HOW TO CALCULATE YOUR PENSION

Richie MacRitchie is an information officer with Welfare Appeals, who provide information and representation on social welfare, housing, employment and other issues.  Regular clinics are held in Russian language in the Larkin Unemployed Centre, North Strand Road, Dublin 3 and by zoom (Appointment is required)

For details, visit http://www.welfareappeals.ie/index.php/en/russian-info .

If you would like further information or help with their circumstances please phone 085 7630328 (Russian) or 083 4001658 (English) or email contact@welfareappeals.ie 

HOW TO CALCULATE YOUR PENSION

The first thing I should make clear is that these calculations only apply to the State Pension (Contributory).  This is the pension that is based on your PRSI contributions, it is not means tested (other income will not affect it), and you can bring this pension with you if you decide to leave Ireland.

Only social insurance contributions awarded in Ireland count towards this pension.   There are other pensions available (eg. if you have worked in other EU countries, or the means-tested Non-Contributory pension, but we will talk about those another day!).

It can be difficult to know how much of a State Pension you can expect to receive, because our circumstances may change between now and when we reach pension age.  Also, the rules for pensions will likely change.  At the minute the pension age in Ireland is 66.  There were plans to raise it to 68, but these have been put on hold and some are calling for the pension age to be reduced to 65.   We will have to wait and see how this develops, but we can be sure that the rules will change one way or another.

There are currently two different sets of rules that apply to the Contributory Pension.   The old rules are more complicated.   The new rules are known as the Total Contributions Approach and are more straight forward.   The old rules will likely be phased out soon, but for now the Department will assess your claim under both rules and will use the method that gives you the highest pension.

Each week that you work (and got paid) counts towards your pension, as long as you earned at least €38 per week.   Even if you don’t make contributions yourself, your employer will make them on your behalf.   These contributions are known as paid contributions   To get the Contributory Pension you must have at least 520 paid contributions (or 10 years working) in Ireland.

When you are not being paid by your employer, you do not get a paid contribution (unless you are receiving PUP or some other COVID support).    For other social welfare payments, you get a credited contribution, also known as credits.    To get credits, you must be claiming a social welfare payment in your own right.   If your spouse or partner is claiming for you, you should arrange to sign for credits, or you will end up with no social insurance contributions for the period.

These credits do not count towards the 10 years you need to get a pension.   But if you already have 10 years paid contributions, the credits can help you get a higher rate of payment.

Under the new rules, you can use a maximum of 10 years credits as well as the years you have worked.   Under the old rules, there is no limit to the amount of credits you can use.

Under the new rules, periods spent at home looking after children (under 12) or those with increased needs, can also count towards your pension.  A maximum of 20 years of these homecaring credits can be used towards your pension.   Under the old rules, only years after 1994 are taken into consideration if you were looking after children.

In some circumstances, you can arrange to buy paid contributions to increase your pension entitlement if you do not have any in a particular year.   These are known as Voluntary Contributions.   However, you can only do this if you have already worked for at least 10 years in Ireland (or in some other EU country).

The above rules only deal with the pension rate for an individual.   If your spouse/partner does not have their own income, you can also claim an increase in your pension for them.   You can claim some increase if the spouse has less than 310 Euro per week, and a full increase if the spouse has less than 100 Euro of their own income.

All of the above is quite complicated, so to demonstrate some of the rules, please see the following examples – although please note that these are for illustrative purposes only.   If you need advice about your own pension entitlement, please contact us for a detailed consultation.

Example 1

A came to Ireland in 2011.  She worked for 10 full years in Ireland and is eligible to claim the pension in 2021 at 66 years old.   She first worked in Latvia in 1981.

Under the new rules, A’s pension entitlement is simple.  She worked 10 years.  She gets 10/40 or 25% of the Contributory Pension or approx. €62 per week.

Under the old rules however, the calculation is more complicated.   Her working life is 40 years.  Her total Irish contributions are 520 (10 years x 52 weeks).  She has an average of 13 contributions per year.    Those who have an average between 10-14 contributions get a pension of €99.20.

Because the average rule is better for her, she will get €99.20 per week.

Example 2

B also came to Ireland in 2011 and is claiming her pension in 2021.   She also worked 10 years in Ireland, but she never worked in the EU before.

The calculation under the new rules is exactly the same as for A.  She will get €62 per week.

However, because her working life in the EU is only 10 years, she has an average of 52 weeks contributions.   She is therefore entitled to the maximum €248.30.   However, this will not apply to anyone who applies after the old rules have been removed.

Example 3

C came to Ireland in 2001.   He worked in Lithuania from 1971 until 2001.  He worked for 10 years when he arrived in Ireland, but then he lost his job, and has been on a social welfare payment since then.

Under the new rules, he has worked for 10 years, and has 10 years of credits.  This gives him a total of 20 years contributions.  He will get 20/40 or 50% of the pension, which is approx. €124

Under the old rules, he has a working life of 50 years.   He has 520 paid contributions and 520 credits, so has a total of 1040 contributions.  His average is 20.8.  Those with an average of between 20-29 contributions get a pension of €211.40

Again, the average rule is better for C and he will get €211.40

Example 4

D is married to C from Example 3.   They have no children.   D also came to Ireland in 2001 and worked for 10 years before losing her job.   She also worked from 1971-2001 in Lithuania.   However, when C & D lost their jobs, C claimed social welfare for the family, and D did not have a claim in her own name.   She did not realise that she should have signed for credits.

When D applies for a pension, she will not get the benefit of the 10 years of social welfare that her husband will.

Under the new rules, she will only get 10/40 or 25% of the pension (€62), and under the old rules she will have an average of only 10.4 so will only qualify for €99.20, much less than her husband, even though they have worked exactly the same!!!

However, because C has an average of 20.8, he can claim an increase on his pension for his wife of €140.10 (as long as she has income of her own of less than 100 Euro per week), and so it seems that this would be better than D applying for a pension in her own right.

Example 5

E has lived in Ireland her whole life.   She worked from 1971 until 1976, but then left the workforce to have children.  She looked after her children for 20 years.   She went back to work in 2016 and worked for 5 years before reaching pension age.

She has a total of 520 years contributions and a working life of 48 years (2 years are disregarded as she was looking after children after 1994)  She has an average of 10.8 contributions per year and under the average rule is entitled to €99.20 per week.

However, under the new rules, she can have up to a maximum of 20 years counted as a Homecaring Period.   Together with her 10 years work, she has 30/40 of the years required and will get 75% of the pension, or approx. €186 per week.

For E, the new rules are better.

Example 6

F came to Ireland in 2011, after working in Estonia for 40 years.   He worked for 8 years in Ireland before losing his job.   Because he has worked for more than 10 years in the EU, he is able to arrange to pay voluntary contributions for 2 years before he reaches pension age.   He is able to claim the Irish pension.

The calculation for the amount of pension is the same as for A in Example 1.  He will receive €99.20 per week

Example 7

G also came to Ireland in 2011, but he had previously worked in Moldova.   He worked in Ireland for 8 years and also lost his job.   Because he has not worked for 10 years inside the EU, he is not able to make voluntary contributions, and he will not be entitled to any Irish Contributory Pension.

Note – If you receive a reduced pension, it may be possible to get a Non-Contributory Pension of 237 Euro per week instead.   However, this pension is means tested, so it may be reduced by any income or capital that you have, and it cannot be received outside of Ireland.    You also must meet the Habitual Residence Condition to get this pension