Pre 95 retiring with 30 years service

B

Bellow

Registered User
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Am working part time for the past few years and want to keep doing so until retire at 60. Salary is currently about 32k and on lower tax bracket.
When should I start paying into a lump sum AVC to bring upto the 1.5 times salary when I retire. And is the purpose of this so that I can claim 20% tax relief on the lump sum or is there any point in doing it? I have 6 years working left ( 3 years of service) and want to minimise charges to Corkmarket so want to leave as last minute as I can.
I've seen something about being able to pay 35% of salary max into an AVC per annum. Is this 35% of 32k ( as a part timer) or could I pay in 35% of 64k( the fully time salary, even though I'm not working full time)
 
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Retiring at age 60 allows you to gain full rate paid Prsi contribution up to age 70.
You could qualify for a partial contributory pension in addition to your PS pension.
Having extra AVCs in addition to those needed to maximise your tax free lump sum can allow you to buy an ARF.

The ARF can be used to gain extra full rate paid contributions.

If you can afford it, you should aim to pay maximum allowable AVCs from now until you cease employment.

The maximum AVC is your % age allowable amount minus your employee contributions to your PS pension. The % is based on your salary of 32k.

If you want to avoid the Cornmarket fees, you could set up an AVC PRSA using an execution only broker.
 
When I spoke to Corkmarket a few years ago, they said something about there being no point paying avc for pension itself as I'm on the lower tax bracket. So might as well just put in a regular savings account. Does that make sense?
 
Bellow said:
When I spoke to Corkmarket a few years ago, they said something about there being no point paying avc for pension itself as I'm on the lower tax bracket. So might as well just put in a regular savings account. Does that make sense?
Click to expand...
One of the major benefits of pension products is the tax element.
Those on the higher rate benefit more.

Those on the lower rate get a lesser benefit.
There may be other savings products that would give you an equivalent or better benefit.
Terms and conditions apply.
 
Bellow said:
When I spoke to Corkmarket a few years ago, they said something about there being no point paying avc for pension itself as I'm on the lower tax bracket. So might as well just put in a regular savings account. Does that make sense?
Click to expand...
Probably not.

You have missed the point I was trying to make.
As a pre 95er retiring at 60, you have a 10 year window of opportunity.
With fairly minimal effort now and during your time from age 60 to 70, you could gain an extra state pension of approximately 93 euro per week (or possibly more) at age 70.
You could also get 65s benefit which is worth 12,064 euro.
To achieve this you would have to do some Prsi "engineering".
AVCs used to set up an ARF is an excellent tool to assist in the engineering.

If you read this thread you will get an idea of what is possible.

Help with calculating pension entitlements - public sector worker

Anyone know the ph number of DSP to request PRSI Contribution statements ?
www.askaboutmoney.com
 
S class - I’m in a similar position. I plan to retire at 60 in a few years and won’t have enough Contributions for a full Contributory pension. (I have D class stamps for approx 11 years followed by A class stamps). I’m expecting to get the supplementary pension.
I was assuming I’ll get the supplementary pension until age 66 when I’d receive a partial Contributory pension.

How would Bellow get full rate paid PRSI contributions from age 60 to 70? Is this from signing on? Or voluntary contributions? Or from an ARF? Or something else ? Would this mean she wouldn’t get her Contributory pension until age 70? She hasn’t said if she’s paying D or A class stamps now, but I’m guessing from her question that she’s been paying D class all along.
 
Bellow is a pre 95er and still in public sector employment. They presumably have a large number of class B or D contributions and very little class A contributions.
Their problem is is get to the minimum of 260 or 520 full rate paid contributions level.
If they don't reach this level, credits are of no use to them.

I assume you already have reached the 520 full rate paid level (class A), so you don't have that problem. You are presumably short of having the 2080 reckonable contributions needed to get the full pension. You can sign on for class A credits up to age 66 to assist you to get nearer to the 2080 level.

If Bellow wanted to get extra paid contributions after age 66, they could get them from ARF drawdowns or from taking up PAYE employment.

From age 60 to 66 they could make voluntary contributions.

Credits are not allowed after age 66. I enquired from DSP if voluntary contributions are allowed after age 66. I didn't get a definitive answer so I would tend to assume that they won't be allowed.

If Bellow has 260 full rate paid contributions at age 66 they could get a pro rata pension immediately. If they were able to increase their full rate paid level to 520 at age 70 they could achieve a greater pension.
 
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I asked two different Dept of Social Protection sources and they said that even if you do not claim State Pension til 70,you cannot pay PRSI between 66 and 70. I thought differently from radio interviews etc. If they are correct,one cannot use 66-70 to increase your contributions total.
 
Paying class D prsi. I need to do alot of googling/research to get my head around the responses here as I have no idea about the basics eg only learned that need 520 class A stamps to get contributory pension. The idea that appeals most to me at first glance is to top up lump sum to max using AVC.Start this at age 58?
So this is my understanding of what I need to do. When retire at 60, work for 1 week at least just to change to class A stamps( my partner is self employed so he can hire me for a few weeks).Then every year until I am 66 ,pay 500€ a year to get a total of 312 stamps(it's 6 years,not 5?) Any idea what the pro rata pension amount would be if claim from age 66?
The whole creating an AVC so can convert to an ARF doesn't appeal if can avoid. I'll do more research though.
Thanks everyone
 
People aged between 66 and 70 who have deferred their state pension will continue to be liable to pay Prsi.

If they are in PAYE employment they will pay class A.
If they are in self employment they will pay class S.
If they have ARF drawdowns of 5000 euro per year they will pay class S.

If they are Jobseekers they will not qualify for class A credits.

They might or might not be able to pay voluntarily Prsi.
I asked this question and got a vague reply.

In the case of ARF drawdowns. I recently reached age 66 and Zurich phoned me to verify if I had started to claim the State Pension. As I had started to claim, my ARF drawdowns converted to class M.
If I had deferred, my ARF drawdowns would have remained liable to class S.
The employer (Zurich) needed to seek this information as certain people over age 66 are still required to pay Prsi.
 
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Bellow said:
my partner is self employed so he can hire me for a few weeks
Click to expand...

That might not work.

The following categories of ‘Family Employment’ are
the exceptions that are not covered by the Social
Insurance system:
• If you are employed as an employee by your
spouse.
• If you are employed as an employee by a
‘prescribed relative’ and the family employment
relates to a private dwelling house or a farm in or
on which both you and the employer reside.
• If you are not a spouse or civil partner and you
assist or participate in the running of the family
business but not as an employee (such as a
son/daughter who is attending full-time education
and who participates in the business, for example,
helps out on a farm after school hours but is not an
employee).


PRSI and Family Employment

www.gov.ie
 
Practically speaking so, I would have to get a job somewhere and hand in my notice after a week. Not sure what kind of job I could get at 60 but I'll think about it. I have chronic pain which is why am working part time. Would a part time job in private sector allow me to switch to class A prsi or would it have to be full-time for a week or so ?
"If Bellow has 260 full rate paid contributions at age 66 they could get a pro rata pension immediately". How much would the pro rata pension be weekly from age 66 on, if had 5 years worth of voluntary contributions?
 
Maybe one of your partners self emploed friends could employ you.
To get 1 class A contribution you only need to be employed for 3 hours at minimum pay in any 1 week period.



You would have to calculate that out. It is the ratio of class B or D to class A.
If for instance you had 35 years of B or D and 5 years of A you might get 1/7th of the contributory pension.

You would need to check this out as I am not certain how it's actually calculated.
 
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Below, I am trying to understand the pro rata payments as well. I found this which backs up what "S class" said.

Pro-rata pensions​

Pro-rata pensions were introduced because some people were excluded from the social insurance system at particular times. A pro-rata pension means you get a proportion of a full pension.

Pro-rata pension for mixed insurance​

You may get a pro-rata pension if you have a mixed insurance record. This can happen when you spend part of your working life in the public service (where you pay modified-rate social insurance contributions), and part in the private sector (where you pay full-rate social insurance contributions).
A career in both the public and private sectors may not give you a mixed insurance record. This is because people with incomes above certain amounts did not have to pay PRSI before 1 April 1974. In addition, certain groups (for example, Gardaí) who now pay PRSI were outside the system.
If you have mixed insurance, you may still have enough full-rate contributions to get a State Pension (Contributory). However, it depends on your exact circumstances. It is possible that one person will qualify but another, who has more contributions, will not qualify.
If you reach pension age on or after 6 April 2012 with a mixed insurance record, you need to meet all these conditions:
  • You have a minimum of 520 PRSI contributions (full-rate and modified-rate).
  • You have at least 260 full-rate paid contributions since your entry into insurance.
  • Adding together a mixture of full-rate contributions and modified-rate contributions, gives you a yearly average of 10 from the time you first entered insurance (or 1953, whichever is later) to the end of the tax year before you reach 66. This yearly average condition does not apply if the TCA (or Aggregated Contributions Method) is used.
  • You do not qualify for a pension under EU regulations or under reciprocal arrangements with other countries (or you only qualify for a pension at a lower rate than this pro-rata pension would give you).
If you meet all these conditions, you may qualify for a pension proportionate to the number of contributions that you paid at the full rate. For example, if you worked for 40 years and 10 of those years were in the private sector, you would get one-quarter of the full pension


It was from this site:

State Pension (Contributory)

The State Pension (Contributory), previously called the Old Age (Contributory) Pension, is payable to people aged 66 and over who have worked and paid enough social insurance contributions.
www.citizensinformation.ie
 
It will be 37 years of class D and that's all I have( part timer means only equates.to 30 years service).
 
Bellow said:
It will be 37 years of class D and that's all I have( part timer means only equates.to 30 years service).
Click to expand...
Did you get a copy of your Prsi record ?

You might already have a few years of class A from pre establishment.
 
This is the method for calculating pro rata pension. (from Operation guidelines for contributory pension)

If your combined modified and full rate contributions are over 40, the notional pension used in the formula will be the full contributory pension.



Calculation of rate of payment

The rate of pension, where full and modified insurance contributions are combined, is calculated as follows:

Step 1:

The notional pension is calculated. Notional pension is the pension that would be paid if all social insurance contributions, both full and modified rate, were treated as full-rate contributions. The full and modified rate contributions are therefore added together and the total is then divided by the number of years to get the yearly average.

Step 2:

The following formula is then used:

A multiplied by B divided by C

(A x B)/ C

A = the notional rate of pension i.e. the rate (personal plus increase for a qualified adult, if applicable) which would be payable if all contributions, both full and modified rate, were treated as full rate contributions.

B = the number of full rate contributions

C = the total number of contributions (full and modified rate)




37 years D = 1924. 5 years of A = 260. Total D+A = 2184.

If you put 1924 D and 260 A into that formula you get a pension of 33 euro per week.

If you managed to get 520 full rate paid Prsi and deferred to age 70 you could get a pension of 84 euro per week.

Both of these calculations don't take into account any change of status credits that you could receive. So your potential pension would be slightly larger.
 
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Using the calculations above and allowing for the loss of 4 years of pension from age 66 to 70, you could break even in 2.5 years if you deferred.
After age 72.5 you would continue to gain an extra pension of 51 euro per week.

This is why I suggested that it could be beneficial for you to maximise your AVCs.
 
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