Need advice on how to catch up on state pension entitlements after being abroad for 10+ years

[Curly Wurly]

Hi,

as the title says, I need reputable advice on this. How do I catch up on my PRSI contributions as quickly as possible, and how can my wife, who has never paid PRSI in Ireland, also catch up when we relocate to Ireland and start working there soon.

Additional topics would be the best strategy in Ireland for deploying capital to attain an additional source of income as tax efficiently as possible.

I would like to speak with a reputable advisor familiar with my scenario, who charges a fixed fee for a consultation and action plan.

1. Ages: I plan to repatriate when I am 44. My wife will also be 44.
2. Employment history in IE: I worked on and off between 1998 and 2012 in summer jobs, weekend jobs and some permanent jobs. I was 16-29 during that period. My total PRSI contributions to date are 420. My wife has never worked or lived in Ireland, the UK or the EU.
3. Employment History abroad: Since 2012 I've been working in the UAE. Wife has also been working there since 2005.
4. Likely Work Pattern in Ireland: I plan to stay with my current employer in the UAE until the end of 2026. Then I would remain with them but get an international transfer to Ireland from January 2027 and resume work full time with them there. My wife would also seek to work, most likely as an accountant.

Thanks,

 

[Horatio]

Hi CW,

I am in a similar situation at the moment & I'm asking myself whether I would be best served by catching up or not via the route you described (PRSI contributions top up/catch up).

I don't know exactly how I would go about it but before you get to your answer try modeling up if you'd be better off trusting the state with your potential contributions or would you be better figuring out an alternative & sending the funds down that route.

 

[NoRegretsCoyote]

It's not so easy to "catch up" on PRSI but you may be able to use contributions from abroad to give you state pension entitlement in due course

You will get good advice on this thread if you share, for you and spouse:

1. Ages
2. Employment history in Ireland and total PRSI paid
3. Employment history abroad (crucially how much UK, EU, and RoW)
4. Likely work pattern in Ireland

 

[Curly Wurly]

It's not so easy to "catch up" on PRSI but you may be able to use contributions from abroad to give you state pension entitlement in due course

You will get good advice on this thread if you share, for you and spouse:

1. Ages
2. Employment history in Ireland and total PRSI paid
3. Employment history abroad (crucially how much UK, EU, and RoW)
4. Likely work pattern in Ireland

Thanks for the pointers. I've updated my OP.

1. Ages: I plan to repatriate when I am 44. My wife will also be 44.
2. Employment history in IE: I worked on and off between 1998 and 2012 in summer jobs, weekend jobs and some permanent jobs. I was 16-29 during that period. My total PRSI contributions to date are 420. My wife has never worked or lived in Ireland, the UK or the EU.
3. Employment History abroad: Since 2012 I've been working in the UAE. Wife has also been working there since 2005.
4. Likely Work Pattern in Ireland: I plan to stay with my current employer in the UAE until the end of 2026. Then I would remain with them but get an international transfer to Ireland from January 2027 and resume work full time with them there. My wife would also seek to work, most likely as an accountant.

 

[Curly Wurly]

Hi CW,

I am in a similar situation at the moment & I'm asking myself whether I would be best served by catching up or not via the route you described (PRSI contributions top up/catch up).

I don't know exactly how I would go about it but before you get to your answer try modeling up if you'd be better off trusting the state with your potential contributions or would you be better figuring out an alternative & sending the funds down that route.

I hear you. we can add around 150k per annum to our net worth abroad. I anticipate having around 900k euros worth of investments and cash by the time we plan to move back to Ireland. Or we could stay in the UAE and continue to build up our net worth, but if we do that, the other side of the equation makes itself felt as follows:

1. We have to stop working in the UAE at 62, but could live to be 92. If we don't move back to Ireland and don't have a state pension there, that's 30 years of having to cover absolutely every cost for ourselves - all facets of medical care, insurance costs, nursing homes, etc.. all without any state help.
2. As our kids hit secondary school age, in the UAE school fees will jump to 20k per child per year. (We have two children). These costs aren't there in Ireland.
3. We pay a further 20k per year in rent in the UAE. In Ireland our family home is fully paid off and furnished and waiting to receive us. (We have not rented it out while we are abroad as we see it as our holiday home and a place where we can escape to at short notice in the event of an emergency)
4. We want to send our children to Ireland for university, so we will need to be back in Ireland at least 3 years before they start. The alternative would be to pay university fees here which are a) high and b) the institutions themselves are not of the same calibre.
5. The state pension in Ireland might not be much, but it is significant over long periods and, if supplemented with other retirement income, be that derived from dividends or a private portfolio, will contribute to a comfortable retirement.
6. I'd like to get citizenship for my wife. She is the spouse of an Irish citizen, the mother and guardian of two Irish citizens, and the joint-owner of our home in Ireland. But without citizenship, her rights and security are tenuous.

Basically, as per my current plan the options are:

1. Return to Ireland to our fully paid off home with 900k euro in my bank account but with only 400 PRSI contributions and a wife with zero contributions
2. Stay abroad, hope the strong income stream continues, continue to build a portfolio of 2-3 million euro over the next 10-15 years and absorb the rising costs of living (healthcare, retirement costs, rent, education). This seems a much riskier option to me, considering one could live to be 90+ and literally anything could happen.

 

[Horatio]

A very nice considered approach above. Well done.

I just looked up options and you may have some friction to overcome in making top up "voluntary contributions" if my understanding is correct.

Voluntary social insurance contributions

Voluntary social insurance contributions can help you qualify for a social insurance payment in the future. Find out more about making voluntary contributions.

www.citizensinformation.ie

Just an excerpt, check out the full article above:

"Changes to PRSI requirements for voluntary contributors
Since 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)
Rules
To be eligible to make voluntary contributions you must:

Have at least 520 PRSI contributions paid under compulsory insurance in either employment or self-employment
Apply to make your voluntary contribution within 60 months (5 years) of the end of the last completed tax year (contribution year) during which you last paid compulsory insurance or you were last awarded a credited contribution. (Since February 2017, the time limit for making voluntary contributions was extended from 12 months to 60 months.)
Agree to pay voluntary contributions from the start of the contribution week that follows the week in which you leave compulsory insurance
The contribution year is the same as the income tax year so it runs from January to December.

You cannot use contributions paid in Class J to satisfy these conditions. However, you may pay PRSI at Class J and voluntary contributions at the same time. You stop paying voluntary contributions either when you reach 66 years of age or start paying PRSI again."

 

[NoRegretsCoyote]

2. Employment history in IE: I worked on and off between 1998 and 2012 in summer jobs, weekend jobs and some permanent jobs. I was 16-29 during that period. My total PRSI contributions to date are 420. My wife has never worked or lived in Ireland, the UK or the EU.

Neither you nor your wife can make voluntary backward-looking contributions so both of you would be starting or re-starting PRSI contributions in late 40s. There is no bilateral social security agreement with the UAE for recognition of social insurance paid there (if social insurance even exists in the UAE which I think it doesn't).

This will work out slightly better for your wife than you, paradoxically enough:
You: Assume you make 17*52 PRSI contributions for a total of 884 contributions by 66. You will have 1,300 in total over a period of 50 years for an average of 26 per annum. Under current rules you would get a pension of €165.10 per week compared to the maximum of €253.30. There is nothing you can do to catch up to my knowledge. The rules work on an annual average basis and the fact is you started young, had less than full contributions when working in Ireland, and then will have been out of the country for 20 years. You wouldn't have been able to make voluntary contributions when you left even I think as you didn't have enough paid PRSI contributions.
Wife: Assume she makes 17*52 PRSI contributions for a total of 884 contributions by 66. This is an annual average of 52 over at least ten years so she will qualify for the full state pension of €253.30 per week. So basically any ten years of a full-time work pattern will see her get a full pension at 66, once she makes her first contribution before 56. Her contributions will be incredibly good value. Have a close read of the rules here.

PS: there is most likely a way to optimise your UAE wealth for tax purposes. This can be very complex and you will need professional advice on this too. Moving from UAE to Ireland is pretty common, but you'd want someone who knows at least something about UAE rules and knows the Irish tax rules very well. For example you are Irish domiciled but your wife isn't, but if she comes to Ireland intending to stay for life, already owns property, etc, then she could become Irish domiciled. All I know is that this can make a difference for tax treatment of investments so it's best to be well prepared and it's worth paying good money.

 

[Curly Wurly]

A very nice considered approach above. Well done.

I just looked up options and you may have some friction to overcome in making top up "voluntary contributions" if my understanding is correct.

Voluntary social insurance contributions

Voluntary social insurance contributions can help you qualify for a social insurance payment in the future. Find out more about making voluntary contributions.

www.citizensinformation.ie

I saw that :-(
I'm guessing I would have to work as normal in Ireland until I cross a threshold, and then I could start buying contributions. One question is, can I buy as many contributions as I like, or is there an annual cap?

You said you are in a similar situation to me. What is your own view at this point?

 

[Curly Wurly]

Neither you nor your wife can make voluntary backward-looking contributions so both of you would be starting or re-starting PRSI contributions in late 40s. There is no bilateral social security agreement with the UAE for recognition of social insurance paid there (if social insurance even exists in the UAE which I think it doesn't).

This will work out slightly better for your wife than you, paradoxically enough:
You: Assume you make 17*52 PRSI contributions for a total of 884 contributions by 66. You will have 1,300 in total over a period of 50 years for an average of 26 per annum. Under current rules you would get a pension of €165.10 per week compared to the maximum of €253.30. There is nothing you can do to catch up to my knowledge. The rules work on an annual average basis and the fact is you started young, had less than full contributions when working in Ireland, and then will have been out of the country for 20 years. You wouldn't have been able to make voluntary contributions when you left even I think as you didn't have enough paid PRSI contributions.
Wife: Assume she makes 17*52 PRSI contributions for a total of 884 contributions by 66. This is an annual average of 52 over at least ten years so she will qualify for the full state pension of €253.30 per week. So basically any ten years of a full-time work pattern will see her get a full pension at 66, once she makes her first contribution before 56. Her contributions will be incredibly good value. Have a close read of the rules here.

PS: there is most likely a way to optimise your UAE wealth for tax purposes. This can be very complex and you will need professional advice on this too. Moving from UAE to Ireland is pretty common, but you'd want someone who knows at least something about UAE rules and knows the Irish tax rules very well. For example you are Irish domiciled but your wife isn't, but if she comes to Ireland intending to stay for life, already owns property, etc, then she could become Irish domiciled. All I know is that this can make a difference for tax treatment of investments so it's best to be well prepared and it's worth paying good money.

Thanks for this. On the one hand it's great to hear that my wife could qualify for a full pension after 10 years. This wildly exceeds my expectations.
On the other, the calculus seems to suck for me. I'd nearly be better off going for the non-contributory pension. I'd be happy to pay as many voluntary contributions as necessary to catch up for the contributory, if they'd let me.

 

[Early Riser]

Assume she makes 17*52 PRSI contributions for a total of 884 contributions by 66. This is an annual average of 52 over at least ten years so she will qualify for the full state pension of €253.30 per week. So basically any ten years of a full-time work pattern will see her get a full pension at 66, once she makes her first contribution before 56. Her contributions will be incredibly good value. Have a close read of the rules here.

Do you reckon this "averaging rule" will still be in place in 20+ years? It was supposed to have been ended before now but this has been deferred. I suspect that at some stage along the line it will either be significantly amended or blended with the "total contributions" approach.

 

[Horatio]

I saw that :-(
I'm guessing I would have to work as normal in Ireland until I cross a threshold, and then I could start buying contributions. One question is, can I buy as many contributions as I like, or is there an annual cap?

You said you are in a similar situation to me. What is your own view at this point?

I haven't really made an effort to model up my options fully but my subjective leaning is to pay my contributions as required between now and retirement and make arrangements to plan for my retirement through investments, defined contribution and defined benefit products. I'm already back in Ireland.

I am somewhat untrusting of the Government machine with my money so a self governed approach somewhat suits my general outlook anyway.

Further, consider whether or not you are 100% certain of your intent to retire in Ireland. Right now I am intent on leaving again once the kids are up and running independently. Depending on your choice of retirement location your cost of living may be lower / higher.

 

[huskerdu]

You can only make voluntary contributions if you are not working/ not compulsary contributions.
THe max contributions you can make in a year is 520. There is more info here.

PRSI - Pay Related Social Insurance

www.gov.ie

Its not true that your wife can gt a full pension after 10 years paid contributions. Thats the minimum to get any pension.
Its pro rataed if you have less than 2080 ( 40 years)

State Pension (Contributory) pre 2025

The State Pension (Contributory), previously called the old age pension, is paid to people aged 66 and over, who have worked and paid enough social insurance contributions. This page is for people who were born before 1 January 1959 and did not defer claiming their State Pension (Contributory).

www.citizensinformation.ie

You wont be penalised for gaps under the new TCA which is explained in the link above.
Also the non contributary pension is means tested, from what you said about your wealth, you wont qualifiy.

You should be contributing the max to a pension plan, its a very good way of legally avoiding income tax.

Tax relief on contributions

The amount of tax relief you can get on your own contributions to a pension depends on your age...

www.pensionsauthority.ie

 

[NoRegretsCoyote]

Do you reckon this "averaging rule" will still be in place in 20+ years? It was supposed to have been ended before now but this has been deferred. I suspect that at some stage along the line it will either be significantly amended or blended with the "total contributions" approach.

It's a good point. I don't know the policy well enough. Possibly it will be grandfathered if you've started working by a certain date. If the rules change they would probably work out in favour of @Curly Wurly but to the detriment of his wife. So at a household level it might be neutral.

Its not true that your wife can gt a full pension after 10 years paid contributions. Thats the minimum to get any pension. Its pro rataed if you have less than 2080 ( 40 years)

I'm happy to be corrected but can't see that at the link. Where have I gone wrong?

To get a State Pension (Contributory), you must have started to pay PRSI before the age of 56...............If you reach pension age on or after 6 April 2012, you need to have 520 full-rate PRSI contributions (10 years’ contributions).........The normal average rule states that you must have a yearly average of at least 10 qualifying contributions paid or credited, from the year you first entered insurance to the end of the tax year before you reach pension age. You need an average of 10 contributions a year to get a minimum pension, and you need an average of 48 a year to get the maximum pension. Your yearly average will be rounded to the nearest number. For example, 9.4 is rounded down to 9 and 47.5 is rounded up to 48.

I'd nearly be better off going for the non-contributory pension.

You don't have a choice. If you have the paid contributions you get a contributory pension.

 

[huskerdu]

If you are using the averaging rule ( which is likely to be gone by the time the OP retires) the rules are as below , from citizensinformation.ie.

The TCA paper in on the same page states that the penison is pro rataed., 2080 gets you a full pension and its pro rataed if you have fewer,
I dont have time to find the exact line in the doc at the moment

 

[NoRegretsCoyote]

If you are using the averaging rule ( which is likely to be gone by the time the OP retires) the rules are as below , from citizensinformation.ie.

I was quoting the rules in force today. The abolition of the current approach was first proposed in 2010 - it hasn't happened yet!

 

[huskerdu]

I was quoting the rules in force today. The abolition of the current approach was first proposed in 2010 - it hasn't happened yet!

Im not disagreeing with anything you said, but its important that the OP understands the TCA as they want to be prepared
The OP misunderstood your post and stated that 10 years contributions would get his wife a full pension which is why I corrected them.

Everything I posted, I believe to be valid information that the OP should research

 

[NoRegretsCoyote]

Everything I posted, I believe to be valid information that the OP should research

It's a fair point.

The most up-to-date statement of policy is from this PQ. It seems like proposals are coming, I would imagine in the Budget in September.

In 2018, the Government announced the new Interim Total Contributions Approach (also known as the Aggregated Contributions Method) for the calculation of State Pension (Contributory) payments. Since April 2019, all new State Pension (Contributory) applications are assessed under all possible payment rate calculation methods, including the Yearly Average and the Interim Total Contributions Approach, with the most beneficial rate paid to the pensioner.

The Programme for Government “Our Shared Future” includes a commitment to introduce a Total Contributions Approach, aligning a person’s contributory pension more closely with the contributions they make. The Pensions Commission was established in November 2020 to examine the sustainability of the State Pension system and the Social Insurance Fund. The Commission was an independent body comprised of knowledgeable and experienced academics, pension experts, members of civil society and representatives of workers and employers.

The Pensions Commission’s Report was published on 7th October 2021. The report established that the current State Pension system is not sustainable into the future and set out a wide-range of recommendations, including recommending a full transition to the Total Contributions Approach and the abolition of the Yearly Average approach on a phased basis over a ten year period. In terms of the specific design of the Total Contributions Approach, the Commission recommended that the current Interim Total Contributions Approach should become the definitive Total Contributions Approach, i.e., 40 years (2,080) contributions required at State Pension age to qualify for a maximum rate pension. This includes provision for 10 years of PRSI credits and 20 years of HomeCaring periods, but with a cap of 20 years combined PRSI credits and HomeCaring periods.

In the interests both of older people and future generations of older people, the Government is considering the comprehensive and far reaching recommendations in the Pensions Commission’s Report very carefully and holistically. The views of the Joint Committee on Social Protection, Community and Rural Development and the Islands and the Commission on Taxation and Welfare are being considered as part of these deliberations. My officials are examining each of the recommendations and consulting across Government through the Cabinet Committee system. I intend bringing a recommended response and implementation plan to Government in the coming weeks.

 

[Early Riser]

If you are using the averaging rule ( which is likely to be gone by the time the OP retires) the rules are as below , from citizensinformation.ie.

The TCA paper in on the same page states that the penison is pro rataed., 2080 gets you a full pension and its pro rataed if you have fewer,
I dont have time to find the exact line in the doc at the moment


View attachment 6486

If you first enter insurable employment at 55 and continue to State Pension Age you will have 10 years contributions and you will have more than an average of 48 contributions a year from the year you first entered insurance, ie, you qualify for full pension under the Averaging Rule. I agree that this is unlikely to be sustained into the far future but then it was supposed to have ended before now.

 

[Horatio]

If you first enter insurable employment at 55 and continue to State Pension Age you will have 10 years contributions and you will have more than an average of 48 contributions a year from the year you first entered insurance, ie, you qualify for full pension under the Averaging Rule. I agree that this is unlikely to be sustained into the far future but then it was supposed to have ended before now.

Correct however this does not apply in Curly Wurly's case as he first entered insurable employment in Ireland ~1998-2012. So his average will have been significantly diluted by all those years.
2027-2012 = 15 years in his best case scenario.
2027-1998= 29 years in his worst case scenario.

It may work out for his Mrs though.
They'll be ~49 yo when they come to Ireland in 2027.

 

[Early Riser]

It may work out for his Mrs though.

Yes, that is the case I was referring to (under current rules):

Its not true that your wife can gt a full pension after 10 years paid contributions.

I doubt that it will apply in 20+years, though.