Help, I’ve no PRSI stamps – can I still get a pension?

A non-contributory State pension could be worth as much as €12,064 a year to you – or as little as €234

Even if you’re not eligible to qualify for a contributory State pension you may be entitled to   a non-contributory pension. Photograph: iStock

Even if you’re not eligible to qualify for a contributory State pension you may be entitled to a non-contributory pension. Photograph: iStock

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Maybe you’ve never worked; maybe you worked abroad, or maybe you just didn’t work enough to earn enough contributions to qualify for a contributory State pension in Ireland.

Don’t lose heart. You might be entitled to what’s known as a non-contributory pension. This is paid out to people over the age of 66 who are resident in Ireland. It is paid at a rate of over 95 per cent that of the contributory pension’s maximum rate. This means that, while the top rate on a contributory pension is €243.30 a week, you can still get up to €232 a week, even if you haven’t contributed enough over a working lifetime.

Crucially, however, it is a means-tested payment. So, while its top value may deliver annual income of up to €12,064, it may be worth as little as €234, or nothing at all if you don’t qualify because of other income or savings. That could mean anything from €181,000 if you live and get to claim it at the full rate for 15 years, or as little as €3,510 over that same period if you are on only the minimum payment.

The other big difference is that, while you can continue to receive the contributory State pension even if you are no longer resident in Ireland, you must stay here to continue to receive the non-contributory payment.

According to the Department of Employment Affairs and Social Protection, some 95,092 people were in receipt of this payment as of the end of September 2018. Over 70 per cent of them were being paid at the maximum rate.

When working out an applicant’s 'means', the family home is not considered in the equation

As it happens, the average rate of a non-contributory pension paid is higher than the average contributory pension rate. While this might surprise, given that recipients haven’t made contributions towards these pensions, it typically arises because people have few other means.

So who is eligible for such a payment and for how much?

Who is eligible?

The clue to how it works is in the name – you don’t contribute to it by virtue of having paid PRSI stamps throughout your working life. Rather it is distributed on a basis of need. This means, however, that the State is a lot more circumspect in doling out benefits.

The means test

Crucial in qualifying for the payment is how much money you have through your own means. When assessing what you might be entitled to, the department will take into consideration a number of sources of income, including any cash income, such as a pension from another country.

Typically, you can have savings or assets of up to €20,000 and earnings of up to €200 per week from a job and still qualify for a full non-contributory pension – currently €232 a week for a person aged between 66 and 79. From age 80, an increased rate of €242 per week applies. Both will increase by €5 from March 2019.

An applicant may have up to €96,000 in capital, earn up to €200 per week from insurable employment, and be entitled to a reduced personal weekly rate of payment, currently €7, just above the lowest weekly rate payable of €4.50.

If you have assets/income greater than this, and your overall assessed means exceed the weekly statutory limit of €257.50, you have no entitlement to the payment.

When working out an applicant’s “means”, the family home is not considered in the equation. Thereafter, the first €20,000 in savings or “capital” is also disregarded.

Other income not counted in the means test includes the first €200 in earnings each week if you are still working, as well as any welfare payment, and certain payments from the Health Service Executive.

Reforming the amount of tax relief on pension contributions is unlikely to result in increasing the saving habits of lower paid workers, according to an ESRI report.
Like many welfare payments, the non-contributory pension has some quirks people should be aware of.

If you rent out a room in your home, this rent may also be disregarded from the calculations.

How is this calculated?

Cash income is obviously counted in full after exemptions. Thereafter your “means” are calculated according to a specific formula. After the “exempt” €20,000 in savings or assets, the department determines that every €1,000 of capital between €20,000-€30,000 yields weekly means of €1. This rises to €2 per €1,000 of capital between €30,000 and €40,000, and €4 for every €1,000 thereafter.

If you choose to save part of your pension, those savings will be means-tested in the same way as savings from any other source

So, for example, someone with capital of €50,400 will have eligible capital of €30,400 which works out as weekly means of €70. According to the department, this equates to a weekly non-contributory pension payment of €192 a week.

And there’s no use being coy about your assets: the State will seek this payment from your estate if you don’t declare total assets or savings when applying for this payment.

Any quirks?

Like many welfare payments, the non-contributory pension has some quirks people should be aware of.

As it’s primarily a payment to ensure that everyone has a basic subsistence standard of living in their retirement, the department will want to see that you’re spending all, or most, of your pension each week. If you don’t, it could affect the future payment you’ll be entitled to. For example, if you go into a nursing home or hospital for a spell and end up saving most of your pension each month, your payments could fall.

“If you choose to save part of your pension, those savings will be means-tested in the same way as savings from any other source (for example, from an increase in earnings, from an occupational pension or from an inheritance),” the department says.

Any increases?

Recipients of the non-contributory State pension may be entitled to a number of increases which can help drive up their weekly payment. Those aged 66 or over and living alone, for example, are entitled to an additional €9 per week, while an extra allowance of €10 per week is automatically paid when recipients reach 80 years of age.

In addition, the fuel allowance pays an increase of €22.50 per week to help with the cost of heating homes during the winter months, although there is only one such payment per household.

Do I have any other options?

If you do qualify for a non-contributory pension, but are only entitled to a derisory amount on the grounds that you have other means, you could consider seeking out another welfare payment. Some people might find that they would do better applying for an “increase for qualified adult” payment for example.

This is given to the spouses, partners and civil partners of people who qualify for a social welfare payment in their own right and it is paid at a rate of 90 per cent of the associated payment.

Currently, the rate of payment for a qualified adult (effectively an adult dependent) to a person on a contributory State pension is €162.10 for those aged under 66, or up to €218 for those aged 66 and over. Like other welfare payments, it will rise in March 2019, up to €165.40 and €222.50, respectively.

To qualify, you need to be a spouse, civil partner or cohabitant of the person getting the pension benefit, and you should not be getting a welfare payment in your own right (apart from a number of eligible ones, such as child benefit).

The qualified adult payment is also means tested, but not as harshly as the non-contributory pension. You’re allowed gross income of €310 a week, although it does work on a tapered basis. You get the full payment if you have income of less than €100 a week: between €100 and €300, reduced rates apply.

Remember, even if your partner only qualifies for a non-contributory pension, you may be entitled to an qualified adult payment also. It is paid at a rate of up to €153.30 – but only up to the age of 66. After this point, people need to apply for a non-contributory pension themselves.

Changes on the horizon

The whole pensions landscape is currently under review as the Government considers, on the one hand, auto-enrolment, which will pull more employees into having private pensions, and, on the other, discussions on a move to a total contributions approach (TCA) for the contributory State pension from 2020.

But where does this leave those depending on the non-contributory pension? According to the department, there is no “signalled impact” from the move to total contributions as the calculation of payments under TCA applies only to contributory pensions.

However, there may be some impact – and it could be positive. Some people who actually qualify now for a contributory State pension, but are taking the non-contributory payment because they are entitled to a higher payment through this scheme, may end up doing better through a contributory pension once the system is changed.

The Irish Longitudinal Study on Ageing (Tilda) report looked at more than 8,000 people aged over 50, focusing on 325 people who retired during the survey period between 2009 and 2015. Photograph: Getty
Even if your partner only qualifies for a non-contributory pension, you may be entitled to an qualified adult payment also. File photograph: Getty

People are entitled to go for the pension type which yields them the highest weekly rate.

“It is possible that the new calculation may benefit some of these people, where the recalculated state contributory pension entitlement using the total contributions approach method exceeds their current non-contributory pension weekly entitlement,” a spokeswoman for the department said.

Who qualifies for a non-contributory State pension?

Example 1: Single man with no income + savings of €25,000

John (68) owns his own home and has savings of €25,000 but has no income. As the first €20,000 in savings is disallowed, John will be assessed only on the remaining €5,000 at a rate of €1 per €1,000, giving weekly income of €5. As an applicant can have weekly means of up to €30 and still be eligible for maximum rate, John will get the maximum rate of €232 per week. He will also qualify for the living alone allowance (€9 a week); fuel allowance (€22.50) and telephone allowance (€2.50).

Total weekly entitlement: €266

Example 2: Married couple with €100 weekly income + savings of €45,000

Joe (73) and Majella (59) have a dependent child in university, and a private income of just €100 a week. They don’t own their own home and are renting at €650 a month.

As the weekly income is below €200 it’s not assessed. Of the savings, the department will assess Joe for half – €22,500 – which gives weekly means of €2 (at €1 per €1,000). As the weekly means are under €30, Joe would qualify for the maximum payment of €232 per week as well as an increase for a qualified adult for Majella of €153.30 a week, also the maximum rate. They will get a further qualified child increase of €31.80 per week, as well as the seasonal fuel allowance of €22.50 per week.

Total weekly entitlement: €439.60.

The whole pensions landscape is currently under review. File photograph: Getty Images

Example 3: Married couple with income of €865 a week + assets of €550,000

Joan (82) and John (85) have income from a personal pension of €865 a week, an investment property worth €200,000 and savings and investments of €350,000.

Their assessed means exceed the statutory limit, so neither qualify for the non-contributory pension.

Total weekly entitlement: €0.

How much of a pension might I get?

Weekly means (€)  Weekly rate (€)

           €30.00                       €232.00

     €50-52.50                       €209.50

 €100-102.50                        €159.50

  €150-152.50                       €109.50

€200-202.50                         €59.50

 €250-252.50                           €9.50

          €257.50                          €4.50

         €258.00                          €0.00

When do I get a non-contributory pension?

Age

2018 66

2021 67 – born between January 1st, 1955 and December 31st, 1960

2028 68 – born after January 1st, 1961

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