Dave Vanian
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No, they'll receive 30% of a State Contributory Pension.
PRSI Contribution statement
- Thread starter phoenix53
- Start date
No, they'll receive 30% of a State Contributory Pension.
Dave's one line reply summarises succinctly the more detailed one that I was typing, as follows:
Under the TCA, which will (unless changed by a future Sinn Fein government) come into full effect in a decade, every eligible individual's State contributory pension will be calculated using the following formula: [maximum pension X (total number of reckonable pension contributions/2080)]
So the person who has accumulated 624 reckonable contributions (i.e. 30% of 2080) will receive 30% of the maximum pension payable.
It will take ten years (which, IMHO is far too long) but, ultimately, the payment will be proportionate to the "investment".
Under the TCA, which will (unless changed by a future Sinn Fein government) come into full effect in a decade, every eligible individual's State contributory pension will be calculated using the following formula: [maximum pension X (total number of reckonable pension contributions/2080)]
So the person who has accumulated 624 reckonable contributions (i.e. 30% of 2080) will receive 30% of the maximum pension payable.
It will take ten years (which, IMHO is far too long) but, ultimately, the payment will be proportionate to the "investment".
Des Pondent
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I don't think so. It is clearer on Citizens Information. The 2 previous years will help you get some payments, but only PEC’s from the start of the tax year that you start work help towards the contributory state pension.
Pre-entry credits when you start work
When you start work you are automatically given pre-entry credits. These credits are normally given once. They cover you from the beginning of the tax year in which you start work, up to the actual date you start work. The credits also cover you for the 2 previous income tax years.
Your pre-entry credits can help you to qualify for the following social insurance payments:
- Illness Benefit
- Jobseeker's Benefit
- Treatment Benefit
- Maternity Benefit
- Paternity Benefit
- Parent's Benefit
- Adoptive Benefit
- Health and Safety Benefit
https://www.citizensinformation.ie/en/social-welfare/irish-social-welfare-system/social-insurance-prsi/credited-social-insurance-contributions/#:~:text=Pre-entry credits when you,actual date you start work.
Flybytheseat
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It won't be "proportionate" to the investment though as somebody who had paid PRSI on a salary of €150K for x years will still get the same as someone who has paid PRSI on a salary of €30K for x years i.e. over 5 times the investment made but no proportionate payment.
Agreed 100%!
But in my response I was treating the "investment" as being each reckonable paid PRSI contribution, irrespective of its cost to the employee (and to their employer!)
Many thanks for that. That CI text couldn't be clearer. It's ridiculous that the DSP couldn't have made it equally clear in their Operational Guideline.
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so why is that not the case now, a person who has 30% average contributions per year still gets over 60% of full state pension, nobody is explaining why that is the case?
Flybytheseat
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Because it cant be explained. Its just indicative of an arbitrary unfair system that is currently in existence with no rhyme or reason behind it. Take for example Mr. A who has a summer job flipping burgers for 3 months when he is 17, then goes to college and emigrates for 12 years before returning to ireland and then pays PRSI until he retires at 65. Mr. B doesnt take that summer job, still goes to college and emigrates for 12 years, returns to Ireland and pays PRSI until he retires. Mr. B is entitled to a far larger state contributory pension than Mr A. under the current system despite him having made fewer contributions. Shows how unfair the current system can be.
Do you think that , if there was a Sinn Fein government, they would change the rules on this?
Secondly, is this 10 year transition to the different calculation definitely starting in 2025?
What I think is irrelevant! What I know is that Sinn Fein has repeatedly committed to reduce the State Pension Age to 65, and as yet I haven't heard a U-turn on this pledge. Hence my parenthetical comment that a SF government could change the rules.
As for your second question, the Gov.ie website states as follows:
https://www.gov.ie/en/publication/90d8b-changes-to-the-state-pension-contributory-what-you-need-to-know/
Thanks
One more question!
Mine is due towards the end of 2025. Therefore, I think it'll be 90%/10%.
Will mine stay like that from then on? So, someone starting to claim in say 2027, would be 70/30 and so on.
Or would mine decrease each year so that by 2035, mine will be 100% based on TCA?
Your pension will stay on 90%/10% for the rest of your life if you apply for it in 2025.
There is indeed a difference in the pensions of Mr A and Mr. B when we take this example. And it does not favour the guy getting his pension under the new TCA system. It actually brings his pension down!
Mr A starts working at age 17 and stops at age 65. That means the number of years spent in employment used for calculating in the average system is 48. If Mr A emigrates after the first job and his college time and comes back 12 years later and works from age 34 until he is 65- means 31 years, his combined PRSI contributions will be 1612 plus the summer job. This will mean a yearly average of about 33 ( 1612 contributions divided through 48 years). Which will put Mr A into band into the average band 3 ( 30 to 39 ) and would give him a pension of Euro 249.30.
Mr B does his college and emigrates at about age 22. He comes back 12 years later at also works from age 34 to age 65. Means he works for about 31 years. His PRSI count will be also 1612. To get the maximum pension under TCA he needs 2080. So Mr B ends up with Euro 214.90 ( Euro 277.30 multiplied with 1612 divided through 2080)- a whopping Euro 34.39 less than under the old "unfair" system.
By the way- both Mr A and Mr B have about the same amount of PRSI contributions in this example if we leave out the summer job of Mr A.
The old system is not that unfair as we are told. The different bands are very generous. You could also use as much "credits" as you actually have in your calculation- while there is a cap of 520 credits under the new system.
Make no mistakes- this system is to be introduced to bring down the costs for the pensions- not to bring in fairness or root out "anomalies". The current pension system is not sustainable under the present rules. It is a cost cutting exercise dressed up as doing something good. And I am sure there is more to come in years down the road- because even with the TCA cuts the pot won't be big enough anymore to feed the ever increasing number of pensioners.
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Flybytheseat
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Agree - Mr. B is the bigger looser under the TCA approach and sees his 100% contributory pension under the average caculation reduced by about 20% under the TCA approach. Mr. A also looses out but by not as much and yes it is being introduced to bring down the costs of pensions to the state and not for fairness.
Given that "the state" is a synonym for the hapless employers and employees whose PRSI contributions help to fund the pensions, it can be argued that it's a heck of a lot fairer to them!
Anyone with a genuine interest in the subject is invited to read the Green Paper on Pensions, which was launched a mere 17 years ago by three very wise men!
Disagree. The inequity with the Average Method is that it was possible for someone with only 10 years contributions (say from 55 to age 65), to get a full State Pension. The TCA is far more equitable, in that the Pension is pro-rata to the amount of contributions paid.
So 10 years get you 10/40ths whereas 40 years is required for a full pension. More equitable.
That example is an extreme rare case. I suppose the majority of those are housewives who never worked in their lives before and got a few hours one afternoon per week behind a counter in a news agent from the age of 55.They would get a fantastic return. Say they work 3 hours per week to fulfill the PRSI conditions and work until the age of 65. That is 1560 hours of work spent in the workforce to get the full pension- while somebody on 40 hours per week for 40 years works 83200 hours to get the same amount.
Surely there is the odd Irishman who emigrated before he got his first Irish job when he was young, spends around 35 years across the water and comes back from England at the age of 55 and clocks up 10 years here to claim the full Irish pension on top of his UK pension.
And there are the mysterious Eastern Europeans who are supposed to do the same thing.
But how many are there really? Any facts and figures from the DoSW?
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Just started to read...
Quote from the Foreword from 2007:
".....in the Programme for Government, including: increasing the basic State Pension to at least €300 per week by 2012"
It is 12 years after 2012 now- and the max. rate of the CP only stands at Euro 277.30.
What is the source of that assertion?