New Social Welfare Payment for 65 Year Olds

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LiferT

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Hi

A new social welfare payment for 65 year olds, who are no longer employed, was announced today.

This is to rectify the situation where people who leave work at 65 will need to wait, sometimes for several years, before claiming the social welfare pension. I understand that the proposed extension of the pension age to 68 was put on hold after the last general election.

If, at the age of 65, I decide to retire and draw an income from an ARF, will I be able to claim the new social welfare payment?

Also, is there a difference between being contractually obliged to retire at 65 and voluntarily retiring at 65?

Many thanks in advance.

LT
 
LiferT said:
is there a difference between being contractually obliged to retire at 65 and voluntarily retiring at 65?
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It appears not:
The new "Benefit Payment for 65-year-olds" will apply to people aged between 65 and 66, "who cease employment, whether voluntarily or otherwise". https://www.rte.ie/news/ireland/2021/0208/1195676-pension-social-welfare/

LiferT said:
I decide to retire and draw an income from an ARF, will I be able to claim the new social welfare payment?
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It is based on PRSI record and not a means test, so the ARF drawdown should make no difference (except that total income will be subject to income tax).
 
Bronte said:
This is so stupid. Why don't they just put the pension age back to 65.
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Better still, if it is solvency they are concerned with why can't they break down the SCP into a basic and a top up element rather than faffing about with ages? A minimum guaranteed amount (say, 60% of the SCP.... 60% x €248.30 = €149.00) with the balance by way of a means tested top -up. That would improve solvency and introduce fairness to it. Afterall, a well pensioned employee on €200,000pa is hardly reliant on the SCP?
 
ivannomonet said:
Surely not required/irelavent if they've paid PRSI all their life?
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True but it is a social welfare benefit is it not? Like, even taking my 60% cut-off above a €148.30pw (€7,712pa) pension would require a fund of something like €220,000 at retirement to pay for it (assuming an annuity rate of 3.5%). Would the cumulative value of their employee PRSI contributions have exceeded €220,000 over a 40 year working life.

Take an average salary of €50,000 increasing by 2%pa and a PRSI rate of 4% => €120,000 contributions in nominal terms over 40yrs. If this was in a dedicated fund earning 3%pa, those contributions should total €220,000 over 40yrs ergo, the benefit is fully funded.... purely accidental my choise of 60% universal benefit and finding it was fully funded based on a salary of initial €50,000pa and a 2% annual increase!

The point I am making though is that the current SCP rate of €248.30pw is not fully funded so, the argument you've paid PRSI all your life is only half of true. The full truth is you didn't pay enough PRSI relative to the benefits. And, its even worse when you consider that PRSI covers more benefits than just the SCP
 
Sadim said:
True but it is a social welfare benefit is it not? Like, even taking my 60% cut-off above a €148.30pw (€7,712pa) pension would require a fund of something like €220,000 at retirement to pay for it (assuming an annuity rate of 3.5%). Would the cumulative value of their employee PRSI contributions have exceeded €220,000 over a 40 year working life.

Take an average salary of €50,000 increasing by 2%pa and a PRSI rate of 4% => €120,000 contributions in nominal terms over 40yrs. If this was in a dedicated fund earning 3%pa, those contributions should total €220,000 over 40yrs ergo, the benefit is fully funded.... purely accidental my choise of 60% universal benefit and finding it was fully funded based on a salary of initial €50,000pa and a 2% annual increase!

The point I am making though is that the current SCP rate of €248.30pw is not fully funded so, the argument you've paid PRSI all your life is only half of true. The full truth is you didn't pay enough PRSI relative to the benefits. And, its even worse when you consider that PRSI covers more benefits than just the SCP
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Shouldn’t your calculations include employer’s PRSI ?
 
Bronte said:
This is so stupid. Why don't they just put the pension age back to 65.
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Couldn’t agree more. They never miss an opportunity to make these systems more complicated. A 64 year old unemployed client will now move through three different state supports in three years. Jobseekers -> Benefit Payment for 65-year-olds -> State Pension (Contributory)
 
Pension age is actually pretty simple in Ireland compared to a lot of the EU where it can depend on stuff like whether you worked down a mine.

Successive governments missed a trick by proposing these big one-year jumps that meant if you were born on 31 December 1954 you got a pension the next day but if you were born on 1 January 1955 you had to wait another 365 days. This isn't fair.

The UK approach, of six-week increases in eligibility age every year, would have been much more equitable.

Freelance said:
Shouldn’t your calculations include employer’s PRSI ?
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Correct. Everyone forgets this.

The actuarial review of the social insurance fund shows that on an average salary the state pension more or less funds itself in notional terms (nothing is invested of course). If you have a long career on low wages the state pension is really good value. If you are a doctor or something you are probably funding yourself three times over.
 
Freelance said:
Shouldn’t your calculations include employer’s PRSI ?
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In truth I do not know. I would have thought employers PRSI covers a lot more things like sick pay, statutory redundancy, disability etc, even non contributory state pensions as they are all drawn from the social insurance fund? The employer contributions are not part of any individual's PRSI record, they just go into a general fund, the only element that is personal is the employee contribution. It is all a bit opaque, who is funding what and from what I've seen there have been no actuarial calculations done on it.
 
NoRegretsCoyote said:
Pension age is actually pretty simple in Ireland compared to a lot of the EU where it can depend on stuff like whether you worked down a mine.

Successive governments missed a trick by proposing these big one-year jumps that meant if you were born on 31 December 1954 you got a pension the next day but if you were born on 1 January 1955 you had to wait another 365 days. This isn't fair.

The UK approach, of six-week increases in eligibility age every year, would have been much more equitable.



Correct. Everyone forgets this.

The actuarial review of the social insurance fund shows that on an average salary the state pension more or less funds itself in notional terms (nothing is invested of course). If you have a long career on low wages the state pension is really good value. If you are a doctor or something you are probably funding yourself three times over.
Click to expand...

Yes, the UK state pension rose to 66 in 2020 but not in simple one year blocks, it was a more scientific way of doing it and definitely fairer than the anomaly you have highlighted
 
NoRegretsCoyote said:
Pension age is actually pretty simple in Ireland compared to a lot of the EU where it can depend on stuff like whether you worked down a mine.

Successive governments missed a trick by proposing these big one-year jumps that meant if you were born on 31 December 1954 you got a pension the next day but if you were born on 1 January 1955 you had to wait another 365 days. This isn't fair.

The UK approach, of six-week increases in eligibility age every year, would have been much more equitable.



Correct. Everyone forgets this.

The actuarial review of the social insurance fund shows that on an average salary the state pension more or less funds itself in notional terms (nothing is invested of course). If you have a long career on low wages the state pension is really good value. If you are a doctor or something you are probably funding yourself three times over.
Click to expand...

Yes, I did some rough calculations assuming a €50,000 salary with 2% annual increases and zero notional "investment" return over a 40yr working life and the SCP in that case was largely funded. I ignored employer PRSI assuming that covered all the extra benefits coming out of the social insurance fund.
 
Sadim said:
In truth I do not know. I would have thought employers PRSI covers a lot more things like sick pay, statutory redundancy, disability etc, even non contributory state pensions as they are all drawn from the social insurance fund? The employer contributions are not part of any individual's PRSI record, they just go into a general fund, the only element that is personal is the employee contribution. It is all a bit opaque, who is funding what and from what I've seen there have been no actuarial calculations done on it.
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Non-contributory pensions are not paid from the Social Insurance Fund. They are paid from the annual budget allocation of moneys to the Department (called the Vote). PRSI, whether paid by employee or employer, is used to pay all of the contribution-based SW payments (jobseekers, illness, invalidity, widow/er, state pension).
The Social Insurance Fund is subject to regular actuarial reviews.


Minister Doherty Welcomes Publication of the Actuarial Review of the Social Insurance Fund 2015

The annual shortfalls are projected to increase into the foreseeable future as the ageing of the population starts to impact.
www.gov.ie www.gov.ie
.

Link to the last review in 2015.
 
Sadim said:
Yes, the UK state pension rose to 66 in 2020 but not in simple one year blocks, it was a more scientific way of doing it and definitely fairer than the anomaly you have highlighted
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My sister in the UK, born the year before me, got her pension at age 60. I had to wait till 63 and a half for my UK pension. It didn't feel fair.
 
gipimann said:
Non-contributory pensions are not paid from the Social Insurance Fund. They are paid from the annual budget allocation of moneys to the Department (called the Vote). PRSI, whether paid by employee or employer, is used to pay all of the contribution-based SW payments (jobseekers, illness, invalidity, widow/er, state pension).
The Social Insurance Fund is subject to regular actuarial reviews.

[/URL]

Link to the last review in 2015.
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Thanks for the clarification gipimann, every day is a school day! I was not aware the non-contributory came out of general govt funds as opposed to the social insurance fund. The point you were making about PRSI though is important too, it is a fund contributed by empoyers and employees PRSI and covers a lot more benefits than just the SCP. That link to the actuarial review did not work though
 
Gervan said:
My sister in the UK, born the year before me, got her pension at age 60. I had to wait till 63 and a half for my UK pension. It didn't feel fair.
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That was the way until recently in the UK, women had a retirement age of 60 and men had a retirement age of 65. The respective retirement ages have been converging progressively since 2015 or 2016 I think and now are 66 for both sexes. I am surprised nobody ever took a discrimination case against HMG but I suppose it doesn't matter now as the EU directives no longer apply!
 
gipimann said:
Non-contributory pensions are not paid from the Social Insurance Fund. They are paid from the annual budget allocation of moneys to the Department (called the Vote). PRSI, whether paid by employee or employer, is used to pay all of the contribution-based SW payments (jobseekers, illness, invalidity, widow/er, state pension).
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This is true in pure accounting terms but not in substance.

When the Social Insurance Fund (SIF) is in deficit it is topped up from the Exchequer via taxes. And when in surplus it just pays it back to the Exchequer. The SIF doesn't have an investment strategy or any autonomy.

No one who looks at the sustainability of the public finances makes much of a distinction between the SIF and the Exchequer. People will get old, they will need pensions, and they will have to be paid for whether out of PRSI or tax receipts.
 
I have already"retired" at age 62 having worked in the PAYE sector for 42 years and am currently drawing from my ARF. When I reach the age of 65 will I be entitled to this new Social Welfare Payment? Thanks in advance.
 
Derry25 said:
I have already"retired" at age 62 having worked in the PAYE sector for 42 years and am currently drawing from my ARF. When I reach the age of 65 will I be entitled to this new Social Welfare Payment? Thanks in advance.
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Are you signing for JB and/or credits? It seems you would need at least 39 paid or credited contributions in the governing contribution year, ie, the second last complete tax year before the year of application for this pension. So if you reach 65 in 2024 the governing year would be 2022.
Alternatively you would need 52 Class S contributions in 2022. It will depend on how much you are drawing from the ARF - it may not be sufficient for this.

That is how I read it, anyhow : https://www.gov.ie/en/service/49d25...5-year-olds/?referrer=http://www.gov.ie/bp65/
 
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