State Contributory Pension - transition to TCA from 2025

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Dave Vanian

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I'm aware that from next year, the calculation of eligibility for the State Contributory Pension is moving gradually over a period of 10 years from the current system of averages to the Total Contributions Approach (TCA). Next year it will be 10% TCA and 90% averages, with another 10% being added to the TCA side each year until it's entirely a TCA calculation.

My question is - from 2025 onwards, is this now the ONLY way to calculate eligibility? In other words, if someone is retiring in 2026 and the old method works better for them than 20% TCA / 80% averages, can they choose to use only the old method?
 
Dave Vanian said:
if someone is retiring in 2026 and the old method works better for them than 20% TCA / 80% averages, can they choose to use only the old method?
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It wouldn't appear so. According to this:

"During the 10-year transition period, pensions will be calculated using two methods:
  • the first method will use the full TCA approach
  • the second method will, starting in 2025, calculate what your pension would be under the existing Yearly Average Method. The pension rate of payment will then combine 90% of this yearly average rate with 10% of the TCA rate. The proportion accounted for by the Yearly Average Rate will then reduce by 10% over each of the subsequent 9 years until the pension calculation is fully based on the TCA method only."
The motivation for the phased removal of the Yearly Average method is to bring in a fairer system (in a gradual manner) which will be fully operational by 2034. 2024 is the last year an individual will be able to fully avail of the Yearly Average method.

The State pension entitlement during the transition period will be the greater of the:

- TCA method, or
- X% TCA + (1-X%) Yearly Average method.
 
For what it's worth I don't agree with the change. Probably a biased opinion, because I did much better under the average method.
One thing very unfair about the TCA is that a person who works for 9 years and 51weeks (519 contributions) gets no contributory pension. Every contribution should count in the so called total contributions approach.
 
S class said:
For what it's worth I don't agree with the change. Probably a biased opinion, because I did much better under the average method.
One thing very unfair about the TCA is that a person who works for 9 years and 51weeks (519 contributions) gets no contributory pension. Every contribution should count in the so called total contributions approach.
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I agree with your view.
But unfortunately every EU country has has such a rule in place. Germany has 5 years minimum, Spain and Austria 15 years minimum, etc.
What I find more troubling is that your man in the example of 519 weeks contributions is not even allowed to make one voluntary contribution to make up for the missing PRSI contribution. He is simply excluded from the whole contributory pension- and those who make it over the 520 PRSI contribution line benefit from his lost payments. Talk about making the pension system fairer...
 
What I find more troubling is that your man in the example of 519 weeks contributions is not even allowed to make one voluntary contribution to make up for the missing PRSI contribution.
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You have to have some cut off point.
May not seem "fair" to some who lose out but it has to be done.
Also the transition period is 10 years from 2025 to 2034.
I would argue that they have tried to be more than "fair"
 
BlackandBlue said:
You have to have some cut off point.
May not seem "fair" to some who lose out but it has to be done.
Also the transition period is 10 years from 2025 to 2034.
I would argue that they have tried to be more than "fair"
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Regarding fairness, which can be interpreted differently from person to person, it’s arguable that a fundamental change like what we are discussing here can only truly “fairly” take place for an individual entering the social welfare system after the new rules take effect.

There are social welfare contributors who legitimately expected to achieve a max contributory Irish state pension (using the average approach) and who have contributed very significantly under the PRSI system in actual €terms and have taken very little from it (for 24 years in my wife’s case since 2000 and still running). Now the rules are changing without any consideration for her situation.

By the time she is eligible for the Irish state pension it will be all TCA according to the new rules and she now expects to only get about 85% rather than the full 100% she would have calculated when first entering the Irish social welfare system.
 
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Aren't the "519 contribution" examples above hypothetical cases to make a point? If we take it that a typical working career is around 45 years, what has our hypothetical friend been doing for the other 35 years? Perhaps working in another country in which case he may well have an entitlement to a State pension there. If it's an EU country he can amalgamate his Irish and other country PRSI for this purpose.

If a person doesn't have enough PRSI to qualify for the contributory pension, then they can qualify for the non-contributory pension if their means are below a certain level.

Then there's the credit schemes which can enable someone who's spent time out of paid employment caring for someone else to get PRSI credits for that period.

Overall I think the system is fair and, while no system is perfect, it goes to great lengths to see that deserving cases are not excluded.
 
Dave Vanian said:
Then there's the credit schemes which can enable someone who's spent time out of paid employment caring for someone else to get PRSI credits for that period.
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Credits only apply to a person who has already reached the 520 paid contributions level.
 
Dave Vanian said:
If a person doesn't have enough PRSI to qualify for the contributory pension, then they can qualify for the non-contributory pension if their means are below a certain level.
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If they don't meet the means test, possibly due to a relatively small occupational pension they will not be eligible for the non contributory pension. They have paid many years prsi contributions and it is totally unfair to bar them from any pension benefits from those contributions.
 
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S class said:
They have paid many years prsi contributions and it is totally unfair to bar them from any pension benefits from those contributions.
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If someone aged 66 has spent less than 10 years of their life working and paying PRSI in this country, why should they be entitled to a State Contributory Pension? As has been said above, most countries have a cut-off point somewhere - some longer; some shorter.
 
S class said:
The administrative cost could be reduced by paying an annual pension of 360 euro.
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Yes and in the UK any pension of £5 or less (per annum) must be paid annually, presumably to minimise the administrative costs. While it seems a ludicrously low amount to pay in the first place their system acknowledges that such small benefit amounts are due and must be paid.
 
Dave Vanian said:
If someone aged 66 has spent less than 10 years of their life working and paying PRSI in this country, why should they be entitled to a State Contributory Pension? As has been said above, most countries have a cut-off point somewhere - some longer; some shorter.
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Its a matter of fairness. Some people who work 8 or 9 years, here , will get no pension entitlement.
A working life is about 40 years, so thats a big chunk with no pension entitlement.
Surely a buy back scheme could be devised, as in the UK, so that these people could pay a fee and access a portion of the pension.
 
Allpartied said:
Its a matter of fairness. Some people who work 8 or 9 years, here , will get no pension entitlement.
A working life is about 40 years, so thats a big chunk with no pension entitlement.
Surely a buy back scheme could be devised, as in the UK, so that these people could pay a fee and access a portion of the pension.
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But where did they spend the other 31 years of their average working lives and how did they support themselves?

What about this unfortunate chappie? https://extra.ie/2024/05/14/news/irish-news/priest-pension-missionary

(Maybe his God will look after him and strike down those evil people in the Department who are depriving him of his "entitlement".)
 
Dave Vanian said:
Are you seriously saying that the Department should incur the administrative cost of setting up and paying out a pension of €6.93 per week to someone who was little more than a visitor here for a year?
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It does not matter if a person gets a tenner or the full pension. The system is already in place. There are no further costs involved.
 
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