least 100 pounds a week since 1990 as he recalls.

Well then his employer should have given him a P60 every year stating how much his pay was for PRSI purposes and what PRSI class he was paying.

If he ever got them, he should look back through his old P60s.