State pension averaging rules implication on pension amount at retirement age

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Chewbacca

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Returned to Ireland few years back and at retirement should have approx 15 years of continuous contributions (excl 2/3 years contributions early 90's). A few years back I was under the impression I would get a fairly reduced Irish state pension based on averaging with earlier contributions. I read an Irish Times article recently that suggested averaging was being phased out by circa 2034 and that only 10 years continuous contributions (?) might be needed for a full Irish state pension leading me to believe I might get a full or close to full Irish state pension. Can anyone confirm , clarify this for me?

If this actually is true, my other thought is how is this sustainable in the the long term if anyone can achieve a full pension with only 10 years contributions. To get a full UK state pension one has to have made 35 years of contributions as a comparable.
 

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 www.citizensinformation.ie

Changes to the State Pension (Contributory) 2025​

From 1 January 2025, if you were born on or after 1 January 1959, your pension rate will be calculated using either:

  1. Only the ‘Total Contribution Approach (TCA)'
  2. A combination of the ‘yearly average method’ and ‘Total Contribution Approach (TCA)’.
You will get whichever rate is greater.

Read about these methods under ‘How your pension application is assessed’ above.

Over the following 10 years (from 2025 to 2034), the ‘yearly average method’ will be phased out. By 2034, all pensions for people born on or after 1 January 1968, will be calculated using only the TCA.

Table showing how State Pension (Contributory) is calculated using combination of ‘Yearly Average’ and ‘TCA’​



The year you draw down your pensionThe percentage calculated using 'yearly average'Plus, the percentage calculated using Total Contributions Approach (TCA)
202590%10%
202680%20%
202770%30%
202860%40%
202950%50%
203040%60%
203130%70%
203220%80%
203310%90%
20340%100%

Example of how the rate of SPC is calculated in 2027​



Example of how someone’s rate of State Pension (Contributory) is calculated in 2027
Mary will be 69 when she applies for her State Pension (Contributory) in 2027.
The Department of Social Protection (DSP) will calculate her rate of pension using both the:
• Total Contribution Approach, and
• The yearly average method
Step 1:
The DSP checks the total number of Mary’s contributions, using the TCA.
Step 2:
The DSP then calculates Mary’s ‘yearly average’.
If her rate of pension using the TCA is higher than when using the yearly average, Mary gets the rate from the TCA calculation.
But, if the yearly average calculation gives a higher rate, the DSP continues their calculations (see Step 3).
Step 3:
In 2027, the DSP will add 70% of the SPC rate Mary will get using the yearly average, and 30% of her TCA pension rate.
70% (YA) + 30% (TCA) = Mary’s final SPC rate.


To get a State Pension (Contributory), you must have started paying PRSI at least 10 years before you reach the age of 66 or the age you defer your pension to.

Read more about the upcoming changes on gov.ie.
 
Chewbacca said:
Returned to Ireland few years back and at retirement should have approx 15 years of continuous contributions (excl 2/3 years contributions early 90's). A few years back I was under the impression I would get a fairly reduced Irish state pension based on averaging with earlier contributions. I read an Irish Times article recently that suggested averaging was being phased out by circa 2034 and that only 10 years continuous contributions (?) might be needed for a full Irish state pension leading me to believe I might get a full or close to full Irish state pension. Can anyone confirm , clarify this for me?

If this actually is true, my other thought is how is this sustainable in the the long term if anyone can achieve a full pension with only 10 years contributions. To get a full UK state pension one has to have made 35 years of contributions as a comparable.
Click to expand...
It's the opposite as far as I can see, although it's a classic example of non plain English. Notwithstanding time off caring, total contributions effectively give rise to a proportion of the full pension. Based on potential 2080 contributions (52x40) for the full rate. So 1040 contributions means 50% of the full rate etc.

The 10 year thing is very badly phrased, it means you have to have started paying contributions at least 10 years before retirement to be eligible for a contributory pension at all
 
40 years is the figure under TCA in Ireland

Qualifying Conditions in Detail​

Qualifying Conditions:​

First qualifying condition - age at entry​

A person must have started contributing to their social insurance record with full or modified rate contributions before age 56 if born between 1 October 1922 and 31 December 1957.
A person must have started contributing to their social insurance record with full or modified rate contributions 10 years prior to drawdown date if born on/after a January 1958.

Second qualifying condition - number of full-rate contributions paid​

  • a person reaching age 66 on or before 5 April 2002 must have paid 156 full-rate employment contributions or, if the yearly average (see third condition below) falls between 10 and 19, 260 full-rate employment contributions
  • a person reaching age 66 between 6 April 2002 and 5 April 2012 (both dates inclusive) must have paid 260 full-rate employment contributions.
Note: There is one exception. Persons who commenced paying high rate voluntary contributions on or before 6 April 1997 will need only 156 full-rate employment contributions paid if the yearly average is 20 or more.
  • a person reaching drawdown date on or after 6 April 2012 must have paid 520 full-rate employment contributions, or, if at least 260 full-rate employment contributions are paid, the balance of the 520 can be made up with high rate voluntary contributions
Note: There is one exception. Persons who:
  • commenced paying high rate voluntary contributions on or before 6 April 1997, and
  • have 156 full-rate employment contributions paid, and
  • have a yearly average of 20 contributions or more will satisfy this condition if they can make up the balance of the 520 with high rate voluntary contributions

Third qualifying condition​

The standard yearly average test​

Maximum rate of pension is payable where a person has a "yearly average" of at least 48. The yearly average is the average number of full-rate contributions paid and/or credited per year over the period from 1953*, or from the year of starting insurable employment, if later, to the end of the tax year before reaching pension age (66).
A reduced rate pension is payable where a person has a yearly average of between 10 and 47. (See rates structure on page 20).
See also "Special State Pension (Contributory) for persons with social insurance contributions paid prior to 1953" below.
The alternative contribution test
Maximum rate pension is also payable where a person has an "alternative yearly average" of at least 48. The alternative yearly average is the average number of contributions paid and/or credited over the period from April 1979 to the end of the tax year before reaching pension age (66). The "alternative yearly average" applies only to persons who reached age 66 on or after 6 April 1992.
Aggregated Contributions Method
An Aggregated Contributions Method (ACM) arrangement is in place since 30 March 2018 and is applicable to those with a date of birth on or after 1 September 1946. This approach has three elements to it. The Department takes into account:-
  • Social Insurance Contributions (PRSI) paid while working
  • Homecaring periods (HCP) awarded for time spent caring for children aged 12 or under or dependent relatives (subject to a max of 1040)
  • Credited contributions (credits) that are awarded for periods where a person is unable to work and claims a welfare payment e.g. Illness Benefit or Jobseeker’s Benefit (subject to a max of 520)
When both credits and HCP are on a record , 1040 is the maximum number of combined HCP and credits than can be used in the calculation.
To receive the maximum rate of payment under the ACM, you must have 2,080 contributions and credits (equivalent to 40 years). If you have less than 2,080 contributions and credits your rate will be a percentage of the maximum rate of pension.
 
mmclo said:
It's the opposite as far as I can see, although it's a classic example of non plain English. Notwithstanding time off caring, total contributions effectively give rise to a proportion of the full pension. Based on potential 2080 contributions (52x40) for the full rate. So 1040 contributions means 50% of the full rate etc.

The 10 year thing is very badly phrased, it means you have to have started paying contributions at least 10 years before retirement to be eligible for a contributory pension at all
Click to expand...
Yes very confusing . This is what I would have thought but I'm pretty sure the Irish Times article suggested otherwise but I can't find it as it seems to be behind a paywall now.

As far as I know it's not possible to make back dated contributions here for previous years like in the UK , that's right I think?
 
Protocol said:
40 years is the figure under TCA in Ireland

Qualifying Conditions in Detail​

Qualifying Conditions:​

First qualifying condition - age at entry​

A person must have started contributing to their social insurance record with full or modified rate contributions before age 56 if born between 1 October 1922 and 31 December 1957.
A person must have started contributing to their social insurance record with full or modified rate contributions 10 years prior to drawdown date if born on/after a January 1958.

Second qualifying condition - number of full-rate contributions paid​

  • a person reaching age 66 on or before 5 April 2002 must have paid 156 full-rate employment contributions or, if the yearly average (see third condition below) falls between 10 and 19, 260 full-rate employment contributions
  • a person reaching age 66 between 6 April 2002 and 5 April 2012 (both dates inclusive) must have paid 260 full-rate employment contributions.
Note: There is one exception. Persons who commenced paying high rate voluntary contributions on or before 6 April 1997 will need only 156 full-rate employment contributions paid if the yearly average is 20 or more.
  • a person reaching drawdown date on or after 6 April 2012 must have paid 520 full-rate employment contributions, or, if at least 260 full-rate employment contributions are paid, the balance of the 520 can be made up with high rate voluntary contributions
Note: There is one exception. Persons who:
  • commenced paying high rate voluntary contributions on or before 6 April 1997, and
  • have 156 full-rate employment contributions paid, and
  • have a yearly average of 20 contributions or more will satisfy this condition if they can make up the balance of the 520 with high rate voluntary contributions

Third qualifying condition​

The standard yearly average test​

Maximum rate of pension is payable where a person has a "yearly average" of at least 48. The yearly average is the average number of full-rate contributions paid and/or credited per year over the period from 1953*, or from the year of starting insurable employment, if later, to the end of the tax year before reaching pension age (66).
A reduced rate pension is payable where a person has a yearly average of between 10 and 47. (See rates structure on page 20).
See also "Special State Pension (Contributory) for persons with social insurance contributions paid prior to 1953" below.
The alternative contribution test
Maximum rate pension is also payable where a person has an "alternative yearly average" of at least 48. The alternative yearly average is the average number of contributions paid and/or credited over the period from April 1979 to the end of the tax year before reaching pension age (66). The "alternative yearly average" applies only to persons who reached age 66 on or after 6 April 1992.
Aggregated Contributions Method
An Aggregated Contributions Method (ACM) arrangement is in place since 30 March 2018 and is applicable to those with a date of birth on or after 1 September 1946. This approach has three elements to it. The Department takes into account:-
  • Social Insurance Contributions (PRSI) paid while working
  • Homecaring periods (HCP) awarded for time spent caring for children aged 12 or under or dependent relatives (subject to a max of 1040)
  • Credited contributions (credits) that are awarded for periods where a person is unable to work and claims a welfare payment e.g. Illness Benefit or Jobseeker’s Benefit (subject to a max of 520)
When both credits and HCP are on a record , 1040 is the maximum number of combined HCP and credits than can be used in the calculation.
To receive the maximum rate of payment under the ACM, you must have 2,080 contributions and credits (equivalent to 40 years). If you have less than 2,080 contributions and credits your rate will be a percentage of the maximum rate of pension.
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Thank you as I would have thought, I'm pretty sure the Irish Times article I read didn't take this approach but can't find it now.
 
Chewbacca said:
Yes very confusing . This is what I would have thought but I'm pretty sure the Irish Times article suggested otherwise but I can't find it as it seems to be behind a paywall now.

As far as I know it's not possible to make back dated contributions here for previous years like in the UK , that's right I think?
Click to expand...
Yes, there's something on another thread on that
 
It is possible but very unlikely.

If a person first started working in Ireland on their 56th birthday (and their 56th birthday was before 1st January 2015) and they paid Prsi until the day before their 66th birthday and gained 520 full rate paid Prsi contributions. They could claim the State Contributory Pension on their 66th Birthday and they would get the full pension.

A few immigrant workers or native Irish slow starters might have achieved this.
 
Chewbacca said:
Returned to Ireland few years back and at retirement should have approx 15 years of continuous contributions (excl 2/3 years contributions early 90's). A few years back I was under the impression I would get a fairly reduced Irish state pension based on averaging with earlier contributions. I read an Irish Times article recently that suggested averaging was being phased out by circa 2034 and that only 10 years continuous contributions (?) might be needed for a full Irish state pension leading me to believe I might get a full or close to full Irish state pension. Can anyone confirm , clarify this for me?

If this actually is true, my other thought is how is this sustainable in the the long term if anyone can achieve a full pension with only 10 years contributions. To get a full UK state pension one has to have made 35 years of contributions as a comparable.
Click to expand...
Here’s the IT article, and probably the piece you are thinking of, yes it is behind a paywall.

It does say earlier in the article that the average starts from when you first start making contributions which in your case was in the early 90’s, not a few years ago when you returned. Those 2 / 3 years in the 90’s get you.

https://www.irishtimes.com/your-mon...i-qualify-and-how-much-will-i-be-entitled-to/

‘’And the yearly averaging system does work better for some people. For instance, you can get a full pension with just 10 years of contributions as long as those are the 10 years before you hit the State retirement age of 66.’’
 
Hypothetical but not impossible example.
Someone is born here in 1978, starts working in 1998 and in 2008 emigrates to Australia, after the crash.
In 2018 aged 40 and fully settled, they decide to plan for their retirement and upon investigation discover that on account of having paid ten years
contributions in Ireland that they will be entitled to a full Irish State pension. They then factor this into their planning for their desired retirement
income, set up a pension plan to pay into for the next quarter century and, job done, put all pension thoughts to bed.
Coming up on retirement in 2044 they may only then discover that their irish pension entitlements have been retrospectively reduced by 75%.

I don't know much about the UK state pension changes but by contrast, it appears that they offered people adversely affected the opportunity to restore their full entitlements.

I'm not a lawyer but I'd wonder if the Irish government is on shaky legal ground with this.
 
It's all clearly explained in the relevant guidelines documents.
On first reading it can be difficult to grasp but if read over a few times it becomes clear what the rules are.

What is disgraceful is the fact that after introducing a new deferred pension scheme DSP refuse to give accurate detailed pension figures before a person applies for their pension. It is quite difficult to accurately work out your own pension. Especially so in the next 10 years while the averaging system is being phased out.

Once a person applies their pension cannot be cancelled if they realise that they are getting less than they estimated and would have been better off if they had deferred for a period.
 
You can apply for your pension and wait for the result. If you do not like it, you are not forced to take up the offer and you are free to withdraw your application and come back again with a new application in the future.
It is true that they don't give you any information at all before you apply. I tried it for years, but all I got was "That will be all decided when you hand in your application!"
 
jimmij said:
Hypothetical but not impossible example.
Someone is born here in 1978, starts working in 1998 and in 2008 emigrates to Australia, after the crash.
In 2018 aged 40 and fully settled, they decide to plan for their retirement and upon investigation discover that on account of having paid ten years
contributions in Ireland that they will be entitled to a full Irish State pension. They then factor this into their planning for their desired retirement
income, set up a pension plan to pay into for the next quarter century and, job done, put all pension thoughts to bed.
Coming up on retirement in 2044 they may only then discover that their irish pension entitlements have been retrospectively reduced by 75%.

I don't know much about the UK state pension changes but by contrast, it appears that they offered people adversely affected the opportunity to restore their full entitlements.

I'm not a lawyer but I'd wonder if the Irish government is on shaky legal ground with this.
Click to expand...



The word "full" in the fourth line is false.

If a person starts paying PRSI at age 20, and pays it for ten full years, 520 weeks, aged 20-30, that does not entitle that person to a full State Pension, and it never did.
 
Forumuser said:
You can apply for your pension and wait for the result. If you do not like it, you are not forced to take up the offer and you are free to withdraw your application and come back again with a new application in the future.
It is true that they don't give you any information at all before you apply. I tried it for years, but all I got was "That will be all decided when you hand in your application!"
Click to expand...
This is incorrect.

When a person applies for their pension the only reply they get is the one stating that they have been awarded the State Contributory Pension and the weekly amount awarded and the date of their first payment.

At this stage the deal is done and it cannot be cancelled.
 
Protocol said:
The word "full" in the fourth line is false.

If a person starts paying PRSI at age 20, and pays it for ten full years, 520 weeks, aged 20-30, that does not entitle that person to a full State Pension, and it never did.
Click to expand...

Just telling me what I've said is false is a little judgemental sounding, it makes it sound as though you're accusing me of lying.
I know that some people are entitled to a full pension with just ten years' contributions but there must be other rules then that I'm unaware of.
 
The pension using your average yearly contributions is based on the total number of weekly contributions divided by the number of years of contributions based on the year of your first contribution and the year of your last contribution

In my case, I had a number of contributions from working part-time as a student from 1968-1973 and then worked abroad from 1974 to 2004. I then had contributions from 2004 to 2017. I ended up with 836 contributions over 52 years and was awarded a pension of 65% of the full pension

If I hadn't worked as a student, or had worked on a cash payment basis ie no stamps, as they were back then, I would have got a full pension based on my 728 contributions from 2004 to 2017 or 14 years

If only I'd known that back in 1968 ....
 
jimmij said:
Just telling me what I've said is false is a little judgemental sounding, it makes it sound as though you're accusing me of lying.
I know that some people are entitled to a full pension with just ten years' contributions but there must be other rules then that I'm unaware of.
Click to expand...
It is false though. Someone paying PRSI from the age of 20 to 30, and not paying anything beyond that, would not qualify for a full state pension.
 
S class said:
This is incorrect.

When a person applies for their pension the only reply they get is the one stating that they have been awarded the State Contributory Pension and the weekly amount awarded and the date of their first payment.

At this stage the deal is done and it cannot be cancelled.
Click to expand...
Not true. I was told by the pension office in Sligo that you do not have to take it. You get an award alright- but you can refuse and withdraw your claim.
Citizen Information always gives the advice to apply for both NC and C pension. You can take the one which gives you the better money- and refuse the other.
Nobody is forcing you into anything!
 
jpd said:
The pension using your average yearly contributions is based on the total number of weekly contributions divided by the number of years of contributions based on the year of your first contribution and the year of your last contribution

In my case, I had a number of contributions from working part-time as a student from 1968-1973 and then worked abroad from 1974 to 2004. I then had contributions from 2004 to 2017. I ended up with 836 contributions over 52 years and was awarded a pension of 65% of the full pension

If I hadn't worked as a student, or had worked on a cash payment basis ie no stamps, as they were back then, I would have got a full pension based on my 728 contributions from 2004 to 2017 or 14 years

If only I'd known that back in 1968 ....
Click to expand...
You still would have worked as a student in 1968. Nobody at that age thinks of the pension- it is far far away! Besides- even if you would have known the rules you would have been unable to know how your life developed after your student job!
 
I don't understand.
Is it the case so that if you start work at 16 and have a bit of a patchy record but still overall manage 2080 contributions by age 66
that you could end up with less than a full pension because 2080 divided by 50 gives you an average of 41.6?
 
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