Is it worth me making voluntary contributions?

Discussion in 'Welfare and state benefits' started by putsch, 25 Oct 2018.

  1. putsch

    putsch Frequent Poster

    Currently 61. Retired early from public sector with actuarially reduced pension and 25 years of D contributions. Since then have worked in private sector on and off and paid about 8 years of class A stamps. Since then I have been living on public sector pension. This year I have started seasonal work some of which is subject to prsi and some of which is self employed.

    I would be interested in maximising any potential contributory state pension I may be entitled. I just recently asked about making voluntary contributions. They would be expensive c.3k per annum and I could backdate them to 2014 (when I stopped paying A class) that would give me @ age 66 c.18 years of full contributions (paid As & possibly 10 years of voluntary contributions).

    The regulations about what contributory pension I might be entitled to are a bit complex so I am struggling to understand if it is worth my while to make the voluntary contributions (costing about 30K over the period) as I am not sure as to whether or what proportion of a contributory state pension I might be entitled.

    I also am not sure about the impact of this new seasonal work I am doing - it would have about 10 weeks of prsi but also overlapping other income (which I think I could deal with under paye as it is less than 5k profit or as self employed).

    Any views would be gratefully received.
  2. Conan

    Conan Frequent Poster

    A couple of points:
    - for you, the State Pension will start at age 67, not 66.
    - in 2020 it is proposed to change the calculation basis for the State Pension. The details are not yet finalized, but it is understood that the calculation basis will be 1/40th of the State Pension for each year of contribution. So if you will have 18 or 19 years contributions then you might expect almost a 50% Pension.
    - if the above goes ahead, there may be a phased in approach, so that individuals might get the higher of the above or the current “totals and averages” for a period. But no guarantee on this yet as we are still awaiting the precise details of how the new proposed system will work.
    - if the current “totals and averages” calculation were to apply, you might fall into the 20 to 29 average A Class contributions over your working lifetime (total number of weekly A contributions divided by the number of years you were in the PRSI system - whether A or D). If so this would give you an 85% State Pension.

    So if you were to make voluntary contributions it might only add 1/40th for each year you contribute. Alternatively if the additional contributions did not push up your average to a higher band (up to say an average of 30+ , getting you into a 90% level) it might not be worthwhile. Perhaps that might become clearer after we see what is going to happen from 2020. I think there is a Government paper due on the future of the State Pension sometime over the next 2/3 months.
    I hope this helps.
    putsch likes this.
  3. Early Riser

    Early Riser Frequent Poster

    putsch - I don't know the details of your situation but it sounds like you are in and out of work. While out of work have you applied for Jobseeker's Benefit based on your A contributions ? Apart from the payment itself, you also get credited contributions when signing on which count towards the state pension in the normal way. If still unemployed after 9 months you may be entitled to remain signed on for credited contributions even though the benefit payment itself would have finished.

    As Conan has said, the calculation system will be changing but having the extra credits is likely to be of some (if as yet undetermined) benefit.
    putsch likes this.
  4. putsch

    putsch Frequent Poster

    Thanks - I did enquire about credited contributions but since I wasn't looking for full time work I reckoned I wasn't entitled to jobseeker's benefit or credited contributions.