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

[Groucho]

@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.

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!

 

[ukpokerguy]

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

 

[Groucho]

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.

 

[Dave Vanian]

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.

 

[bstop]

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.

 

[murphaph1]

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.

 

[bstop]

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.

 

[NoRegretsCoyote]

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?

 

[bstop]

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.

 

[murphaph1]

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?

 

[NoRegretsCoyote]

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.