# State Pension - Underpublicised major issue



## Gordon Gekko (3 Mar 2015)

Hi

I'm doing some pension planning at the moment and I've come across something pretty alarming.

In order to get a full State Pension, you need a total of at least 520 PRSI contributions and an average of 48 contributions per year. The former represents 10 years of work which isn't onerous at all. However the latter could be very problematic. It's the average from when you first worked until you retire. I had a summer job when I was 16. Then I wasn't in employment while I did my Leaving Cert and while I was in college. I've worked consistently since then, but if I work to retirement age (assume 70 for the purposes of this discussion) I can't get a full pension.

Age 16 - One year with circa 12 contributions
Age 17 to 22 - Six years with no contributions
Age 23 to 70 - 48 years with 52 contributions

My average, despite my 48 years of graft and payment of 4% PRSI on what will hopefully be decent numbers, will not entitle me to a full State Pension.

That simply isn't fair - It's "only" a reduction of €5 a week based on current rules, but it's ridiculous.


----------



## Prittstick (3 Mar 2015)

Hi Gordon
I am also very interested in this issue, and I seem to spend a lot of time discussing Pension issues with various people.! (seemy post a few minutes ago on ARF PRSI contributions)

Yes, I agree this rule regarding from the time you first entered employment is very unfair.

But it might not be as bad as you think, depending on your present age. 

Under the Alternative Average Rule your contributions are averaged from 1979, so this might exclude those 'poor' contribution years between 16 and 23.

Also, under the new National Pension Framework, if you were born after 1 Jan 1954 , you only need 30 years contributions to get the full State pension. , but you do have to wait till you are 67!

if you were born on or after 1 January 1954 the following changes apply;

Once you have paid 520 full-rate contributions (10 years), the minimum State Pension will be payable (i.e. 10/30 ths – or one third – of the maximum rate).  For each additional complete year of contributions you will gain  1/30 th of a pension up to a maximum of 30/30 ths. A total of 30 years contributions and/or credits will be required in order to receive the maximum State Pension. The maximum number of credits that can be used in calculating your entitlement to State Pension will be 520 (i.e. 10 years).


----------



## seamless (4 Mar 2015)

Interesting observation. Is it possible to check your contributions online somehow ?


----------



## elcato (4 Mar 2015)

Prittstick said:


> Also, under the new National Pension Framework, if you were born after 1 Jan 1954 , you only need 30 years contributions to get the full State pension. , but you do have to wait till you are 67!
> 
> if you were born on or after 1 January 1954 the following changes apply;



I presume the first one should be *born before 1954*


----------



## orka (5 Mar 2015)

elcato said:


> I presume the first one should be *born before 1954*


No. It is 'on or after 1 January 1954'.


----------



## Meath Lady (5 Mar 2015)

Any ideas if homemakers credits will be included in the maximum ten years credits.


----------



## dub_nerd (10 Mar 2015)

Any idea if four years of modified rate (civil service) contributions (for which there is no entitlement to a civil service pension) can be counted as part of total contributions for State contributory pension? They would bring me up to exactly 30 years of contributions.


----------



## Brendan Burgess (10 Mar 2015)

The whole system is crazy.

The pension should be based on the amount of PRSI paid by you and by your employer and not by the number of contributions, and certainly not by the average number.

Gekko, what age are you? There is a good chance that it will be changed in the coming years.

Brendan


----------



## Gordon Gekko (10 Mar 2015)

Hi Brendan

I'm a youngish one - 34.

Regards

GG


----------



## Jim2007 (10 Mar 2015)

Gordon Gekko said:


> I'm a youngish one - 34.



No worries then!  By the time you reach pension age there will be no state pension at the rate they are going


----------



## Jim2007 (10 Mar 2015)

Brendan Burgess said:


> The whole system is crazy.



They are all a little crazy.  Here in Switzerland they calculate the pension as the number of full years contributed over 47 years being the max number of years you could have contributed for....  At 18 most kids are still in school, in college or on an apprenticeship so most will not actually contribute until around 25, in other words almost everyone looses 7 years!


----------



## Gordon Gekko (10 Mar 2015)

Jim2007 said:


> No worries then!  By the time you reach pension age there will be no state pension at the rate they are going



The reason that all of this is to the forefront of my mind is that I'm currently engaged in pension planning / financial planning.


----------

