Phasing in of the Total Contributions Approach for the State Pension

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jimmij

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I am currently 60. I've lived and worked in Ireland since 2000 and I expect to have 28 years contributions by the time I retire at age 66.
Under the current rules I'd get a full pension.
Under the new rules, fully implemented, I think it would be 28/40 of that. Is that correct?
Because the new rules are being "phased in", I'm optimistic I'll do better but at the same time I've no idea how it's actually going to work.
Have there been any hints given out or past precedents to go by?
 
Allpartied said:

State Pensions: 1 Dec 2022: Written answers (KildareStreet.com)

A site about the Houses of the Oireachtas that you can actually follow.
www.kildarestreet.com
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Table 1 - Phased 10 year Full Transition to the Total Contributions Approach and Abolition of the Yearly Average Method


Year Attaining State Pension Age 66If a person is better-off with Yearly Average Calculation Mix of the Yearly Average and Total Contribution Approach to be used in the transition phaseIf a person is better-off withTotal Contributions ApproachCalculation
202490% Yearly Average +10% Total Contributions Approach100% Total Contributions Approach
202580% Yearly Average +20% Total Contributions Approach100% Total Contributions Approach
202670% Yearly Average +30% Total Contributions Approach100% Total Contributions Approach
202760% Yearly Average +40% Total Contributions Approach100% Total Contributions Approach
202850% Yearly Average +50% Total Contributions Approach100% Total Contributions Approach
202940% Yearly Average +60% Total Contributions Approach100% Total Contributions Approach
203030% Yearly Average +70% Total Contributions Approach100% Total Contributions Approach
203120% Yearly Average +80% Total Contributions Approach100% Total Contributions Approach
203210% Yearly Average +90% Total Contributions Approach100% Total Contributions Approach
2033100% Total Contributions Approach100% Total Contributions Approach
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This is exactly what I was looking for, thank you!

I think that based on the current full pension of €265.30 that
I with 28 years' contributions, retiring in 2028 should get €225.51. Is that correct?

My calculation was:
In 2028 the phasing means the calculation will be 50% old way and 50% new way.

50% of full pension is €132.65

For the Old way 50% I get the full amount, ie €132.65.

For the new way 50%, with 28 years contributions, I'll get 28/40 of €132.65, ie €92.86

Adding together: €132.65 + €92.86 = €225.51
 
jimmij said:
This is exactly what I was looking for, thank you!

I think that based on the current full pension of €265.30 that
I with 28 years' contributions, retiring in 2028 should get €225.51. Is that correct?

My calculation was:
In 2028 the phasing means the calculation will be 50% old way and 50% new way.

50% of full pension is €132.65

For the Old way 50% I get the full amount, ie €132.65.

For the new way 50%, with 28 years contributions, I'll get 28/40 of €132.65, ie €92.86

Adding together: €132.65 + €92.86 = €225.51
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I think that is right. Either way the new method won't leave anyone better off, but lots of people will be worse off.

I suppose its fairer, but it does seem to be designed, solely, to cut costs.

Perhaps they will reduce the number of contributions to 35 years ( same as UK) or allow people to buy back missing years ( same as UK), but I doubt it.
 
An inequity in the current system is that its possible to get a full State Pension with only 10 years service (eg if you emigrated into Ireland at say age 55 and worked for 10 years paying Class A Contributions). Whereas someone else might require 40 years of A to get a full pension.
So a move to the Total Contribution Approach, even on a phased basis, is fair and equitable.
 
Conan said:
An inequity in the current system is that its possible to get a full State Pension with only 10 years service (eg if you emigrated into Ireland at say age 55 and worked for 10 years paying Class A Contributions). Whereas someone else might require 40 years of A to get a full pension.
So a move to the Total Contribution Approach, even on a phased basis, is fair and equitable.
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While the new system may seem fairer, it is really just a money grabbing exercise.
The new arrangement brings no benefit to anyone. It simply punishes people who , previously, would have received a full pension under averaging, whilst leaving the the other cohort untouched.
Although the TCA group will now be able to rest easy, knowing that another group of Irish citizens won’t be getting a bit more than them, they won’t be any better off.
The correct way to equalise these systems would be to abolish averaging, whilst reducing the number of contributions required,
So, a change to 35 years, or less, would be fairer and less punitive to those who arrived in Ireland , within the last 30/35 years.
 
Allpartied said:
I think that is right. Either way the new method won't leave anyone better off, but lots of people will be worse off.

I suppose its fairer, but it does seem to be designed, solely, to cut costs.

Perhaps they will reduce the number of contributions to 35 years ( same as UK) or allow people to buy back missing years ( same as UK), but I doubt it.
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That's great, thanks very much Allpartied!


Conan said:
An inequity in the current system is that its possible to get a full State Pension with only 10 years service (eg if you emigrated into Ireland at say age 55 and worked for 10 years paying Class A Contributions). Whereas someone else might require 40 years of A to get a full pension.
So a move to the Total Contribution Approach, even on a phased basis, is fair and equitable.
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Yesterday was a real roller coaster of a day for me. I started off expecting something like the new system to apply but I was a bit worried that not having anywhere near a full record might mean I'd fall below some significant threshold.
I was then incredulous to discover that you'd only need 10 years of full contributions so I'd get a full pension, yay!
Then I found out about the TCA which dampened things to a degree.
But compared to the day before yesterday I'm ahead of where I'd expected to be and a lot better off than young people
coming up. I've nothing to complain about.
 
Allpartied said:
While the new system may seem fairer, it is really just a money grabbing exercise.
The new arrangement brings no benefit to anyone. It simply punishes people who , previously, would have received a full pension under averaging, whilst leaving the the other cohort untouched.
Although the TCA group will now be able to rest easy, knowing that another group of Irish citizens won’t be getting a bit more than them, they won’t be any better off.
The correct way to equalise these systems would be to abolish averaging, whilst reducing the number of contributions required,
So, a change to 35 years, or less, would be fairer and less punitive to those who arrived in Ireland , within the last 30/35 years.
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Why an arbitrary 35 years though? That would (to use your own language) punish people who arrived say 25 years ago. The averaging approach had to go and I speak as someone who would have benefited from its retention as I have a ca. 13 year gap in my Irish social insurance record, right in the middle of my working life. I would have been able to get a full COAP under averaging but I will be a small bit short under TCA. Funding full COAPs from the taxation of workers just starting out, for people who arrived in Ireland at 56 is bizarre to say the least. One can argue that the phase out should have been longer, perhaps over 20 years, but the principle of moving to TCA is entirely fair and reasonable for future taxpayers.

I view this as fixing a basically broken pensions system to be honest. I would argue that the new system does bring benefits to people, just not the pensioners who would have been entitled to a full COAP after 10 years of contributions. It benefits wider society in that those pensions will now not need to be paid and the taxation instead spent on public services.
 
Conan said:
An inequity in the current system is that its possible to get a full State Pension with only 10 years service (eg if you emigrated into Ireland at say age 55 and worked for 10 years paying Class A Contributions). Whereas someone else might require 40 years of A to get a full pension.
So a move to the Total Contribution Approach, even on a phased basis, is fair and equitable.
Click to expand...
The current averaging setup is fairly perverse and seems to disproportionately reward people who have considerably pension rights built up in the UK and elsewhere. Though it does probably help some people coming from less developed countries with lower costs of living and pension provision.

The bigger picture questions seem to be (a) how should countries sensibly provide for people's retirement when there is lots of international migration going on and (b) should we be prodding people into employment by tying pension rights to social insurance contributions and means tests? TCA seems to align with an answer of 'you're on your own for the years you were outside the country' on (a) and a strong 'yes' on (b).
 
I reach 66 in 2026 and will have 1902 contributions paid to end of 2025 over 48 years.What will I get under this new system?
 
Germany has a TCA and if you arrive at 56 you will have a small pension. It's complicated though, because the credits you earn during your working life are weighted, so that credits later in life are worth less than those when you start working. The idea is to make pensions "progressive". People who earn more later in life due to their experience don't end up with gigantic pensions while unskilled workers who do not really earn more as a 60 year old than a 20 year old get barely anything. You will have a larger pension as a higher earner but it is not linear! I honestly have no idea if first starting work as an older person gets you the credits that are worth less or worth more, I suspect worth less, like everyone else in that age bracket. I think the average pension in Germany is €993 p.m. A "good" state pension might be around €2,500 p.m. The theoretical max pension is €3,154 and virtually nobody in Germany is entitled to this as you would need to earn 85k from the very beginning of your working life to have the required contributions, which in reality almost nobody will. Someone coming to Germany and working even a reasonably well paid job for a decade before retirement could not expect to get more than €500 a month as a state pension, probably less. An unskilled worker, less again.

Clonback said:
I reach 66 in 2026 and will have 1902 contributions paid to end of 2025 over 48 years.What will I get under this new system?
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1902/2080 (0.91) x 30% of full pension = €72.42
70% of full pension = €185.71
Added together makes a pension of: €258.13
 
Anyone care to advise me of what state pension I will get ? I first paid stamps in 1986 as a student summer job but then left ireland in 1990 and worked in Germany for 12 years. I returned in 2002 and calculate that I will have paid a totsl 1632 stamps by 65 (2033). Believe its normal Class A.

I will also be entitled to a partial German state pension for the 12 years paying into their system there which presumeably I can also draw down ?
 
Flybytheseat said:
Anyone care to advise me of what state pension I will get ? I first paid stamps in 1986 as a student summer job but then left ireland in 1990 and worked in Germany for 12 years. I returned in 2002 and calculate that I will have paid a totsl 1632 stamps by 65 (2033). Believe its normal Class A.

I will also be entitled to a partial German state pension for the 12 years paying into their system there which presumeably I can also draw down ?
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Unluckily for you, I believe that your pension will be entirely calculated under the new TCA approach.
That means you'll get 1632/2080 of the full pension, 78.5% .
At today's pension that would be €208.16.
It's extraordinary to think that there will be some people retiring this year who first started contributing 27 years after your first contributions and have fewer than 1/3 your eventual number of contributions but who will be retiring on a pension 27% bigger than what you'll be getting.
 
murphaph1 said:
Why an arbitrary 35 years though? That would (to use your own language) punish people who arrived say 25 years ago. The averaging approach had to go and I speak as someone who would have benefited from its retention as I have a ca. 13 year gap in my Irish social insurance record, right in the middle of my working life. I would have been able to get a full COAP under averaging but I will be a small bit short under TCA. Funding full COAPs from the taxation of workers just starting out, for people who arrived in Ireland at 56 is bizarre to say the least. One can argue that the phase out should have been longer, perhaps over 20 years, but the principle of moving to TCA is entirely fair and reasonable for future taxpayers.

I view this as fixing a basically broken pensions system to be honest. I would argue that the new system does bring benefits to people, just not the pensioners who would have been entitled to a full COAP after 10 years of contributions. It benefits wider society in that those pensions will now not need to be paid and the taxation instead spent on public services.
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35 or 30 , its just a suggestion. Or, alternatively, if you want to make it fully equal, give everyone the right to buy back years, up to the maximum.
So, if you weren't working here and you do not have another EU pension from a comparable country, you can purchase those years for x Euros per year. As noelOm points out, there are large numbers of, recently arrived, workers here in Ireland who come from countries where pension arrangements are non-existent, or paltry. So workers from India, or Pakistan, or anywhere in Africa, or the Phillipinnes, many of whom were encouraged to come here to fill essential posts in healthcare, or agriculture, or industry, will be severely disadavantaged. Those workers who came from the UK, or anywhere else in Western Europe will, probably, be ok, if they amalgamate their pensions. But it will leave many people in penury and they will then become reliant on the Non-contributory pension, along with other social welfare payments, to bridge the gap anyway
 
jimmij said:
Unluckily for you, I believe that your pension will be entirely calculated under the new TCA approach.
That means you'll get 1632/2080 of the full pension, 78.5% .
At today's pension that would be €208.16.
It's extraordinary to think that there will be some people retiring this year who first started contributing 27 years after your first contributions and have fewer than 1/3 your eventual number of contributions but who will be retiring on a pension 27% bigger than what you'll be getting.
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@jimmij
What do you think the figure would be for me? Would be grateful if you could have a go at it.
First paid PRSI Dec 1990.
Reach 66 Dec 2025.
Have 887 contributions, all class A.

Secondly, that 10 year transition to TCA. Is that a definite thing now, or still just a proposal?
 
Flybytheseat said:
Anyone care to advise me of what state pension I will get ? I first paid stamps in 1986 as a student summer job but then left ireland in 1990 and worked in Germany for 12 years. I returned in 2002 and calculate that I will have paid a totsl 1632 stamps by 65 (2033). Believe its normal Class A.

I will also be entitled to a partial German state pension for the 12 years paying into their system there which presumeably I can also draw down ?
Click to expand...
If you have any gaps in your record (for example when in full time education as an adult) you may well be able to get additional credits (Entgeltpunkte) to go towards a better German pension. Speak to the DRV about that! Also any time spent rearing children should be considered. You should make sure the DRV has your address and request a statement. Unlike in Ireland, they will project your future pension. You may be able to take your German pension at 63 already if you are happy to take a penalty.
 
jimmij said:
Unluckily for you, I believe that your pension will be entirely calculated under the new TCA approach.
That means you'll get 1632/2080 of the full pension, 78.5% .
At today's pension that would be €208.16.
It's extraordinary to think that there will be some people retiring this year who first started contributing 27 years after your first contributions and have fewer than 1/3 your eventual number of contributions but who will be retiring on a pension 27% bigger than what you'll be getting.
Click to expand...
I've always felt the existing system is terribly unfair particulary if like me you took a student job but started your proper career abroad so the fact that a shitty job I had when I was 18 for 3 months makes my total years for the average annual calc 47 is ridiculous. Same applies for women with career breaks for rearing a family. I welcome the move to TCA as it at least seems more just.
 
Flybytheseat said:
I've always felt the existing system is terribly unfair particulary if like me you took a student job but started your proper career abroad so the fact that a shitty job I had when I was 18 for 3 months makes my total years for the average annual calc 47 is ridiculous. Same applies for women with career breaks for rearing a family. I welcome the move to TCA as it at least seems more just.
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The " existing system " is that you currently get the higher of the two calculation models. But the proposal (not yet law) is from 2024 to gradually move to the TCA. The Minister's answer in the Dail needs to be turned into legislation.
As for women who took career breaks to rear children, they can get up to 1040 credits (equivalent to 20 years).
 
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