Mixed rate contributions

I am currently age 55 and planning to retire from my public service role at age 60. I am a pre 95 member and paying class D contributions but have 330 paid class A contributions (360 paid plus credited) from temporary service in my early working life. I understand that I should be entitled to a mixed contribution pro rata pension at age 66 but am considering my options to maximise my contributions in order to qualify for a Contributory State Pension.

I am paying PNS in order to have a full occupational pension and lump sum i.e 40 years at age 60 so will have reached revenue maximum tax free threshold therefore an AVC/ARF is not a runner.

Am I correct in thinking that having retired at age 60, if I worked for a week at class A, I could then qualify for change of status credits and pay full rate voluntary contributions for the years up to age 66 in order to gain the maximum number of class A contributions possible for me?

Yes you could do that.

But there is a better way to go.

You could pay more into your AVCs.
You are not limited to maximizing your tax free lump sum. You can make AVCs on the basis of maximizing the shortfall in your PS pension from the 25% surviving spouse pension to the revenue allowed 50% surviving spouse pension.

On this basis you could make maximum contributions to an AVC.
When you retire you can then buy an ARF.

Drawdown 5000 euro from the ARF and you will get 52 reckonable class S contributions per year.

If you decide to do this you should also get the 1 paid class A contribution to gain the change of status credits.

You should also then sign on for Jobseekers credits up to the end of the calender year of your 63rd birthday. This will keep the possibility of qualifying for Benefit Payment 65 open.

You are allowed to have class A credits and class S Prsi in any year.

If you decide to do the voluntary contributions plan you can also keep claiming Jobseekers credits.

You are allowed to have voluntary prsi and class A credits in any year.

Also the Jobseekers credits would allow you to qualify for treatment benefits
Voluntary prsi doesn't allow qualification for treatment benefits.

Read this thread for more information.

Thanks S class for your helpful response. I am not currently paying into an AVC and as I am a lower rate tax payer and already availing of tax relief on PNS I'm not sure if it would be cost effective to start AVCs but I will look into it.

Otherwise the change of status credits followed by voluntary contributions and signing on for jobseekers credits sounds like a good option.

Many thanks again for your response, it is much appreciated.

clarity said:

Am I correct in thinking that having retired at age 60, if I worked for a week at class A, I could then qualify for change of status credits and pay full rate voluntary contributions for the years up to age 66 in order to gain the maximum number of class A contributions possible for me?

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If I was in this situation I would consider a different approach.
As you say, if you work for a week at Class A you should qualify for change of status credits. After that you can apply to sign for credited contributions, which should be at Class A. You will qualify for a pro-rata state pension at 66 but with 260 more reckonable A contributions than you have now. I am not sure but I don't think there is much difference between this and the pension you would get with another 260 paid contributions. Signing for credits is once a year once it has been set up.

Very good point.

The advantages of the averaging system will unfortunately be gone when clarity reaches age 66.

The maximum number of reckonable credits allowed is 520.
When pre entry and change of status and any previous Jobseekers credits are counted in, a few years of credits are already there. Then there is up to 6 years from age 60 to 66. So the credits is a useful way to go.

This is the method for calculating pro rata pension.

Ruffian said:

If I was in this situation I would consider a different approach.
As you say, if you work for a week at Class A you should qualify for change of status credits. After that you can apply to sign for credited contributions, which should be at Class A. You will qualify for a pro-rata state pension at 66 but with 260 more reckonable A contributions than you have now. I am not sure but I don't think there is much difference between this and the pension you would get with another 260 paid contributions. Signing for credits is once a year once it has been set up.

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Yes Ruffian, you're probably right and if, as you say signing for credits is just once a year it would make sense to do it that way. Many thanks for your input.

Ruffian said:

If I was in this situation I would consider a different approach.
As you say, if you work for a week at Class A you should qualify for change of status credits. After that you can apply to sign for credited contributions, which should be at Class A. You will qualify for a pro-rata state pension at 66 but with 260 more reckonable A contributions than you have now. I am not sure but I don't think there is much difference between this and the pension you would get with another 260 paid contributions. Signing for credits is once a year once it has been set up.

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S class said:

Very good point.

The advantages of the averaging system will unfortunately be gone when clarity reaches age 66.

The maximum number of reckonable credits allowed is 520.
When pre entry and change of status and any previous Jobseekers credits are counted in, a few years of credits are already there. Then there is up to 6 years from age 60 to 66. So the credits is a useful way to go.

Click to expand...

S class said:

Very good point.

The advantages of the averaging system will unfortunately be gone when clarity reaches age 66.

The maximum number of reckonable credits allowed is 520.
When pre entry and change of status and any previous Jobseekers credits are counted in, a few years of credits are already there. Then there is up to 6 years from age 60 to 66. So the credits is a useful way to go.

Click to expand...

Many thanks for that. Much appreciated.

clarity said:

signing for credits is just once a year it would make sense to do it that way

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It would probably make more sense to make 4 years of voluntary contributions alongside signing on.

These 208 + your current 330 will get you over the 520 full rate paid contribution level needed to have a pension calculated using the total contributions method.

A rough calculation of your possible Prsi record might be..

1800 class D

694 Reckonable classes
(paid A, credited A, change of status credits, pre entry credits and voluntary)

Using these numbers in the pro rata calculation (if you don't reach the 520 paid level ) gives a weekly pension of 80 euro.

Using the total contributions method (over 520 paid level) gives a pension of 96 euro per week.

You would have roughly 832 euro extra pension for life for a cost of 4 years voluntary contributions. (2000 euro).

So break even after about 2.5 years.

Thanks so much for taking the time to do that S class, great to gave that information. I have read it and will look into it. Much appreciated.

Could you also pay your contributions / sign for credit past 66 and draw down an increased pension if your credits bring you into a higher band as well.

I presume you are referring to the averaging bands.

Yes you can make contributions beyond age 66 in order to reach a higher band.

Credits are not awarded after age 66. But voluntary contributions and paid class A and class S are allowed.

Contributions in the averaging system are only counted in the last complete tax year prior to claiming the Contributory pension.

So for example, a person whose 66th birthday was on 1st July could deferr until 1st January of the following year a then claim their pension. All contributions for the calendar year of their 66th birthday would then be counted.

Bear in mind that there will be an extra year added to the averaging divisor as a result of the deferral.

BilboB said:

I am right to include Change of status & pre-entry credits?

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Yes.
You include paid A, credited A, change of status credits, pre entry credits and voluntary.

Calculating from above you probably should have 30 pre entry credits.

When do you reach age 66 ?

You have the possibility to pay voluntary Prsi for 2022, 2023, 2024 and 2025.

This would bring you to over 520 full rate paid contributions and allow you to get a higher pension calculated using the yearly average and Total contributions phase out method.

You would get 52 change of status credits for 2017 and 30 for
2018.

You would need to defer until 1st January 2026 to get your 2025 contributions counted for the averaging calculation.

Read post #9.
You are in a similar position, but you have the added advantage of getting the YA + TC mix.

BilboB said:

How is the pro-rata worked out ?

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Click on link at post #5.

I will be 66 in May this year. Does that change anything?

S class said:

You have the possibility to pay voluntary Prsi for 2022, 2023, 2024 and 2025.

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Is this 6.6% of my current income(pension) ?

You seem to have a shortfall of 13 paid contributions for 2021.
You could fill in this gap with voluntary contributions. Then pay voluntary contributions for 2022, 2023, and 2024.

This will give you 357+13+52+52+52 = 526 full rate paid contributions up to 31December 2024.

You could then claim your pension in May.

You would get 90% YA +10% TC.

This might be your best possible pension (depending on the cost of voluntary contributions) and would not involve any deferral.

PS. You could avoid the cost of voluntary contributions for 2021.

You are actually just short of 7 contributions to reach the 520 level. ( 2022, 2023 and 2024 voluntary).

You could make up these 7 contributions this year if you get 7 weeks of employment.

Any contributions needed to reach the 520 full rate paid level are counted in your pension claim year for the YA method.

BilboB said:

Is this 6.6% of my current income(pension) ?

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It would be 6.6% of your your previous years class A earnings for 2021 and 2022 or 500 euro, which ever is the highest.

It would be 500 euro for 2023 and 2024 as you have no class A earnings in 2022 or 2023.

Your class M pension earnings are not included for calculating the amount for voluntary Prsi.

You could get an immediate pro rata pension in May. It would be a lot less than what you could achieve if you gain 520 or more full rate paid contributions.

You need to carefully calculate out all your options.

There is also the possibility to defer beyond 66 and only then make your voluntary contributions. Your credits up to age 66 will count on top of these.

You would be aiming to get to a level to get you to average 14.5.

Your yearly divisor would increase for each deferred year. So for 3 years of deferral it could increase to 53. If you then had 53 x 14.5 = 769 reckonable contributions your YA pension is 188 euro.

Your TA pension would be based on the increased pension for 3 years of deferral.

You would get roughly 50% YA + 50% TC.

You could probably break even in 6 to 7 years. So starting pension at age 69 you could break even at age 75 to 76.

You would have a pension of roughly 156 euro per week.