# Prsi voluntary contributions after early retirement



## Spud50 (3 Aug 2022)

I am planning on retiring early this December (I’m 55) and am going to live off savings for a few years to build the pension up a bit .( so will have no income)
I have 35yrs + of PRSi paid at Class A and want to pay voluntary contributions for the next 5 yrs until I draw down my pension at 60.
My question is do I have to pay the first PRSI contribution @6.6% of my previous years salary for the first year ( which would be a big chunk out of saving)  and 500€ every year thereafter or can I pay 500€ every year from the outset and contact social welfare before old age pension to pay any shortfall??

also the form mentions an Agent ? Can I just make the payment myself or do I need to go through someone?


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## NoRegretsCoyote (3 Aug 2022)

Spud50 said:


> I am planning on retiring early this December (I’m 55)


If you can, retire in early January.

VCs are based on PRSI payments in last calendar year of employment. So it makes sense to work off a low base.


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## Groucho (3 Aug 2022)

Spud50 said:


> also the form mentions an Agent ? Can I just make the payment myself or do I need to go through someone?



You can do it all yourself; there's absolutely no requirement to use an agent.


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## bstop (3 Aug 2022)

If you can manage to open a PRSA and invest at least 10,000 euro before you resign and then when you retire at age 60, set up an ARF. Make monthly drawdowns from the ARF and you would achieve 52 S class Prsi contributions per year from age 60 to age 66. These S class contributions are rekonable for the contributory pension. By doing this you could avoid the necessity of making voluntary Prsi contributions.

Another way could be, if you apply for Jobseekers Benefit you would get A class Prsi credits for 9 months and then continue to sign on for credits and you could achieve your 40 years of Prsi contributions.


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## Spud50 (4 Aug 2022)

bstop said:


> If you can manage to open a PRSA and invest at least 10,000 euro before you resign and then when you retire at age 60, set up an ARF. Make monthly drawdowns from the ARF and you would achieve 52 S class Prsi contributions per year from age 60 to age 66. These S class contributions are rekonable for the contributory pension. By doing this you could avoid the necessity of making voluntary Prsi contributions.
> 
> Another way could be, if you apply for Jobseekers Benefit you would get A class Prsi credits for 9 months and then continue to sign on for credits and you could achieve your 40 years of Prsi contributions.


so @bstop if i open up a PRSA with 10k and presumably draw it down now from January (age 55) which i believe i can do as i am currently a PAYE employee  , will that PRSA make s class contributions every year from 55 to 60 ??? until i set up an ARF at 60


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## bstop (4 Aug 2022)

It depends on your current employment pension. If you have an occupational pension related to your current employment you can only set up an ARF when you start to receive your occupational pension which you implied would start at age 60. You will not start getting S class Prsi contributions until you begin drawing down your ARF. If you are able to set up the ARF at age 55, then you could get S class Prsi contributions from age 55 to age 66. 

You only get S class contributions from an ARF and not from a PRSA.

10000 euro is the minimum that Irish Life will allow for the setting up of an ARF. Zurich require 20000 euro. 10000 euro is therefore the minimum amount required. Ideally you should aim to maximize the size of your ARF by investing the maximum allowable contributions to a PRSA for 2021 and 2022. You will need to invest for 2021 before 31st October 2022.


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## Spud50 (4 Aug 2022)

thanks @bstop for the clarification , i wont have an ARF till 60 so i may go for the @NoRegretsCoyote option of waiting till end of Jan to finish and work off the low base.
thanks folks for all the replies


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## LDFerguson (4 Aug 2022)

Spud50 said:


> i wont have an ARF till 60



Is the main pension scheme a Defined Contribution pension scheme?  If so, it might be worth exploring the possibility of taking your benefits now and setting up the ARF now for the reasons that @bstop mentions.  Just draw the bare minimum out of the ARF for the first few years to get your Class S PRSI contributions.  It has the advantage of using up Tax Credits during that period.


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## Spud50 (4 Aug 2022)

thanks @LDFerguson , it is a DC , but presumably if i start drawing on the ARF i will have to take 4% per annum minimum which i dont want to do yet, i want to leave it for another 4 or 5 years


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## LDFerguson (4 Aug 2022)

Spud50 said:


> thanks @LDFerguson , it is a DC , but presumably if i start drawing on the ARF i will have to take 4% per annum minimum which i dont want to do yet, i want to leave it for another 4 or 5 years



No - there's no requirement to take any income from the ARF until the year in which you turn 61.  That's when the 4% requirement comes in.  Before then, you could choose to take a lower withdrawal - ideally enough to get your Class S contributions but pay little or no tax.


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## RedmondC (4 Aug 2022)

bstop said:


> If you can manage to open a PRSA and invest at least 10,000 euro before you resign and then when you retire at age 60, set up an ARF. Make monthly drawdowns from the ARF and you would achieve 52 S class Prsi contributions per year from age 60 to age 66. These S class contributions are rekonable for the contributory pension. By doing this you could avoid the necessity of making voluntary Prsi contributions.
> 
> Another way could be, if you apply for Jobseekers Benefit you would get A class Prsi credits for 9 months and then continue to sign on for credits and you could achieve your 40 years of Prsi contributions.


Thank you so much for this post. I am planning to stop next year at 53 and pay voulintary which would be 3k a year but doing it as you suggest will save a fortune. But is S class just for self employed or can a paye worker get them if as you say I pay PRSI on a small afr drawdown?


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## bstop (4 Aug 2022)

RedmondC said:


> Thank you so much for this post. I am planning to stop next year at 53 and pay voulintary which would be 3k a year but doing it as you suggest will save a fortune. But is S class just for self employed or can a paye worker get them if as you say I pay PRSI on a small afr drawdown?


Anybody with an ARF is subject to S class Prsi. You do not need to be self employed.


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## dub_nerd (5 Aug 2022)

If you have unearned income which you are charged PRSI on -- rental income, share dividends, deposit interest -- all those things are normally credited as Class K with no benefit entitlements. However, if unearned income is _your only source of income_, _AND_ it amounts to >5k per year (which makes you a "chargeable person" and subject to minimum EUR 500 PRSI payment), you will get Class S credits instead. Saved me a lot compared to VCs, made up the 5k from a combination of deposit interest and UKIT dividends. I got a couple of PRSI statements over the years to confirm they were credited at Class S.






						Can you pay PRSI at Class S on unearned income?
					

When PRSI was introduced for everyone on unearned income in 2014, I understood it was at Class K which conferred no social welfare entitlements. The other day I came across this in the Irish Times from last year:  Minister for Finance Michael Noonan extended the reach of PRSI so that it would be...



					www.askaboutmoney.com


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## bstop (6 Aug 2022)

dub_nerd said:


> If you have unearned income which you are charged PRSI on -- rental income, share dividends, deposit interest -- all those things are normally credited as Class K with no benefit entitlements. However, if unearned income is _your only source of income_, _AND_ it amounts to >5k per year (which makes you a "chargeable person" and subject to minimum EUR 500 PRSI payment), you will get Class S credits instead. Saved me a lot compared to VCs, made up the 5k from a combination of deposit interest and UKIT dividends. I got a couple of PRSI statements over the years to confirm they were credited at Class S.
> 
> 
> 
> ...


Yes that is correct.

Unfortunately when a person starts taking benefits from an occupational person they will have other income subject to  Prsi class M. This means that their investment or rental income reverts back to Prsi class K.

However if they also have an ARF then their investment or rental income stays at Prsi class S.


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## Spud50 (8 Aug 2022)

so i got a statement from Social welfare today which shows i have 1945 stamps (of which 50 are credited) ,  is it then correct to say that once i have 2080 stamps in my name that i am eligible for the contributory old age pension and that i dont need to pay any more voluntary contributions??


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## Conan (8 Aug 2022)

Spud50 said:


> so i got a statement from Social welfare today which shows i have 1945 stamps (of which 50 are credited) ,  is it then correct to say that once i have 2080 stamps in my name that i am eligible for the contributory old age pension and that i dont need to pay any more voluntary contributions??


2080 stamps is the equivalent of 40 years and that currently qualifies for a full State Pension


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## fistophobia (9 Aug 2022)

2 out of 3 males will not live long enough to collect the state pension at age 67.
Article in today's Indo.


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## huskerdu (9 Aug 2022)

I cant see that article as its behind a paywall, but I would be very interested in knowing how that statistic was derived, 
The life expectancy for a man in Ireland is 78 and they are claiming that 2/3 of men die before they are 67


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## Early Riser (9 Aug 2022)

fistophobia said:


> 2 out of 3 males will not live long enough to collect the state pension at age 67.
> Article in today's Indo.


I don't think that is quite the claim being made. It is that taking the proposed "deferred option" would not pay off for 2/3 over the course of their life times. That is on the assumption that each year of deferral would result in a 4% increase in their pension rate.


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## RedmondC (12 Aug 2022)

Hi Everyone
From the above reply’s it seems if I stop working in February I can then pay voluntary contributions  the following year and it will be based on two months value from year of stopping working?


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## deanpark (14 Aug 2022)

Spud50 said:


> I am planning on retiring early this December (I’m 55) and am going to live off savings for a few years to build the pension up a bit .( so will have no income)
> I have 35yrs + of PRSi paid at Class A and want to pay voluntary contributions for the next 5 yrs until I draw down my pension at 60.
> My question is do I have to pay the first PRSI contribution @6.6% of my previous years salary for the first year ( which would be a big chunk out of saving)  and 500€ every year thereafter or can I pay 500€ every year from the outset and contact social welfare before old age pension to pay any shortfall??
> 
> also the form mentions an Agent ? Can I just make the payment myself or do I need to go through someone?


Why are you retiring at 55? Is it health reasons or just want to finish working or massive savings though your comments suggest otherwise.   Seems like a long time to eke out savings until 60 and then another 6-7 years to get state OAP.


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## Spud50 (16 Aug 2022)

retiring due to burnout from the cubefarm @deanpark , i was an apprentice at 16 so worked a long time.


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## RedmondC (16 Aug 2022)

I was planning to retire early next year after working until March and then starting voulintary contribution’s in 2025 and figured I would only need to pay 3 months worth each year ie my last PAYE year however citizen’s advice has me confused. Reply below 

Our information and the Voluntary Contributions Operational Guidelines do not give further detail.  I put a call into the Voluntary Contributions section and spoke to somebody in the Customer Service Section of the DSP.  The person there told me that they work a year behind.  If you apply to make voluntary contributions in 2024, they will take it that you are applying to pay contributions for 2023 and will base the assessment on your earnings for 2022.  If you apply in 2025, they will take it that you are applying to pay contributions for 2024 and will base the assessment on earnings in 2023, which will be the three months.  They also said that they do a new assessment each year, as in, if you pay voluntary contributions for the remainder of 2023, your assessment will be based on this year, but the following year your contribution will be lower if your income is lower.


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## Spud50 (17 Aug 2022)

@RedmondC Citizens Advice state *"If you paid PRSI at Class A, E or H you pay a high rate contribution of 6.6%* of your reckonable income in the previous tax year, subject to a minimum payment of €500" 
Having spoken to both Citizens Advice and SW , my understanding (please correct me if im wrong) is that voluntary is 6.6% of  the last year that you worked and thereafter 500€ per annum assuming you have no income in the years following . up to the point where you have acquired 40years /2080 stamps


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## RedmondC (19 Aug 2022)

Spud50 said:


> @RedmondC Citizens Advice state *"If you paid PRSI at Class A, E or H you pay a high rate contribution of 6.6%* of your reckonable income in the previous tax year, subject to a minimum payment of €500"
> Having spoken to both Citizens Advice and SW , my understanding (please correct me if im wrong) is that voluntary is 6.6% of  the last year that you worked and thereafter 500€ per annum assuming you have no income in the years following . up to the point where you have acquired 40years /2080 stamps


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## RedmondC (19 Aug 2022)

Thanks@Spud50 Your Correct- reply from Vol Con Section of social welfare-

If you were employed the first year would be 6.6% of previous years income and then divided by amount of weeks required.
Once there is no further earnings on record the following years will be €500.00 per annum.


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