We like to make things complicated in this country. For the average punter, working out their state pension entitlement is about as easy as navigating Kilimanjaro with a pair of wellingtons. The number of variables one has to consider is excessive. However in the spirit of making life easier for our clients, we have endeavoured to summarise the salient issues of concern below. Before that, a few crucial questions to consider:
  • In what year were you born?
  • Have you made PRSI contributions before the age of 56?
  • Have you made at least 520 weekly contributions?
  • Is your annual average at least 10 weekly?

Okay, let’s get stuck into this. First things first. You need to arm yourself with the information before you make any financial planning arrangements or decisions. The good news is that you can source your own individual PRSI record by logging on to www.mywelfare.ie. There is the state contributory pension and the non-contributory pension. The former is calculated by adding up your “reckonable” PRSI contributions and the amount payable is then based on your own individual yearly average.

If the yearly average PRSI contributions is > or = 48 you should receive the maximum contributory state pension [currently €248.30 per wk]. If you are scratching your head already, bear with me as an example is coming shortly. It is important to remember that there is a fall-back option by way of the “aggregated contribution method” if the yearly average method doesn’t get you to €248.30. I did warn you!

The non-contributory pension is means-tested which seems reasonable until the thorny issue of existing financial means is factored in. The rate of benefit payable can be reduced depending on the scale of financial means. The maximum rate for a person aged < 80 is currently €237/week and €247/week for those aged > 80.

It is important to remember that your state pension income is subject to tax. USC is not collected however and you may be entitled to a full exemption of income tax if one of the spouses is aged > 65 and the combined income from all sources is < €36,000 per anum.

Other issues to be mindful of:

Am I entitled to an additional payment arising from maintenance of a qualifying adult? There are strict rules regarding the definition of a qualifying adult relating to gross weekly earnings and assets.

You need to be mindful of the year 1994 as time spent minding children [in the home] before that date is not recognised for reckonable service. The potential solution is the average contribution method.

There are options available to maintain your PRSI record including part-time employment, PRSI credits and voluntary contributions. Please speak with us re these options.

Have you worked abroad? Have you at least 520 weeks of reckonable PRSI contributions? Whilst foreign social insurance contributions cannot be taken into account, there may be other potential solutions here by way of a reduced pro-rata state pension.

There is undoubtedly a growing problem with future expected levels of retirement provision both in Ireland and globally. Governments have responded through deferred or extended retirement ages, increased taxation and systemized reduction of benefits. The challenges are clear. The proportion of the population entering retirement in the coming 10 to 30 years versus the resources [via workers/ tax-payers] available to fund such retirement provision is growing exponentially. Unfortunately, this period of challenged demographics, burgeoning debt and weakened financial infrastructure come precisely at a time when greater numbers of our population are reliant on state provisions in their old age.

I certainly won’t solve it in this blog but hopefully there is some useful information here that will assist you in calculating your own entitlement.


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