I worked as a public servant for over 25 years and took early retirement to pursue another career. I have a reduced Civil Service pension and paid reduced rate PRSI for my career in that sector.
I am now working in the private sector and paying full rate PRSI. I understand that I need minimum of 10 years’ PRSI contributions to be eligible for any amount of contributory old-age pension. I have seven years’ contributions so far.
My question is whether I will be eligible for the contributory pension at all. Will my start date for employment be when I first started work over 35 years ago? If so, does that mean I won’t have the required contributions?
My “works pension” would render me ineligible for a non-contributory on the basis of means. And with cost-of-living increases, I’m starting to worry about how I would manage after retirement if I don’t have another pension.
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Ms CB
Increasing workforce mobility means a growing number of people are piecing together pension entitlements from different employments when it comes to assessing likely retirement income.
But while you can generally move workplace pensions with you as you go from job to job in the private sector – though you don’t have to – things get a little more complex when you are hopping between public- and private-sector employments.
Essentially the pensions operate in different ways – most particularly, a public-sector pension is a defined benefit one, based on pay and years of service, while most private-sector ones follow the defined contribution model, where your pension is determined by contributions to the fund by you and your employer and the investment performance of those contributions.
In your case, you are already drawing down your public-service pension – albeit reduced on the basis you took early retirement. Given that reduction and the fact you left public service significantly short of full service, I can see why you might be concerned about what the future holds for you financially.
The good news is that you should certainly be entitled to a contributoryState pension though, again, it will be well short of a full one.
I can understand your concern. Traditionally, to assess State pension eligibility, you went back to the time you made your first PRSI payment all those years ago. You then worked out how many PRSI stamps you had on average between that point and the end of the last year before the year in which you turn 66.
You needed an average of 48 or more for a full pension, with the payment falling in bands below that.
With your many years of reduced PRSI payments, you could find it a challenge to qualify on that basis.
However, more recently, the approach has changed.
The base level is still the same: you must have a minimum of 520 full-rate weekly PRSI contributions – ie 10 years of stamps. But after that, things have changed fundamentally.
The more modern system is called the “total contributions approach” and, as those words imply, your pension is based on how many contributions you have, not on when you started work.
Under this system, you need 40 years of PRSI for a full pension – 2,080 weekly payments. That can include credited contributions for periods when you are not in work but are drawing welfare – for instance, jobseekers, maternity benefit, carer’s benefit or illness benefit, among others.
Then there are credits for homecaring periods – time spent out of the workforce caring for children aged 12 or under or dependent relatives.
You can use up to 10 years of welfare-related credited contributions and 20 years of homecaring contributions but, between them, the maximum benefit is 20 years. So if you have 20 years of homecaring, no other welfare credits would count.
Once you have totted your contributions, it is a simple pro rata calculation. Twenty years of PRSI equals a half pension; 10 years, a quarter of the full weekly rate.
You currently have seven years of paid contributions and are confident you will reach the minimum of 10 years. Given the maximum weekly pension is €289.30, your 10 years of stamps would give you a weekly payment of €72.20 – a quarter of the full pension.
If you were to finish on 12 years of stamps (624 weekly payments), the weekly payment would be €86.80, or 30 per cent of the full rate (624 X 100 / 2,080 = 30 per cent), and so on.
You are not obliged to draw down the State pension at 66: you can put it off until any time up to your 70th birthday in return for a modestly higher payment, though I’d think long and hard before doing that.
If in doubt on how many contributions you have, you can get a copy of your PRSI record on mywelfare.ie or from the PRSI records team at Department of Social Protection, McCarter’s Road, Ardaravan, Buncrana, Co Donegal.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com with a contact phone number. This column is a reader service and is not intended to replace professional advice
