Voluntary contributions Question

K

Kramer

Registered User
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My wife has not been working over the last number of years and we have been looking in to the possibility of making voluntary contributions & I'm just trying to get my head around the numbers.

Her contribution history is attached.
We are in a position to pay the €500 for years 2018 - 2020 at the moment but I am struggling to figure out whether this will ultimately benefit her when hopefully qualifying for State Pension in a number if years time.

Assuming there is still a contributory pension available can anyone advise on whether we should make the contribution i.e. would she be entitled to a bigger pension on retirement if the voluntary contribution is applied?
Thanks
 

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Kramer said:
We are in a position to pay the €500 for years 2018 - 2020 at the moment but I am struggling to figure out whether this will ultimately benefit her when hopefully qualifying for State Pension in a number if years time.
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Almost certainly, yes.

The eligibility rules are complex but in general terms a year's contributions gets you 1/40th of the way to a full contributory state pension.

If you were to buy a contributory state pension on the market it would be something like €350k. So about €9k of eventual value for a €500 contribution. I would do it.
 
NoRegretsCoyote said:
Almost certainly, yes.

The eligibility rules are complex but in general terms a year's contributions gets you 1/40th of the way to a full contributory state pension.

If you were to buy a contributory state pension on the market it would be something like €350k. So about €9k of eventual value for a €500 contribution. I would do it.
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Thanks for the quick response and an indication of cost vs benefit. Much appreciated & seems to be worth making the contribution.
 
As a “general” rule, to get the maximum state contributory pension, you need an annual average of 48 contributions per year, from the tax year you started working, up to age 65.

So maybe, a little exercise- project that contribution list forward, up to the year she hits 65. See what the total contributions is and divide by the number of years from 1st tax year up to the year she hits 65, the resultant average will give you an idea of the shortfall, which can be met by working and earning a contribution, or, voluntarily, paying in.

Also, in case it is relevant. if she was not working for those years with no credits, because of minding her children, credits are due for those, you would need to contact SW if that were the case.
 
She needs to start paying voluntary contributions within 60 months of her last payment. As her last payment 2017 so she would need to start voluntary payments in 2022.
Does she intend to return to work in the foreseeable future even part time?
It would help if we knew her expected date of retirement. That would help to decide if it is worthwhile,
 
Currently the State Pension is calculated on two calculation models (and the higher figure supplies):
1. If you have an average of 48 contributions per annum over your history in the PRSI system, you get a full State Pension. If your average is between 40 and 48 you get a 98% Pension.
2. Under the Total Contribution Approach, you get 1/40 of a State Pension for each year of contribution

It is likely that we will move to the Total Contribution Approach only in the coming years (it was meant to change in 2021). So currently 1/40th gets you c €330pa.
 
NoRegretsCoyote said:
Her payments started in early 90s so presumably she is around 50 now.

What are the circumstances where it would not be worthwhile? It's possible they exist but I can't think of any.
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I can’t either, in this example, the 31 years from ‘91 to ‘21, there are 10 years with no credited contributions at all, that will mean, if left unattended, a likely 30-39 contribution average, so a reduced contributory pension (from Max available)of over €1,300 a year, every year.
 
Thanks for the replies.
Currently aged 49
Planning to go back to work this year
We have children born in 2007, 2009 & 2016 so this may be relevant, I will get her to contact SW as a priority
fayf said:
Also, in case it is relevant. if she was not working for those years with no credits, because of minding her children, credits are due for those, you would need to contact SW if that were the case.
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In relation to the comment below, I did query with Dept of Social Protection last year and they replied indicating we would need to make the voluntary contribution before 11th March 2022 so this is why I'm looking at it now (I know I'm leaving it quite close to the cutoff date!)
Black Sheep said:
She needs to start paying voluntary contributions within 60 months of her last payment. As her last payment 2017 so she would need to start voluntary payments in 2022.
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Protocol said:
The Homemaker's scheme is relevant here.

Homemaker's Scheme

If you care full-time for children, or for an ill or disabled person, the Homemaker’s Scheme makes it easier for you to qualify for a State Pension (Contributory).
www.citizensinformation.ie www.citizensinformation.ie

Operational Guidelines: Homemaker's Scheme

www.gov.ie www.gov.ie
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Thanks, that seems to indicate that there is no need to make the voluntary contribution for the missing years - quote from Citizens information below

You do not need to register if you:
You do not need to register because your claim for Child Benefit, Carer's Allowance, Carer's Benefit or the Carer's Support Grant is treated as an application to be registered as a homemaker.
 
If your wife was a SAHP, and assuming she meets the conditions, there are no extra PRSI conts to be made.

Her State Pension will not suffer due to the gap in her PRSI record.

Max age of child is 12.
Max SI gap is 20 years.
 
Protocol said:
If your wife was a SAHP, and assuming she meets the conditions, there are no extra PRSI conts to be made.

Her State Pension will not suffer due to the gap in her PRSI record.

Max age of child is 12.
Max SI gap is 20 years.
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Thank you, that's what i was thinking from the information provided.

Thanks to all for the contributions
 
Kramer said:
Thank you, that's what i was thinking from the information provided.
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Write to DSP to confirm that she should be eligible for the homemakers scheme. This is supposed to be automatic if a child is receiving CB but in practice it sometimes isn't.
 
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