Semi State employed Wife just short of 520 PRSI contribution for State Pension

Knuttell

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My wife has worked for a semi state since she was 18, she is retiring next year at age 60 with 42 years service and full pension.

In addition to Semi State pension she will have circa 113k in AVCs.

She has paid class D stamp (no PRSI ) all through this employment except for a period prior to semi state employment where she earned 130 Class A1 stamps.

When she retires at 60 she will not work any more. We have rental income which is currently classed as Class K. This will change to Class S from 2025 to 2031 earning her 302 Class S stamps ( 52 * 6 years -10 due to birthday).

In total this gives her 432 combined reckonable contributions.

This is 88 short of the minimum requirement of 520.

Is there any method of bringing her up to 520 stamps prior to turning 66?
 
She could take up some employment (part-time/ or full-time) temporarily to gain "change of status" credits as detailed below.

"Change of status credits
You may qualify for change of status credits, if you are employed at PRSI Class A and your last paid PRSI contribution was at Class B, C or D. These change of status credits are only taken into account for the State Pension (Contributory).

You can get change of status credits back to the beginning of the tax year in which you start making PRSI contributions at the Class A rate and for the previous tax year. A mixture of PRSI contributions at Class A and PRSI contributions at Class B, C or D may help you to qualify for a mixed insurance pro-rata State Pension (Contributory)."

 
Thanks for input, my understanding is that Class S stamp is reliant on you not working otherwise it converts to class K which is not reckonable for contributory pension.
 
Presumably you are aware that, as things stand, her contributions will make her eligible for a pro-rata State pension?

If you reach pension age on or after 6 April 2012 and you have a mixed insurance record, you can get a pro-rata pension if you meet the following conditions:

  • You have a minimum of 520 PRSI contributions (full-rate and modified-rate)
  • You have at least 260 full-rate paid contributions since your entry into insurance
  • Adding together a mixture of full-rate contributions and modified-rate contributions, gives you a yearly average of at least 10 from the time you first entered insurance (or 1953, whichever is later) to the end of the tax year before you reach 66. This yearly average condition does not apply if the TCA (or Aggregated Contributions Method) is used
  • You do not qualify for a pension under EU regulations or under reciprocal arrangements with other countries (or you only qualify for a pension at a lower rate than this pro-rata pension would give you).
If you meet all these conditions, you may qualify for a pension proportionate to the number of contributions you paid at the full rate. For example, if you worked for 40 years and 10 of those years were in the private sector, you would get one-quarter of the full pension.
 
If she doesn't qualify for any State Contributory Pension at 66, she can defer until 67, 68, 69 or 70.

If needed, she can also obtain Class S contributions by setting up an ARF with her AVCs and making withdrawals from the ARF

Thanks Dave, so in this case where she is short by 88 contributions ( 52 per year) she can defer taking pension until 1.7 years after 66- so she becomes entitled to it at circa 67.7 years ?

This entitlement is 520/2080 = 25% of state pension at that time.

Is class S (rental income) still allocated after 66 years or does it cease at 66?
 
Presumably you are aware that, as things stand, her contributions will make her eligible for a pro-rata State pension?
  • You have at least 260 full-rate paid contributions since your entry into insurance


Thanks Marsupial, no I was not aware of this, I understood that 520 was the minimum needed to qualify for contributory pension.

If I Understand you correctly, she would qualify based on her 130 A1 stamps & 302 received from Class S rental income meaning she would get 432/2080 = 20.7% of state pension at age 66?
 
Thanks Marsupial, no I was not aware of this, I understood that 520 was the minimum needed to qualify for contributory pension.

If I Understand you correctly, she would qualify based on her 130 A1 stamps & 302 received from Class S rental income meaning she would get 432/2080 = 20.7% of state pension at age 66?

That's my understanding. But it's advisable to check here or with Citizens Information in a couple of years' time, as the legislation may change.
 
She needs to plan carefully.
When she starts to drawdown her ps pension she will be in receipt of class M Prsi.
With class M her rental income will remain at class K.
She will need an ARF to maintain her rental at class S.
Provided her combined income from both rental and ARF is at least 5000 euro per year she will gain class S Prsi. So an ARF of 100 euro + rental income of 4900 euro will gain her 52 class S per year.
She can continue to qualify for class S on this basis up to age 70 provided she deferres her contributory pension.
She can easily reach the 520 paid Prsi level.
She should also take up class A employment immediately after retirement from PS employment to gain 1 paid class A contribution and then continue to sign on for class A credits up to age 66. This will give her up to 2 years of change of status credits and help her to qualify for BP 65.
 
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Pro rata calculation method

 
She needs to plan carefully.
When she starts to drawdown her ps pension she will be in receipt of class M Prsi.
With class M her rental income will remain at class K.
If will need an ARF to maintain her rental at class S.
Provided her combined income from both rental and ARF is at least 5000 euro per year she will gain class S Prsi. So an ARF of 100 euro + rental income of 4900 euro will gain her 52 class S per year.
She can continue to qualify for class S on this basis up to age 70 provided she deferres her contributory pension.
She can easily reach the 520 paid Prsi level.
The combined annual income from rental and ARF will Indeed be at least 5,000 per year.

Thanks S-class, that's very helpful. A few questions if that's ok.

Is there a timing issue here, would she need to have the ARF in place immediately before receiving the semi state pension?

How does this get triggered so it doesn't convert to Class M -is it on foot of a tax return the following year or is there another mechanism?
She should also take up class A employment immediately after retirement from PS employment to gain 1 paid class A contribution and then continue to sign on for class A credits up to age 66. This will give her up to 2 years of change of status credits and help her to qualify for BP 65.
I f we go down the ARF route shouldn't need to do this, after 42 years she's finished with the work lark :) what does help her to qualify for BP 65 mean?
 
If she manages to get her ARF set up and makes a drawdown in the calender
year she retires and has the rental income, she would get 52 class S for that year.

When you do your form 11 return for the rental the Prsi is automatically deducted at 4%. The class S is automatically deducted from her ARF. When this combination is seen by DSP, they will apply class S to her rental income.
She will get 52S for the rental and another 52S for the ARF on her Prsi record.
Only 52 out of the 104 class S will be reckonable for each year.

The A class employment will gain her extra change of status credits and these will increase her number of reckonable contributions and therefore increase her contributory pension.

If she was to earn 38 euro per week for 13 weeks in any calender year from age 61 to 65 and continues to sign on for credits she would get BP65 (benefit payment 65) for 52 weeks at a rate of 230 euro per week. Only 3 hours work at minimum pay per week would be necessary.
 
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Thanks a lot for that great detail S Class, she retires in Oct next year so will push to have the ARF in place for that month. Presumably setting up ARF is relatively straight forward so dont anticipate and delays.
 
The ARF can be slow enough to be set up. It would be a good idea if she gets in touch with a broker before she retires and gets inquires going. She might be able to fill out the application forms before retirement so there is minimum delay in the setting up.
 
If she manages to get her ARF set up and makes a drawdown in the calender
year she retires and has the rental income, she would get 52 class S for that year.
@Knuttell
To clarify.
I have recently learned more information on this.
If your wife sets up her ARF before the end of her retirement year she will get 52 class S contributions. However only some of these will be reckonable for the COAP.

For example say she gets 30 class D contributions in her retirement year, only 22 class S contributions will be counted as reckonable.

These 22 class S contributions will not provide her with change of status credits.

She should aim to get at least 1 class A contribution after her retirement in order to gain change of status credits.

If she does this her retirement year will give her, the following reckonable Prsi contributions....
30 reckonable credits and 22 reckonable paid contributions, so 52 total reckonable contributions.

Only the 22 paid contributions will be counted towards reaching her goal of 260 or 520 full rate paid contributions ,in order to qualify for the COAP.

When she achieves this target she will have 52 reckonable contributions counted for her retirement year.
 
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When she starts to drawdown her ps pension she will be in receipt of class M Prsi.
With class M her rental income will remain at class K.
She will need an ARF to maintain her rental at class S.
I find these rules interesting.

If you are in receipt of a PS pension then PRSI paid on income from your rental property cannot get you a higher COAP (if you haven't worked for 40yrs yet) or qualify you for it in the first place if you are currently not eligible for any amount of it.

Whereas, if you are "rich" enough to have income from a rental property AND from an ARF then drawing even a tiny amount of income from that ARF will make all your rental income now reckonable for a higher COAP.

I don't see why you need to have the ARF in the first place. It rewards people who are wealthy enough to have a rental property and an ARF over those who only have a rental property. It also makes the COAP qualification criteria un-necessarily complicated. It's already complicated enough as it is. Thank goodness we have @S class to help us understand it.
 
Whereas, if you are "rich" enough to have income from an ARF then drawing even a tiny amount of income from that ARF will make all your rental income now reckonable for a higher COAP.
This is not unique to ARF drawdowns.

If a person with rental income at class K has any earned self employment, then the earned self employment will convert the rental class K back to class S.

So instead of using an ARF to gain the Prsi advantage, a person could do a minimal amount of earned self employment to gain the same Prsi advantage.

This could be as simple as cutting their neighbours lawn.

Bill the neighbour for 50 euro and declare this as earned self employment on their tax return. Provided that their rental is a least 4950 euro they will get 52 class S for that year.
 
She should aim to get at least 1 class A contribution after her retirement in order to gain change of status credits.
If they did a job mowing the lawn and put it down as €50 on the tax return would that achieve the same result and get them 52 class S stamps (incl arf and rental income) even though they retire in say September 2025?
Just seeing if that my understanding is correct as in similar situation.
 
The posters wife is in class D public sector employment.
It seems from other posters that when a person has either class D or class B contributions in any particular week that it is not possible to get any form of reckonable paid contribution for that week.

If you have any combination of rental + ARF or earned self employment income (or both of these) of a minimum of 5k, you will get 52 class S shown on your Prsi record, but only the weeks in the retirement year after you ceased class D or B employment will be added as Reckonable for the COAP.

In order to get 52 reckonable contributions in the retirement year it would be necessary to get change of status credits to replace any class D or B contributions gained in that year.

The class S contributions will not allow you to get change of status credits, these can only be gained from class A employment.

If the neighbour or a friend or family member registered as an employer and employed you to cut their grass, and you earned a minimum of 38 euro you would gain 1 class A Prsi contribution and then qualify for change of status credits.

If you manage to get 1 class A contribution you would get 52 reckonable credits for your retirement year and 52 reckonable credits for your last year before your retirement.

Your retirement year will be counted as your class D or B changed to Reckonable credits and the remainder of the 52 counted contributions will be class S or class A reckonable full rate paid contributions.

Change of status credits are not counted in order to reach the 260 or 520 full rate paid contributions in order to qualify for the COAP.
When you reach either of these targets the change of status credits are then counted in your COAP calculation.
 
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