When and how much to pay in Voluntary PRSI towards State Contributory Pension?

[Dave Vanian]

Citizens Information website is a bit unclear so I'd be grateful for any information.

Person voluntarily ended a PAYE employment during 2021. Six-figure salary. Has received credited PRSI contributions since then. Currently in receipt of Illness Benefit, but this will run out in due course. Keen to maintain PRSI contributions towards State Contributory Pension. Future employment prospects unknown at this time.

CI webpage on voluntary contributions says “The rate of voluntary contribution you pay is linked to the last PRSI contribution paid or credited by you.”

So when the Illness Benefit stops in 2022 or 2023, how will the cost of voluntary contributions be calculated? Going back to 6.6% of 2021 salary, which would be substantial? Or looking at the more recent credited contributions while on Illness Benefit?

Other confusing statements on the CI website…apparently you must…

• Apply to make your voluntary contribution within 60 months (5 years) of the end of the last completed tax year (contribution year) during which you last paid compulsory insurance or you were last awarded a credited contribution. (Since February 2017, the time limit for making voluntary contributions was extended from 12 months to 60 months.)
• Agree to pay voluntary contributions from the start of the contribution week that follows the week in which you leave compulsory insurance

The first one is fine. But looking at the second point, how do you “agree” to pay voluntary contributions? (I'm assuming that this would also be when the Illness Benefit expires and that credited contributions are considered "compulsory contributions" for the purpose of this sentence.)

Any help appreciated.

 

[NoRegretsCoyote]

Going back to 6.6% of 2021 salary, which would be substantial?

As far as I know it is 6.6% of PRSI in the calendar year of last payment, or €500, whichever is lower. This is quite anomalous as if your last payment was in January or December makes a huge impact on the base rate for voluntary contributions which can last for years. Edit: the CI website says that the base is "reckonable income". The Social Welfare Acts (consolidated) Section (25) (1) (d) says that for previously employed individuals:

(d) “Reckonable income” for the purposes of this subsection means, subject to regulations, income derived from any employment, including any trade, business, profession, office or vocation.

So my assumption is that it is his earnings from employment in the year in question, so illness benefit would seem not to count.

The first one is fine. But looking at the second point, how do you “agree” to pay voluntary contributions? (I'm assuming that this would also be when the Illness Benefit expires and that credited contributions are considered "compulsory contributions" for the purpose of this sentence.)

Am not the expert but I think you're right. What the "agree" means here is that you have to make voluntary contributions from as soon as you were eligible to start making them, not later. Even if this means arrears payments you can't leave a gap.

 

[Dave Vanian]

Thanks very much for the replies.

As far as I know it is 6.6% of PRSI in the calendar year of last payment, or €500, whichever is lower.

Unfortunately I think it's the above 6.6% or €500 whichever is the higher, which makes a big difference in the case of someone who was on a good salary. From the Citizens Information page ... "If you paid PRSI at Class A, E or H you pay a high rate contribution of 6.6% of your reckonable income in the previous tax year, subject to a minimum payment of €500."

What the "agree" means here is that you have to make voluntary contributions from as soon as you were eligible to start making them, not later. Even if this means arrears payments you can't leave a gap.

Ah yes - thanks - that makes more sense now. It would have been a bit clearer if the website had stated "with effect from the start of the contribution week..."

 

[NoRegretsCoyote]

Co

Unfortunately I think it's the above 6.6% or €500 whichever is the higher, which makes a big difference in the case of someone who was on a good salary.

Apologies. You are of course correct.

The calendar aspect is easily overlooked (though not relevant in your client's case).

If you can retire at (for example) 55 and live off savings and want to keep up voluntary PRSI contributions if at all possible you should retire in early January so that your base year is as low as possible and you only pay the €500 minimum.

 

[lady17]

I know looking at the citizen information website it hard to understand how making voluntary prsi contributions applies in this case or what cost they will be.
One of my friends had the same problem a few years ago as they are now on disability.

My friend contacted here
Department of Social Protection
Client Eligibility Services
McCarter’s Road
Buncrana
Co. Donegal
Telephone: (01) 4715 898

She gave them her name, address, date of birth and pps number and told them her own circumstances and said she wanted to make voluntary contributions. She needed to fill in a VC1 from.
She asked how long be before she heard back after sending this form and their was a wait of a few weeks then. She is currently paying 500 Euro a year by EFT or I think they accept a cheque also. She get a letter to say she has paid this and a form to send the next payment. She has till next summer to make the payment for this tax year.

My advice is that your friend rings them because he/she may need a different from to the above to do this. They can advise then in regards to your friends own circumstances.