Prsi voluntary contributions after early retirement

Spud50 said:
I am planning on retiring early this December (I’m 55) and am going to live off savings for a few years to build the pension up a bit .( so will have no income)
I have 35yrs + of PRSi paid at Class A and want to pay voluntary contributions for the next 5 yrs until I draw down my pension at 60.
My question is do I have to pay the first PRSI contribution @6.6% of my previous years salary for the first year ( which would be a big chunk out of saving) and 500€ every year thereafter or can I pay 500€ every year from the outset and contact social welfare before old age pension to pay any shortfall??

also the form mentions an Agent ? Can I just make the payment myself or do I need to go through someone?
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Why are you retiring at 55? Is it health reasons or just want to finish working or massive savings though your comments suggest otherwise. Seems like a long time to eke out savings until 60 and then another 6-7 years to get state OAP.
 
I was planning to retire early next year after working until March and then starting voulintary contribution’s in 2025 and figured I would only need to pay 3 months worth each year ie my last PAYE year however citizen’s advice has me confused. Reply below

Our information and the Voluntary Contributions Operational Guidelines do not give further detail. I put a call into the Voluntary Contributions section and spoke to somebody in the Customer Service Section of the DSP. The person there told me that they work a year behind. If you apply to make voluntary contributions in 2024, they will take it that you are applying to pay contributions for 2023 and will base the assessment on your earnings for 2022. If you apply in 2025, they will take it that you are applying to pay contributions for 2024 and will base the assessment on earnings in 2023, which will be the three months. They also said that they do a new assessment each year, as in, if you pay voluntary contributions for the remainder of 2023, your assessment will be based on this year, but the following year your contribution will be lower if your income is lower.
 
@RedmondC Citizens Advice state "If you paid PRSI at Class A, E or H you pay a high rate contribution of 6.6% of your reckonable income in the previous tax year, subject to a minimum payment of €500"
Having spoken to both Citizens Advice and SW , my understanding (please correct me if im wrong) is that voluntary is 6.6% of the last year that you worked and thereafter 500€ per annum assuming you have no income in the years following . up to the point where you have acquired 40years /2080 stamps
 
Spud50 said:
@RedmondC Citizens Advice state "If you paid PRSI at Class A, E or H you pay a high rate contribution of 6.6% of your reckonable income in the previous tax year, subject to a minimum payment of €500"
Having spoken to both Citizens Advice and SW , my understanding (please correct me if im wrong) is that voluntary is 6.6% of the last year that you worked and thereafter 500€ per annum assuming you have no income in the years following . up to the point where you have acquired 40years /2080 stamps
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Thanks@Spud50 Your Correct- reply from Vol Con Section of social welfare-

If you were employed the first year would be 6.6% of previous years income and then divided by amount of weeks required.
Once there is no further earnings on record the following years will be €500.00 per annum.
 
Does rent count as income in this context given its always described as non earned income?
 
Knuttell said:
Does rent count as income in this context given its always described as non earned income?
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If you have no earnings and all your income is from rental income (and over €5k) you are liable for Class S PRSI at €500 or 4%, whichever is greater.

This gets you 52/53 PRSI contributions which can be used for the state pension.
 
Knuttell said:
Does rent count as income in this context given its always described as non earned income?
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NoRegretsCoyote said:
If you have no earnings and all your income is from rental income (and over €5k) you are liable for Class S PRSI at €500 or 4%, whichever is greater.

This gets you 52/53 PRSI contributions which can be used for the state pension.
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Is this calculated on gross rental income or what is due after deductions ie net tax liability?
 
just as a follow up , i did retire at the end of Jan this year .
I currently have 1940 Credits to date , if i draw down a pension ARF in 4 years time and then paid S contributions for 6 years as part of that ARF, then presumably i would have more than 2080 Credits so I reckon i should be eligible for the full pension and wont need to pay any voluntary contributions. (correct me if im wrong)
however i would then have a 4 year gap in my stamps / credits record.... Does this matter to Welfare or cause any problem that i need to address??.
 
Spud50 said:
just as a follow up , i did retire at the end of Jan this year .
I currently have 1940 Credits to date , if i draw down a pension ARF in 4 years time and then paid S contributions for 6 years as part of that ARF, then presumably i would have more than 2080 Credits so I reckon i should be eligible for the full pension and wont need to pay any voluntary contributions. (correct me if im wrong)
however i would then have a 4 year gap in my stamps / credits record.... Does this matter to Welfare or cause any problem that i need to address??.
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Once you have 2,080 PRSI contributions towards the State Contributory Pension you'll the full rate pension regardless of any breaks.
 
Spud50 said:
so i got a statement from Social welfare today which shows i have 1945 stamps (of which 50 are credited) , is it then correct to say that once i have 2080 stamps in my name that i am eligible for the contributory old age pension and that i dont need to pay any more voluntary contributions??
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Just be aware that it's not all or nothing.
If you ended up with no more PRSI contributions or credits reckonable for the contributory old age pension then you would still get 1945 ÷ 2080 = 94% of the full contributory pension payment.
 
I dont get this obsession with having a full PRSI record.
Like most people on here, I have a private pension, because I dont want to subsist on a diet of hot water and cream crackers.
Its an averaging calculation, based on years paid in,, move on.
 
Top of my head calculations but I reckon each year of PRSI pension might cost you about 8000 euro to buy as an annuity - if we assume inflation linked annuities at 66 are around 4% (not sure what the rates are - I've not been keeping up)

So 500e to buy the same via voluntary payments seems too good a deal to ignore.

(I was thinking that if it takes you 40 years to build up 13000, that's 325 euro built up each year. If you go looking for an annuity to pay you 325 a year linked to inflation from 66, that's what would cost you several thousand euro)
 
fistophobia said:
I dont get this obsession with having a full PRSI record.
Like most people on here, I have a private pension, because I dont want to subsist on a diet of hot water and cream crackers.
Its an averaging calculation, based on years paid in,, move on.
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How exactly is it an "obsession" to try to get to the 2080 contributions in order to qualify for a full contributory old age pension in whatever way is possible and economical no matter what other pension cover one may have? If it bothers you then maybe you should move on from such threads and leave others to their "obsession"?
 
fistophobia said:
I dont get this obsession with having a full PRSI record.
Like most people on here, I have a private pension, because I dont want to subsist on a diet of hot water and cream crackers.
Its an averaging calculation, based on years paid in,, move on.
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I don't recall anyone saying they were planning to live on just the State pension so you may be missing the point. But it's certainly prudent to maximise your State pension entitlements, especially seeing as this can sometimes be done a low cost, e.g. making a small withdrawal from an ARF to generate Class S PRSI contributions.

If someone shows me how to get an extra €20 per week from the State Pension that could be worth €20,000 if I live for around 20 years after retiring. Is €20 per week going to make a massive difference to my standard of living? Hopefully not. Like you I have private pension arrangements. Will I pass up an opportunity to avail of it without too much cost or hassle? Of course not. That would be foolish and lazy of me.
 
I am cautiously pessimistic by nature.
I am not being missing any point.
My financial planning is based on what the state pension will likely be in 10 years from now.
I am expecting it to be based on a means test, even the contributory pension.
Therefore, its not factored into my plans, even though I have 35 years full stamps paid.
 
fistophobia said:
I am cautiously pessimistic by nature.
I am not being missing any point.
My financial planning is based on what the state pension will likely be in 10 years from now.
I am expecting it to be based on a means test, even the contributory pension.
Therefore, its not factored into my plans, even though I have 35 years full stamps paid.
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So you're speculating that the State Pension might become means tested in the future. Perhaps you're right, although I would speculate that such a move would be a political landmine that would explode in the face of any party that attempted to bring it in. I can't see it happening in my lifetime. Obviously, one of us will be wrong.

But in the knowledge that you're only speculating about what might happen in the future, I just don't see why you're referring to the advice on here as to how to maximise your PRSI contributions as an obsession. People are being given good advice based on the rules as they are now, not how you think they might be in the future.
 
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