Class S PRSI and the State Pension (Contributory)

[AAAContributor]

Hi all. I have a couple of questions on the operation of Class S PRSI stamps and the State Pension (Contributory) (SPC) that hopefully some of you can assist with.

Q1. Class S Paid Contributions

If one has the following mix of earnings:

- investment income,
- self employed income, and
- salary from a company of which you own 100%,

will each of these sources of earnings give rise to 52S + 52S + 52S (total of '156S') in the Paid Contribution column?
(Assume the 4% PRSI paid on all these income sources together exceed €500)

Q2. Class S contributions and the Total Contribution Approach (TCA) and accessing the State Pension at age 66 (no deferral)

As I understand it from another thread on AAM, contributions paid up to the week before one reaches 66 are reckonable for SPC under the TCA.

If an individual reaches 66 on the 30 June and only had self employed income that year, what number of reckonable contributions would be applied? Would it be 0, 26 or 52?

I say zero as the preliminary tax for that year will only be paid after the age of 66 and the final numbers paid over in Form 11 the year after. Or, would the department allow for '26S' as this represents half a year? Or, would the department grant '52S' if it could be shown that the PRSI liability accrued by the 30 June was >€500?

Q3. Divisor for the Yearly Average calculation

I understand that the divisor for this approach is the Last Full Tax Year before Drawdown minus Year of Entry into Social Insurance. I presume this number is calculated on an 'inclusive' basis (effectively running from 01/01 of year of entry to 31/12 of last full tax year before drawdown). Is there any document that confirms this?

Thanks for any help.

Regards, AAA

 

[S class]

Q1.
Self employment income 52 S
Investment income is probably 52 S.
Salary from a company. If it's directors salary, it is collected under the PAYE system and is 1 class S for each week of employment. So it could be 52 S or less.
The total number of class S will be shown in the paid column. This could be 156 S in your case. The total reckonable paid column will show 52.

Q2.
Zero. There is no liability to pay class S in your 66th year from self employment or investment income. This is because the Prsi is collected under the self assessment system. You would need PAYE income in that year to gain the 26 contributions.
Directors salary or ARF drawdowns could get you 26 S or PAYE employment for 26 A.

Q3.

How to calculate your State Pension (Contributory) rate

How to calculate your State Pension (Contributory) rate using the Contribution Statement available on MyWelfare

www.gov.ie

If you are qualifing using averaging calculation your Prsi contributions in your 66th year are not counted.

 

[AAAContributor]

Q1.
Self employment income 52 S
Investment income is probably 52 S.
Salary from a company. If it's directors salary, it is collected under the PAYE system and is 1 class S for each week of employment. So it could be 52 S or less.
The total number of class S will be shown in the paid column. This could be 156 S in your case. The total reckonable paid column will show 52.

Q2.
Zero. There is no liability to pay class S in your 66th year from self employment or investment income. This is because the Prsi is collected under the self assessment system. You would need PAYE income in that year to gain the 26 contributions.
Directors salary or ARF drawdowns could get you 26 S or PAYE employment for 26 A.

Q3.

How to calculate your State Pension (Contributory) rate

How to calculate your State Pension (Contributory) rate using the Contribution Statement available on MyWelfare

www.gov.ie

If you are qualifing using averaging calculation your Prsi contributions in your 66th year are not counted.

That's really helpful. Thank you. Great pseudonym by the way!

 

[S class]

PRSI and Family Employment

www.gov.ie

• if you are not an employee but participate in the running of the company or if you hold a directorship/shareholding position and have control over its operations, you may be treated as a self-employed contributor. PRSI Class S applies if you have reckonable income of at least €5,000 per year from all sources
• From 1 July 2013 proprietary directors who own or control 50% or more of the shareholding of a company, either directly or indirectly e.g., through a holding company, are classified as self-employed and liable to pay PRSI at Class S. The classification of proprietary directors who own or control less than 50% of the shareholding of the company will continue to be determined on a case-by-case basis, taking into consideration the "Code of Practice on determining Employment Status". Code of Practice on Determining Employment Status can be found here.

 

[S class]

If you are relying on Director salary or an ARF for 26 contributors in your 66th year, make sure to reach the 5000 euro level before your 66th birthday. After age 66 all your Prsi will be class M.

 

[AAAContributor]

If you are relying on Director salary or an ARF for 26 contributors in your 66th year, make sure to reach the 5000 euro level before your 66th birthday. After age 66 all your Prsi will be class M.

Cheers. The nuances of this area would make your head spin.