# Retiring just short of 10 years contributions for Irish pension - options ?



## ukpokerguy (31 Aug 2022)

I'm retiring shortly after having accumulated 8.5 years of contributions towards receiving an Irish pension.

I already have a full UK pension (having 35 years UK contributions) to come but as I understand it I need to have 10 years contributions, in the Republic, in order to receive a small state pension from here.

Do I have any options in paying up to the 10 years required or do I just lose any hope of getting an Irish pension ??


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## LDFerguson (31 Aug 2022)

What age are you?


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## Lisgoold (31 Aug 2022)

Sorry, don't know the answer about making it up to ten years, but......you need to check your UK forecast. The 35 year figure, is only relevant if you started paying NI after 2016. 

There are plenty of people who have 40 years of contributions , and won't get full pension. There are also people who will get it , with only 30 years worth. 
It depends (mainly) on wether or not you were contracted out, usually by being in DB scheme through work.

But yes, for someone starting working life after 2016, it's a straight figure of 35 years .

So check, and read all of, your forecast.


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## I'm Nobody (31 Aug 2022)

I'm in a similar situation. This October I will have 9 years contributions for an Irish pension.
I was a carer for several years here, hoping those years with help towards an Irish pension
Worked in the UK for 9 years. Topped up  UK voluntary contributions for 15 years giving me  24 years.
It depends on your age.
I'm 66 on the first of January 2023.
so any contributions after that will not count.
I do wonder though, I will be paying preliminary tax for 2023 in October this year so would that count towards my Years?


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## ukpokerguy (1 Sep 2022)

LDFerguson said:


> What age are you?


I am 62 next birthday


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## ukpokerguy (1 Sep 2022)

Lisgoold said:


> Sorry, don't know the answer about making it up to ten years, but......you need to check your UK forecast. The 35 year figure, is only relevant if you started paying NI after 2016.
> 
> There are plenty of people who have 40 years of contributions , and won't get full pension. There are also people who will get it , with only 30 years worth.
> It depends (mainly) on wether or not you were contracted out, usually by being in DB scheme through work.
> ...


Its not the UK side of things that concerns me.

Is there a way to add in additional PRSI payments to make upto 10 years on the Irish side?


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## NoRegretsCoyote (1 Sep 2022)

ukpokerguy said:


> I am 62 next birthday


You need a minimum of 10 years paid contributions at one of several PRSI types. You have paid Class A (employee) but presumably not Class S (self employed).

You will pay Class S PRSI if you have a minimum of €5,000 self-employed income in a tax year and receive 52 PRSI contributions. The rate is 4% of  your income or €500, whichever is higher. Two years of self-employment would take you to the minimum ten years to qualify for the minimum state pension.

Is there any self employment you can take up? Alternatively do you have a lot of savings you could deploy? Investment income that generates dividends of €5,000 a year or a rental property that generates profits of same amount would do it. Your capital would be at risk of course, but the benefits are large.

Did you start in the Irish system only in your 50s? The yearly average approach means that you could qualify for a full pension of €253.30 at 66. It's well worth doing as much as you can to get the minimum PRSI paid before 66. If your contributions are spread over decades you could still qualify for the minimum pension of €101.40.


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## Groucho (1 Sep 2022)

My understanding is that even if you don't have 520 paid reckonable PRSI contributions you will still be eligible to apply for what is called a pro-rata pension. 

This is a payment based on the proportion of Irish social insurance contributions to the total number of social welfare contributions that you have paid both here and in the UK.    
It's complicated, so you would be advised to study the relevant Operational Guidelines and see how they fit your situation.



> *EU or Bilateral Agreement (BA) pro-rata State Pension (Contributory)*
> If you do not qualify for a standard State Pension (Contributory) from this Department based on your Irish social insurance alone and you have periods of insurance in another EU country or Bilateral Agreement country you may qualify for a pro-rata pension using your combined social insurance records.
> This pension is based on a combination of full-rate Irish social insurance contributions and reckonable social insurance in EU countries or a country with which Ireland has a Bilateral Social Security Agreement. The pension is a pro-rata payment based on the proportion of Irish social insurance contributions to the total number of contributions paid and/or credited, that is, Irish and other insurance combined.


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## NoRegretsCoyote (1 Sep 2022)

Groucho said:


> This is a payment based on the proportion of Irish social insurance contributions to the total number of social welfare contributions that you have paid both here and in the UK.


You're right.

From the operational guidelines:



> *Step 1:*
> The notional pension is calculated. Notional pension is that which would be payable if all social insurance contributions, both full-rate Irish and non-Irish, were treated as Irish contributions. The full-rate Irish and non-Irish reckonable contributions are therefore added together and the total is then divided by the number of years to get the yearly average number of contributions.
> *Step 2:*
> The following formula is then used
> ...



So (very roughly) @ukpokerguy would get have the following values

A: €253.50
B: 8.5
C: 43.5

Which gives a pro-rated pension of €50 a week or so.

I still think it's better if at all possible to get to the Irish ten years (520) so that a minimum pension of €101.40 a week is payable.


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## Groucho (1 Sep 2022)

NoRegretsCoyote said:


> I still think it's better if at all possible to get to the Irish ten years (520) so that a minimum pension of €101.40 a week is payable.



Agreed. 

So what he really needs to do is to find some sort of part-time job (even one day a week would suffice) that will enable him to accumulate the 78 additional paid PRSI contributions that he needs.    He'll need to have accumulated these before the year in which he turns 66.    And as he's still only 61, he has over 4 full years in which to to do it!

EDIT:  Alternatively, maybe he could he set up an ARF and start drawing from it?    That would mean paying Class S PRSI.


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## NoRegretsCoyote (1 Sep 2022)

Groucho said:


> So what he really needs to do is to find some sort of part-time job (even one day a week would suffice) that will enable him to accumulate the 78 additional paid PRSI contributions that he needs.


Self-employment might be even easier depending on situation.

If he has contracting or consulting income of as little as €5k a year he will pay the €500k PRSI and get 52 contributions. Only has to be for 2023 and 2024 as well


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## LDFerguson (1 Sep 2022)

An additional option for accumulating the all-important Class S PRSI contributions is if you have a pension fund in Ireland, you can retire it, take your lump sum and put the balance of the fund into an Approved Retirement Fund (ARF).  Withdrawals from an ARF are subject to Class S PRSI which counts towards the State Contributory Pension.


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## time to plan (1 Sep 2022)

LDFerguson said:


> An additional option for accumulating the all-important Class S PRSI contributions is if you have a pension fund in Ireland, you can retire it, take your lump sum and put the balance of the fund into an Approved Retirement Fund (ARF).  Withdrawals from an ARF are subject to Class S PRSI which counts towards the State Contributory Pension.


Is there any minimum to be able to pay PRSI?? E.g. is you had 5k in savings, could you put it in a pension, get the tax deduction, retire, get an ARF, draw down and pay PRSI?


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## LDFerguson (1 Sep 2022)

time to plan said:


> Is there any minimum to be able to pay PRSI?? E.g. is you had 5k in savings, could you put it in a pension, get the tax deduction, retire, get an ARF, draw down and pay PRSI?



Off the top of my head, the minimum amount required to set up an ARF is €10,000 with some providers and €20,000 with others.  And bear in mind that it's generally advisable to take your tax-free lump sum first before moving the rest into an ARF, so that would suggest a minimum pension fund of around €13,333.  (Tax-free lump sum of €3,333 and €10,000 into an ARF.) 

The ARF withdrawal must be at least €5,000 per year to get 52 Class S PRSI contributions, so this would also be a factor.  How many years' contributions do you need?  If you just need 104, then the above €13,333 example would do it: withdraw €5,000 from the ARF in each of two years and there you go.  If you need more, then you'd need to hike up the size of the pension fund.  

This plan is not going to work for everyone.  The ideal candidate is someone who has no other taxable income in the years they draw €5,000 per year from the ARF.  That way, they'll be exempt from Income Tax and USC on it.  

Regards, 

Liam
www.FergA.com


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## time to plan (1 Sep 2022)

LDFerguson said:


> Off the top of my head, the minimum amount required to set up an ARF is €10,000 with some providers and €20,000 with others.  And bear in mind that it's generally advisable to take your tax-free lump sum first before moving the rest into an ARF, so that would suggest a minimum pension fund of around €13,333.  (Tax-free lump sum of €3,333 and €10,000 into an ARF.)
> 
> The ARF withdrawal must be at least €5,000 per year to get 52 Class S PRSI contributions, so this would also be a factor.  How many years' contributions do you need?  If you just need 104, then the above €13,333 example would do it: withdraw €5,000 from the ARF in each of two years and there you go.  If you need more, then you'd need to hike up the size of the pension fund.
> 
> ...


Thanks. In this case the prize of a state pension is substantial so worth looking at I reckon. Even if you had to borrow the money, given that you could get the tax deduction on the contribution?


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## Groucho (1 Sep 2022)

LDFerguson said:


> The ARF withdrawal must be at least €5,000 per year to get 52 Class S PRSI contributions, so this would also be a factor.  How many years' contributions do you need?  If you just need 104, then the above €13,333 example would do it: withdraw €5,000 from the ARF in each of two years and there you go.  If you need more, then you'd need to hike up the size of the pension fund.



Worth adding that even if you make a €5,000 ARF withdrawal, you'll only pay €200 PRSI (@4%) - so you'll still need to make a voluntary PRSI top-up of €300 to reach the required €500 minimum reckonable Class S contribution.


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## NoRegretsCoyote (1 Sep 2022)

Groucho said:


> Worth adding that even if you make a €5,000 ARF withdrawal, you'll only pay €200 PRSI (@4%) - so you'll still need to make a voluntary PRSI top-up of €300 to reach the required €500 minimum reckonable Class S contribution.


I don't think there's anything voluntary to it.

It's 4% of your Class S reckonable income or €500, whichever is higher, isn't it?

So anything reckonable income under €12,500 and you pay €500 I think.


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## bstop (1 Sep 2022)

The 500 euro minimum payment does not apply to distributions from an ARF.
The Prsi paid on ARF distributions can be any smaller amount. The critical thing is, if the distributions are less than 12500 euro per year you need to make monthly drawdowns. No matter how small the monthly drawdowns you will get 52 S class Prsi contributions per year.

ARFs are set up to be liable for S class Prsi to be paid on all distributions. They do not operate the same as self employment income which is only liable to S class Prsi if income exceeds 5000 euro.


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## Groucho (2 Sep 2022)

NoRegretsCoyote said:


> I don't think there's anything voluntary to it.
> 
> It's 4% of your Class S reckonable income or €500, whichever is higher, isn't it?
> 
> So anything reckonable income under €12,500 and you pay €500 I think.



That may be correct in theory, but it doesn't work in practice!    

I had to contact DSP annually and ask them to invoice me for the balance of Class S PRSI in order to bring it up to the magic €500!


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## Dave Vanian (2 Sep 2022)

Although I'm aware of the €500 stated minimum, I'm also aware that in practice if you make a withdrawal each year from an ARF you will be credited with Class S PRSI even if your PRSI deduction is less than €500.  I think this is also @bstop 's personal experience, from what I've read here. 

@Groucho - When you were making ARF withdrawals, did you get any Class S PRSI contributions added to your total?


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## Groucho (2 Sep 2022)

Dave Vanian said:


> @Groucho - When you were making ARF withdrawals, did you get any Class S PRSI contributions added to your total?



Yes Dave, Zurich paid me net of PAYE, USC and PRSI.      



Dave Vanian said:


> Although I'm aware of the €500 stated minimum, I'm also aware that in practice if you make a withdrawal each year from an ARF you will be credited with Class S PRSI even if your PRSI deduction is less than €500.  I think this is also @bstop 's personal experience, from what I've read here.



I suspect that you're correct about that.     I was told (off the record) by someone in Social Welfare not to worry about paying the €500 as my Class S credits would be added anyway - but I didn't want to take the risk!


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## ukpokerguy (2 Sep 2022)

Thanks for all the info...looks like I'm gonna have to see a financial advisor.

As you all say I have 4 years to make the additional contributions so perhaps a part time job down the pub is the way to go


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## Groucho (2 Sep 2022)

ukpokerguy said:


> Thanks for all the info...looks like I'm gonna have to see a financial advisor.
> 
> As you all say I have 4 years to make the additional contributions so perhaps a part time job down the pub is the way to go



That's definitely the most straightforward way to achieve your ambition.    And you have time to pick and choose until you find a job that you like.


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## Dave Vanian (2 Sep 2022)

Groucho said:


> I suspect that you're correct about that. I was told (off the record) by someone in Social Welfare not to worry about paying the €500 as my Class S credits would be added anyway - but I didn't want to take the risk!



I have a feeling that this is an anomaly - a conflict between the strict rules and actual practice.  Anywhere I've looked, the rules always state that you must pay a minimum of €500 per year Class S PRSI.  But I also know that in practice people who are making small withdrawals from their ARF which do not generate the €500 per year PRSI are getting the Class S contributions credited to their PRSI records in full.  Off the record I've been told that this is because the ARF providers don't know or need to know what other sources of income the individual has, so they just deduct the 4% PRSI and remit it and on receipt, the DSP just clock up the Class S contributions.


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## bstop (2 Sep 2022)

Dave Vanian said:


> I have a feeling that this is an anomaly - a conflict between the strict rules and actual practice.  Anywhere I've looked, the rules always state that you must pay a minimum of €500 per year Class S PRSI.  But I also know that in practice people who are making small withdrawals from their ARF which do not generate the €500 per year PRSI are getting the Class S contributions credited to their PRSI records in full.  Off the record I've been told that this is because the ARF providers don't know or need to know what other sources of income the individual has, so they just deduct the 4% PRSI and remit it and on receipt, the DSP just clock up the Class S contributions.


If you make 12 monthly withdrawals regardless of how small, from an ARF you get S class contributions as if you are paid weekly i.e. 52 contributions. The ARF is treated as PAYE income as regards tax and Prsi payments. Self employment income is treated as self assessed income and the 500 euro minimum Prsi contribution applies.

If you take less than 12 monthly drawdowns to a value of less than 12500 euro in total in any year, you will only get S contributions for the number of weeks included in the months you took drawdowns. However if you drawdown 12500 in one yearly payment you will get the full 52 S contributions.

DSP state that all distributions from an ARF are subject to S class Prsi.
Investment or self employment income of less than 5000 euro is subject to K class Prsi. If an ARF was treated the same as investment or self employment income, then K class would apply to small ARFs.

There is an anomaly in that ARF distributions are classed as self employment income rather than pension income for qualification for certain DSP benefit payments e.g. 65s benefit payment.

The whole Prsi system is a highly complicated mess. I have learned a lot about it in recent years. It rewards certain categories of payers and penalises a lot of others.

It is well worth spending some time to see how it works. I have managed to be one of the rewarded categories as a result of some minor forward planning.


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## murphaph1 (10 Nov 2022)

Your posts on this matter have _certainly_ helped me bstop. I currently pay voluntary €500 contributions (I am at 44 no longer in the PAYE system) through a fluke of having last paid PRSI in Ireland at class S (I am non-resident) but thanks to your posts I only have to make these payments until age 50 and then I am entitled to draw down my old company pension from Ireland. I was always going to just take an annuity but the clever way seems to be to go the ARF option, with monthly distributions, to get the 52 stamps a year for free instead of paying for them. I just need to do my sums to make sure I can make it to 66 this way with the pension pot I have. If I am unsure of anything I will continue to pay voluntary PRSI for a few more years. It's a cracking deal as it is. The ARF distribution is also considered PAYE income so a PAYE tax credit is available to me AFAIK (I have Irish rental income that can take advantage of that). Thanks a lot for highlighting these ARF subtleties. I am sure you have helped many others here.


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## bstop (10 Nov 2022)

You're welcome. The S stamps from the ARF are not free. There is a 4% Prsi rate. For a smallish ARF they can work out a lot less than the 500 euro fee for voluntary contributions. I don't know what the rules are for being liable for Prsi as a non resident. You would need to check this out. If your only irish income at present is rental and if you are earning over 5000 euro this would give you 52 S Prsi contributions if you were resident. You should check your Irish Prsi record to see what class of Prsi is applied to your rental income. 

There are weird rules for Prsi on rental and investment income.
If rental or investment income is your only source of income of at least 5000 euro it is class S.
If you have an occupational pension or earnings at class A ,B or D and your only other source of income is investment or rental then all the rental or investment income, no matter how large is classed at K (which gives no benefits)
However if you have an occupational pension or earnings at class A, or both and have other income from investment or rental plus an ARF, then the investment or rental income if at least 5000 euro reverts back to class S prsi.
You can then have 104 Prsi contributions showing on your Prsi record.

This all definitely applies to tax residents. I would not know if it also applies to non residents.


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## NoRegretsCoyote (10 Nov 2022)

murphaph1 said:


> The ARF distribution is also considered PAYE income so a PAYE tax credit is available to me AFAIK (I have Irish rental income that can take advantage of that).


Are you sure the PRSI payment applies if you are non-resident though?


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## bstop (10 Nov 2022)

murphaph1 said:


> I was always going to just take an annuity but the clever way seems to be to go the ARF option, with monthly distributions, to get the 52 stamps a year


It could also be clever if interest rates keep rising and annuity payments improve to consider an annuity and a small ARF. Irish life will set up an ARF from 10000 euro.


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## murphaph1 (10 Nov 2022)

NoRegretsCoyote said:


> Are you sure the PRSI payment applies if you are non-resident though?


Good question. I will ask the DSP in writing before making any assumptions about the PRSI that would be deducted by the ARF managers being paid at class S for non-residents and leading to the accumulation of stamps. I think it may be though. I see a difference between ARF income that ultimately derived from working in Ireland and PRSI paid at class K by a non-resident landlord, for example. I opt not to pay PRSI on my Irish rental income as I guess it's worthless to me. The DSP invoices me directly for the annual voluntary €500, the entitlement to pay deriving from my time in PAYE employment in Ireland. I suspect the ARF may be viewed similarly, or people who retire early and get stamps from the PRSI paid on the income their company pension payments would not be allowed to retire to Spain etc. until reaching 66. Perhaps it's really like that and you cannot retire early to Spain etc. and still get your contributory pension stamps from your occupational pension?


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## NoRegretsCoyote (10 Nov 2022)

murphaph1 said:


> Good question. I will ask the DSP in writing before making any assumptions


My impression is that Revenue care a lot more than DSP about residency.


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