Key Post PRSI in the year you hit 66

Brendan Burgess

Brendan Burgess

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I thought I had got the definitive answer to this from Revenue but an accountant has told me that he got a different answer, or, probably , a more specific answer. This is my summary, but it's based on what I have been told. I can't find a Revenue or Social Welfare link to confirm it. When completed, I will send it to social welfare and ask them to issue their own version.

Verify any of this before taking action on it.

Corrections and authoritative links welcome. Please also fill in any gaps.

It seems to be full of anomalies.

Issues outside the scope of this thread - and covered in other threads
  1. Exceptions and exemptions due to low income
  2. Whether contributions qualify as PRSI contributions for contribution record purposes
  3. Whether people can make voluntary contributions
Any such posts will be deleted.

Original social
insurance class*
Ordinary employees of companiesAEmployees PRSI payable until your birthday. No PRSI after that
Employers PRSI - I don't know.
Proprietary Director's salarySPRSI payable until your birthday - no PRSI after that.
Self-employed incomeSNo PRSI payable in the full year you hit 66
Rental and investment incomeSNo PRSI payable in the full year you hit 66
Occupational pensionsMNo PRSI payable at any age. If you draw down your pension early, you don't pay PRSI on it source
Drawdowns from an ARFS4% PRSI payable until your 66th birthday.
Definitely for under 66
No PRSI after your 66th birthday. source

* When you no longer pay PRSI, you move to Social Insurance Class M

It is odd that PRSI is deducted on ARFs and Directors' salaries until their birthday while there is no PRSI for the year on the self-employed or rental and investment income, but the explanation appears to be that it is because ARFs and Directors are paid under the PAYE system.
 
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From JPD

Sorry, I do not know the answer to that - but a question was asked in the Dail in 2018 https://www.oireachtas.ie/en/debates/question/2018-11-21/241/#pq-answers-241

Q. Deputy Michael McGrath asked the Minister for Employment Affairs and Social Protection the class of PRSI paid by persons under 66 years of age in respect of income from an approved retirement fund; if such PRSI paid is reckonable for the purposes of the State pension (contributory); and if she will make a statement on the matter. [48608/18]
Written answer:
Approved retirement funds or ARFs are funds managed by a qualifying fund manager into which an individual may invest the proceeds of their pension fund when they retire. The income and gains of such funds are exempt from tax within the fund. Any amounts withdrawn from an ARF are referred to as a distribution. A distribution is treated as income from an employment. It is subject to income tax and the fund manager must operate the PAYE system on it.

Under social welfare legislation any payments received by way of pension are not regarded as reckonable emoluments for the purposes of self-employed pay related social insurance (PRSI). However, unlike annuity products, ARFs are not pensions but are treated as assets. Distributions from ARFs fall within the charge to Class S self-employed PRSI, or if the recipient of the distribution is a modified class contributor, Class K. Class S contributions may be used to qualify for the State pension (contributory). Class K PRSI contributions do not give entitlements to any social insurance benefits.

Does that help?
 
RE PRSI on ARF for 66 and over

McGrath asked a very similar question the following year and got a similar answer, on this occasion it was explicit in relation to the treatment of those who are 66 and over

https://www.oireachtas.ie/en/debates/question/2019-07-02/652/

As such distributions from ARFs for people less that 66 years of age fall within the charge to Class S self-employed PRSI, or if the recipient of the distribution is a modified class contributor, Class K. Distributions and imputed distributions, after age 66 (current State Pension age), are not liable to Class S PRSI deduction. They are recorded under PRSI Class M for which there is a nil liability.
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The opening post does does not make sense the way it is written:
SNo PRSI payable in the full year you hit 66

If you are on Class S you pay Class S PRSI, no matter your age. If no PRSI is to be paid you move to PRSI Class M. It would be clearer to change the wording to reflect this.

BTW, The age limit on Class S is one of those questions you could ask 2 Revenue Officials and get different 3 answers!

2023 PRSI Classes: https://assets.gov.ie/235790/1f7aa00c-0978-46df-9576-4b51dd3826f7.pdf

Note: There is a proposal to increase the 66 Age limit to 70, if you do not qualify for the State Contributory Pension.
 
Towger said:
If you are on Class S you pay Class S PRSI, no matter your age. If no PRSI is to be paid you move to PRSI Class M. It would be clearer to change the wording to reflect this.
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OK, thanks for that.

So something like

original classlater class
Ordinary employees of companiesAMEmployees PRSI payable until your birthday. No PRSI after that
Employers PRSI - I don't know.

Or would I just change the title of the column to Original Contribution Class*

*When you are no longer liable for PRSI you move to Class M
 
Regarding unearned income.
The rules for unearned income are complex and in most cases class S does not apply.
 
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Brendan Burgess said:
It is odd that PRSI is deducted on ARFs and Directors' salaries until their birthday while there is no PRSI for the year on the self-employed or rental and investment income, but the explanation appears to be that it is because ARFs and Directors are paid under the PAYE system.
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The penny might eventually drop, if you study this statement, the difference in Prsi payment rules in the subject year, is based on whether it is collected under PAYE or self assessment.
 
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@Brendan Burgess

Your summary in post #1 needs to be revised to take account of the change in PRSI liability for those over 66, effective 1st Jan 2024. This is a consequence of the new variable start date for the state pension contributory. In essence:

Changes to Pay Related Social Insurance (PRSI)​

From 1 January 2024, a person will be able to draw down their State Pension (Contributory) between age 66 and 70. This will give a person the opportunity to continue to work and pay PRSI which may improve their contribution record at the date they decide to draw down their State Pension (Contributory).
As it stands, a person who is an employee and is aged 66 or over does not pay PRSI on their income (although their employer will pay Class J at the 0.50% rate). A self-employed person who is currently aged 66 or over does not pay PRSI (returned at Class M, nil contribution).
From 1 January 2024, the upper age limit for PRSI exemption is being changed by legislation from age 66 to age 70. This will apply to the employee, the employer and the self-employed PRSI liability.
This change will apply to all persons who are employees and the self-employed with the exception of the following main categories:
  • people who have already been awarded the State Pension (Contributory)
  • people who have already reached 66 years of age by 1 January 2024 (born before 1 January 1958)
The PRSI position for people who have already reached age 66 by 1 January 2024 will be unaffected by the changes. For example, employees do not have to pay PRSI on their income and their employer will continue to pay Class J at the 0.5% rate.
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Details here :https://www.gov.ie/en/publication/70400-changes-to-pay-related-social-insurance-prsi/#:~:text=A%20self%2Demployed%20person%20who,the%20self%2Demployed%20PRSI%20liability.

This might be a good time to send your summary to DSP for their commentary as you originally intended.
 
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