Do you pay PRSI on pension income?

S

sidzer

Registered User
Messages
192
Hi all,

I am hoping to retire early in the next few years /@58 years old - 3 yrs from now. So I am doing calculations on various exit dates before 60 using the dept of education pension modeler. I am aiming to jump when I will have €700 net per week as I feel this will allow me to live a reasonably comfortable life in retirement as mortgage is paid and wont have any big bills other than the usuals.


I will have 3 pension sources:

DB pension from Guinness - approx. €9,500 PA
Dept of Education pension - pre 2004 post 1995 - @ 35yrs service including NSP
AVC - Irish Life and Zurich - approx. 50k

Will I have have to pay PRSI on my pension income when I retire? I have read two different conflicting opinions online.

Thanks - Sidzer
 
For ARF private pensions you are required to pay PRSI up to entry into the state contributory pension (min 66 max 70). After that no PRSI is due. Not sure about your Dept of Education pension.
 
Last edited:
It depends on what you do with your AVCs.

If your buy an Annuity, this is zero rated class M

If you buy an ARF it's class S up to the date you claim the Contributory State Pension or age 70. Whichever occurs first.
Then it's zero rated class M.
 
Last edited:
Ciru75 said:
There's no PRSI on pension income (other than ARFs).
Click to expand...
I'm paying class S PRSI on my PRSA income drawdowns (at age 58 in case it matters).

Edit: ok, so it looks like @S class's post above is more accurate?

Edit 2: in any case it suits me to be paying PRSI as the pension income isn't huge - just enough to top up some other income so that I use up my tax credits - and it gets me closer to the 2080 PRSI contributions as I'm still a couple of years short.
 
Last edited:
S class said:
If your buy an Annuity, this is zero rated class M

If you buy an ARF it's class S up to the date you claim the Contributory State Pension or age 70. Whichever occurs first.
Then it zero rated class M.
Click to expand...
What happens with a hybrid part-annuity, part-ARF setup before you claim the COAP, does it stay class M for the annuity and class S for any ARF distributions, do you know?
 
conor_mc said:
What happens with a hybrid part-annuity, part-ARF setup before you claim the COAP, does it stay class M for the annuity and class S for any ARF distributions,
Click to expand...
I don't know what this is. Is it an Annuity and a separate ARF ?
If they are both separate then the ARF is class S up to COAP claim time.

As far as I know an Annuity is a pension so it will always be class M.

An ARF is classed as self employment income so is always class S up to COAP claim date and then changes to class M.

The ARF part could be converted to an Annuity at any time and then class M would apply.
 
S class said:
An ARF is classed as self employment income so is always class S up to COAP claim date and then changes to class M.

The ARF part could be converted to an Annuity at any time and then class M would apply.
Click to expand...
Not that anyone is suggesting it, but choice to hold an ARF or purchase annuity is a consequential one and there are much bigger factors than 4% PRSI saving.
 
I am just over 60 and I retired recently. I pay no PRSI on either the pension or the supplementary pension. For me a saving of a couple of grand a year. (I worked in the Higher Education Sector).

You would also be able to take a TAX free amount from your AVC to bring you up to a lump sum of 1.5 of final salary. This might allow some of the 50K to be taken out tax free.

I am same as @Slim I pay USC.

The other consideration is that you might be in bother with the Suplementary pension. You won't get it if you retire before 60. I am not sure if you get it when 60. You will also be taking an actuarial reduction before 60 as well. There could be a significant impact in going before 60.
 
DingDing said:
The other consideration is that you might be in bother with the Suplementary pension. You won't get it if you retire before 60.
Click to expand...
He would be able to claim pay related Jobseekers Benefit.
This would part compensate for the loss of supplementary pension up to age 60.
 
S class said:
I don't know what this is. Is it an Annuity and a separate ARF ?
If they are both separate then the ARF is class S up to COAP claim time.
Click to expand...
Yeah, sorry wasn’t clearer but you’ve got it right. Thanks for the answer @S class, I’ve only ever been one class or another, wasn’t sure you could get two types for the same period.
 
The other consideration is that you might be in bother with the Suplementary pension. You won't get it if you retire before 60. I am not sure if you get it when 60. You will also be taking an actuarial reduction before 60 as well. There could be a significant impact in going before 60.
Click to expand...

Thanks Ding Dong - Interesting that you don't pay PRSI on your pensions - that would be a massive boost!

I understand that the supplementary is not available until 60 but I would hope that it would still be available to me from 60 if I retire early! I was planning on using my AVC to fill the gap in the 2-3 years before 60. I would slug it out until 60 if I was going to take a hit on a large chuck on my pension from 60-66 above the actuarial reduced rates!
 
HI @sidzer The actuarial reduction is for ever, I will try to find the table for you, both the lump sum and pension are reduced. From memory, your pension is reduced by 5-6% per year you go before 60 and your lump sum is reduced approx. 2% per year before 60.

EDIT

Table on page 3 of link. From the document it appears to go from your birthday, except in the last year where the reduction is pro-rata across the year. So I would plan to go just after a birthday.

Above is not the case, you can go anytime.

Cost Neutral retirement- calculation-do I have to retire on my birthday?

I am a member of the post 2004 pre 2013 scheme. If I retire at 62, I ger 83.6% of my pension. If I retire at 63 I get 88.5%. My birthday is in October. I would love to retire in Spring, when I would be 62 years and 6 months. If I did this, would the percentage applied be still the 83.6% or...
www.askaboutmoney.com

I found the post with the calculation in circular 2005/10 linked above that counts the days since your last birthday in the formula, the information is towards the end of the thread.



Further info here.

The Suplementary Pension circular is linked below.

 
Last edited:
sidzer said:
I understand that the supplementary is not available until 60 but I would hope that it would still be available to me from 60 if I retire early!
Click to expand...

As long as the normal retirement age for your scheme is 60 then the Supplementary is payable from that age. This is from the Dept of Ed "Occupational Supplementary Pension Information Note" :

"6. Am I automatically entitled to a OSP payment?
No. A person does not have an automatic entitlement to a supplementary pension. In the case of Cost Neutral Early Retirement, Supplementary Pension is not payable before the age of 60 (in the case of an old entrant) or 65 (in the case of a new entrant) as appropriate"

Or there is this:

Supplementary pension​

An individual who avails of CNER may be paid a supplementary pension, in line with the normal rules governing supplementary pensions, on reaching their preserved pension age only (age 60 or 65 as appropriate) and not from the date of their early retirement.
 
You must log in or register to reply here.
Back
Top