Investment options for a Spouse and Class S PSRI

Zep240

Registered User
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Myself and my wife have been living in Ireland for just over 24 yrs. My wife has never worked in Ireland, never claimed any Social Welfare and to date has has no PSRI contributions/history.

I want to setup some investments in her name that will generate income that will be taxed and then pay Class S PSRI in her EOY tax returns. Goal is to generate 520+ contributions over the next 10+ years so she will qualify for a full contributory state pension. Looking at the threshold for paying compulsory PSRI the investment would need to generate a taxable income >€5k pa every year with high confidence for this to work.

I have never invested so any advice is very welcome.

Thanks,
 
I could be completely wrong but I'm not sure that will count as it's supposed to be earned income. Plus the way the contributory pension is going I doubt the 520 stamps rule to qualify will still be in place when your wife retires
 
I'm not 100% sure if investment income alone qualifies for Class S. This is a cut and paste from welfare.ie

PRSI Class S is paid by self-employed people such as:
  • farmers, professional people (for example, doctors, dentists, solicitors etc.), people in business on their own account or in partnerships, authors, artists, religious, contractors, subcontractors carrying on independent businesses,
  • people with income from investments, rents or maintenance payments,
  • employees who are also self-employed pay Class S PRSI in addition to their PRSI contribution as an employee,
  • certain company directors, motorcycle couriers etc. who pay their tax through the PAYE system but who are not regarded as employees for social insurance purposes,
  • from 1 January 2017, Local Authority members (City and County Councillors) with reckonable emoluments from their local authority positions.
 
I looked at this previously in the context of making PRSI contributions after early retirement and before reaching state pension age, from investment income. You can make voluntary contributions which count towards pension entitlements, but you need to have previous regular contributions from paid employment. From Welfare.ie -

Changes to PRSI requirements for voluntary contributors
From 6 April 2015 you need 520 paid PRSI contributions (10 years) to be eligible to make voluntary contributions:

  • People who became voluntary contributors after 6 April 2014 and before 6 April 2015 needed 468 PRSI paid contributions (9 years)
  • People who became voluntary contributors after 6 April 2013 but before 6 April 2014 needed 364 PRSI paid contributions (7 years)
Anyway with the planned move to a Total Contribution Approach when calculating eligibility to the contributory state pension, as Luckystar pointed out 10 years might not get you a whole lot in the future.
 
Decisiontree so you think it will become a system where it's a contribution money wise or an amount of stamps/years working?
 
As I read it, TCA is based on the total number of contributions over your lifetime (not the monetary value), versus the current approach of yearly average number of contributions.
 
Re the 5000 investment income . The minimum is correct.... just be aware the 500 min PRSI contribution will kick in at the lower levels ... rather than 4% of 5000 its 500 as I was hit for this.
Alsobe aware the investment income includes interest on accounts gross of dirt.

Finally I don't know about your overall plan re state pension...Maybe ask social welfare?
 
I hadn't looked at the pension reform plans, so thank you for bringing it to my attention. From what l can see online, starting in 2020 you will need 10 yrs min to qualify and then your pension get prorated with a denominator TBD, but somewhere between 30 and 40. Either ways for my original plan investing for 10 yrs to get income >5k pa to then get between 10/30th or 10/40th of the state contributory pension isn't worth the risk for me. It will be very similar to the UK pension that recently changed from a denominator of 30 to 35.
 
Alsobe aware the investment income includes interest on accounts gross of dirt.

mtk, not sure l understand this. So when l retire early and just live of my savings, does my gross deposit interest get assessed for Class S PSRI and l pay DIRT ?
 
Yes - I think you will pay PRSI on the gross interest. The PRSI min is € 500

I always made sure that our investments and interest bearing accounts were held jointly, so that that both of us were assessed for PRSI - it came to € 500 each for the last few years.
 
mtk, not sure l understand this. So when l retire early and just live of my savings, does my gross deposit interest get assessed for Class S PSRI and l pay DIRT ?
Normally for a PAYE worker unearned income like interest gets hit for PRSI but it's at class K which does not count for entitlement to anything. If you are retired and unearned income is your only source of income, then PRSI can be at class S which counts toward contributory state pension but there is a €500 minimum. If you're in this situation you can request a statement of contributions from the Dept of Social Protection to make sure they are being credited at the right class.
 
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