4 STATE PENSION

Rates

The current rates of contributory State pension varies from €97.20 to €243.30 per week. An additional €10 per week is paid when you reach 80 years of age. There are also additional payments available in certain cases where you care for dependent qualifying adults or children. The State pension is approximately one-third of average annual earnings.

The contributory State pension is taxable.

Conditions for qualification

Entitlement to the State Pension (Contributory) is based purely on PRSI contributions during your working life to age 66. It is not means-tested.

In order to qualify for the contributory State pension, the following conditions must be satisfied:

1 You must have started paying PRSI 10 years before reaching pension age (currently age 66);

2 You must have 520 full-rate contributions (10 years). This includes contributions to class A and class S. Only 260 contributions can be made up of voluntary contributions; and

3 You must have an annual average of at least 10 contributions per year from the year you first entered insurance to the end of the tax year before you reach pension age. An average of 10 contributions entitles you to the minimum pension, while an average of 48 contributions entitles you to the maximum pension.

New arrangement for pensioners on reduced-rate pensions

People who applied for the contributory State pension after 1 September 2012 and who received a reduced pension due to contribution gaps for homemaking and caring will be reassessed and can avail of a new Homecaring Credit.

Under the new regime, credited contributions will be available for periods of up to 20 years of homemaking and caring duties. Periods include time spent caring for children up to age 12, and for a person of any age who requires full time care and attention may be included.

The Department of Employment Affairs and Social Protections are contacting the affected individuals by post towards the end of 2018. You do not need to take any action until you receive this letter. The first payments will be made in 2019, with payments backdated to 30 March 2018.

Time worked outside Ireland

Where you have worked in Ireland and certain other jurisdictions (EEA, Switzerland, Canada, USA, Australia, New Zealand, Austria, Japan, Republic of Korea), the social insurance contributions in each relevant jurisdiction can be relevant to determining your State pension entitlement.

Application

To ensure State pension payments commence on time, the Department of Employment Affairs and Social Protection advise that applications should be submitted three months before the age of 66. Where you have paid social insurance contributions outside Ireland, applications should be submitted six months before reaching 66.

What if I don’t qualify for a (full) Contributory State pension?

If you do not qualify for a Contributory State pension, or if you only qualify for a partial pension, you can apply for the non-Contributory State pension, which is means tested.

Pension reform

As mentioned above, the State pension age is currently set at 66. This is due to increase to 67 years of age from 2021 and to 68 years of age from 2028.

With Ireland’s ageing population, coupled with the fact that only one in three private sector workers has a personal pension policy, the Government is seeking to encourage people to plan for retirement.

The Government has launched “A Roadmap for Pensions Reform” to run from 2018 to 2023. A number of different aspects have been proposed including:

• A new method for calculating an individual’s entitlement to the State pension from 2020 outlines a potential move from the current “yearly average” system to a “total contributions” approach. This includes awarding significant credits to people who have taken time out to perform caring duties;

• An actuarial review of PRSI rates, together with the amalgamation of USC and PRSI;

• Review of life expectancy in 2022 (and every five years thereafter) with a view to alignment with the State pension age. The Government has pledged that any change to the State pension age in light of these reviews would be subject to a 13-year notice period, ie 2035 at the earliest; • Indexation of the State pension rates; and • Introduction of a mandatory automatic enrolment retirement savings system see section 10 below).

Under this umbrella, The Pensions Authority has also been tasked with making pension rules easier to understand and removing anomalies in the current system. A reduction in the number of products is being considered.