What to do ? - Going into retirement and pensionless

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Luap76

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Hi All.

I am just posting a query for my father in law regarding a pension. He is 64 years of age and has worked hard all his life in the construction industry as a labourer. He owns his own house which is worth around €350,000 and in time he might sell it and move into a smaller house and pocket the difference to help him in his retirement. Hypothetically let’s say he sells his house for €350,000 and buys a smaller house for €200,000 and then keeps the €150,000 to help him get through retirement.

The problem is despite working all of his life he only has 17 years of PRSI contributions and for the rest of those years he was paid cash by his employers. He more or less admits himself that he was uneducated in these matters and if he had his time back he would do things very differently and insist the employer put him through the books, but it is what it is. As a result I think he won’t be entitled to a contributory old age pension. His wife is still alive and she also works part time but as she was at home rearing children for many years she won’t have enough PRSI contributions for a contributory pension either, They also have very little saving and no private pensions. What do you think is there best options going into retirement ?
 
Option 1 is to continue working.

Option 2 is to check about entitlement to non-contributory pension
 
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"His wife is still alive and she also works part time but as she was at home rearing children for many years she won’t have enough PRSI contributions for a contributory pension"

If she is paying PRSI contributions in her part time job she may be entitled to the benefit of PRSI "credits" for the times of rearing her children. She will have to contact Dept of Social Welfare and likely she will qualify for all or part of an Old Age Contributory Pension (and non means tested). Otherwise she can apply for an Old Age Pension (Non Contributory) and will be faced with a means test.
 
Hi Luap

The house is ignored for calculating the non contributory OAP.

On the other hand if he has €150k in cash, he will be means-tested and get no OAP.

So he should not trade down.

It's possible that at some later stage he could get a life-loan but again, that would eliminate his OAP, so not a good idea.

Brendan
 
If his wife qualifies for the Contributory OAP she would then get something for him as he would be one of her dependents.

That would not be affected by his means, so he could consider trading down, although a life loan would seem a better option - unless they do actually want to trade down.

Brendan
 
Brendan Burgess said:
If his wife qualifies for the Contributory OAP she would then get something for him as he would be one of her dependents.

That would not be affected by his means, so he could consider trading down, although a life loan would seem a better option - unless they do actually want to trade down.

Brendan
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Hi Brendan. I got this off citizens information which says if he downsizes he can keep up to €190,000 and it can be excluded from any means test. That way he could still get the non contributory pension and have a few Bob along with it ?
 
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Hi Luap

Very interesting.

I was not aware of that.

Before committing to selling, check out if it applies to an ordinary trade down.

Brendan
 
When did he first pay PRSI (early in working life or the last 17 years)? Methinks they calculate average PRSI based on when you first pay PRSI. In such case if he starting paying 17 years ago and continued to date then his average would be 52 and could qualify for the full rate contributory pension. Open to correction as my understanding base on Citizens Information may be flawed.
 
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Luap76 said:
The problem is despite working all of his life he only has 17 years of PRSI contributions and for the rest of those years he was paid cash by his employers. He more or less admits himself that he was uneducated in these matters and if he had his time back he would do things very differently and insist the employer put him through the books, but it is what it is. As a result I think he won’t be entitled to a contributory old age pension. His wife is still alive and she also works part time but as she was at home rearing children for many years she won’t have enough PRSI contributions for a contributory pension either, They also have very little saving and no private pensions. What do you think is there best options going into retirement ?
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That sounds a bit odd. It's unlikely that his employers all managed to pay him cash exclusively for years on end, as both Revenue and Social Welfare kept a tight enough eye on the construction sector from at least 1990 or so. If he didn't work much after the 2008 crash, that might explain it as off-the-books employment was endemic in construction in the 80s and earlier.

At this stage, I would be doing my own detective work and not necessarily assuming that the DSP's word for it that his Social Welfare record is correct or complete.
 
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Even if he paid his first Prsi contribution at age 16 and retires at age 66 his maximum Prsi record spans 50 years. With 17 years of contributions (884) he will have a yearly average of over 17 (172.90 euro per week). He hits 66 in 2025 so he will loose out on a small amount of the averaging calculation. He would probably get an absolute minimum of about 160 euro per week.
 
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Don't forget they might be eligible for other benefits like household benefits for utilities, TV licence, free travel pass etc. These might reduce some current outgoings eg if the household has two cars and now can do with just one if public transport is now free. Also look at medical card eligibility or GP card. There are some schemes for older people to improve their house eg insulation that might make their home cheaper to heat. Citizen's info offices if they still exist are a great source of information on all these things.
 
AndroidMan said:
Is that the case that if somebody has 150k in the bank at retirement age they will not get the state pension?
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They will not get the State Non-Contributory Pension. The Contributory Pension is unaffected by savings or other means.

This person will qualify for at least a partial Contributory Pension. Depending on when he first started paying PRSI it may be a substantial portion of the full pension. If he trades down and nets a lump sum of €150,000 this may help them get through retirement. He can supplement this partial Contributory Pension by whatever (legal) means he wants.

If he stays in the present house and goes the Non-Contributory pension route he might also supplement this pension with some income from the rent-a-room scheme (up to €269 pw). Employment earnings up to €200 per week is allowed. I think both this employment income and rental income is allowed without impacting the pension.

This doesn't takes account of whatever SW his wife may qualify for - partial Contributory Pension, Non-Contributory Pension or allowance for a dependent person.
 
Would they consider trying to make some extra money from having foreign students over the summer?
 
T McGibney said:
If he didn't work much after the 2008 crash, that might explain it as off-the-books employment was endemic in construction in the 80s and earlier.
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Probably also explains why we were able to build all those houses during the 80s recession, the government was indirectly employing builders. Also social welfare was so low back then that people needed to supplement it with actual work.
 
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