PRSI - Entry into Employment Question

[NoRegretsCoyote]

@Early Riser

I fully agree. The unfairness with the averaging is mitigated a bit by the fact that most people who've worked abroad have worked in the UK.

The UK has an incredibly generous facility for making voluntary contributions for people who have worked there for as little as three years to pay £3 a week to get a full UK state pension. So if you only get a partial Irish SPC you can make it up by getting a full UK state pension.

Unfortunately not nearly enough people are aware of this and as of April this year the possibility to make contributions for more than five years in arrears disappears.

 

[atgate]

If he tops up to 35 years NI contributions via voluntary contributions he will get the full UK state pension.

This is the best investment he can ever make and make sure the make the back payments.

Thanks. That's the plan. He submitted the form hoping for class 2 (he's now a PAYE worker down South), they took 6 months and came back with "nope, you're class 3" as he didn't tick one box correctly or submit proof. So, he resubmitted and was due an answer a few months ago, but speaking with them it looks like he'll hear back before the end of the month. Fingers crossed.

 

[Lisgoold]

In terms of fairness it does. Someone who first enters the insurance system at 55 can qualify for a full State Pension at 66 under the averaging system. Someone else with 30 years of contributions may only get a partial pension under either approach.

Take two guys who emigrated at 18.
One worked for a few weeks in a partime job but enough to enter the insurance system. After 17 years abroad he returns to work in Ireland and pays PRSI for another 30 years. At retirement he will qualify for a partial State Pension.
The other, who had no mickey mouse job for a few weeks as a kid, returns aged 55 after 37 years working abroad and works for 10 years in Ireland. He get a full Irish pension.
Fair?
Or maybe the second guy didn't live in Ireland at all until he arrived as an immigrant at 55. He still gets a full State Pension after 10 years work, while someone who has worked for 30 years does not. Fair?

In your example , the person turning up at 55, would end up getting full pension, which as you say, is not really fair. That would be done using that average method, based on date starting to pay PRSI

If it changes to the total contribution method (or has that already happened)?, what would that same person then get?


Would it be around 25% of full pension, assuming they had 520 contributions?

 

[Early Riser]

Would it be around 25% of full pension, assuming they had 520 contributions?

Correct.

If it changes to the total contribution method (or has that already happened)?,

Currently both systems are being operated - you get whichever the more favorable one in your own situation awards. It is meant to be a transition period and then it will only be based on total contributions. But currently the guy in this example could get the full pension based on the averaging approach.

 

[Lisgoold]

Correct.

Currently both systems are being operated - you get whichever the more favorable one in your own situation awards. It is meant to be a transition period and then it will only be based on total contributions. But currently the guy in this example could get the full pension based on the averaging approach.

So, do you think if the new method was used, he'd get around 25%, as he's paid 520 out of 2040?
Just trying to figure out if I'm understanding it correctly.

 

[Early Riser]

So, do you think if the new method was used, he'd get around 25%, as he's paid 520 out of 2040?
Just trying to figure out if I'm understanding it correctly.

Yes, that is correct under the total contributions approach.

 

[Groucho]

So, do you think if the new method was used, he'd get around 25%, as he's paid 520 out of 2040?

Purely in the interests of accuracy - it's actually 2080! (52*40)

 

[Lisgoold]

Purely in the interests of accuracy - it's actually 2080! (52*40)

Of course! Brain dead

I have 887 contributions, so if they bring in the new rule before 2025, I guess that means I may get 42%.

 

[Early Riser]

I have 887 contributions, so if they bring in the new rule before 2025, I guess that means I may get 42%.

The "new rules" are already in place. It is just that, for the moment at least, they co-exist with the old ones. A current applicant for the pension gets the benefit of whichever "rule" works out best for them. You can be sure that the "new rule", at least, will still be in place in 2025.