Full State Pension / PRSI Contributions / Time Scale?

THIRD CONDITION

3. Yearly average or total number of contributions

If you reached pension age before 1 September 2012

If you reached pension age before 1 September 2012, you must have a yearly average number of PRSI contributions (paid or credited contributions) from the year you first started to pay PRSI to the end of the tax year before you reach pension age.

This is probably the most complex aspect of qualifying for a State Pension (Contributory). There is the normal average rule and the alternative average rule.

Normal average rule: The normal average rule states that you must have a yearly average of at least 10 qualifying contributions paid or credited, from the year you first entered insurance to the end of the tax year before you reach pension age. You need an average of 10 contributions a year to get a minimum pension, and you need an average of 48 a year to get the maximum pension. Your yearly average will be rounded to the nearest number. For example, 9.4 is rounded down to 9 and 47.5 is rounded up to 48.

Alternative average rule: The rule says you must have an average of 48 Class A, E, F, G, H, N or S contributions (paid or credited) for each contribution year. This rule applies from the 1979-1980 tax year to the end of the tax year before you reach pension age. This average of 48 contributions entitles you to the maximum pension. You cannot get a reduced pension when this alternative average is used.

The DSP looks at your average in two ways. It assesses both the normal average and the alternative average. The alternative average will probably be looked at first because it is easier to assess. Most employed or formerly employed people will be able to meet the alternative average rule of 48 contributions.

If you do not have an average of 48 contributions from 1979, then the DSP will look at the normal method of assessing the average and you may get a reduced pension. If you do not meet the alternative average, it is almost impossible for you to have an average of 48 using the normal average rule.

Working in the home and the average rule: Since 6 April 1994, the Homemakers’ Scheme has allowed the DSP to disregard (or not take into account) up to 20 years spent as a homemaker when calculating the yearly average. The Homemaker’s Scheme can only be used when calculating your yearly average number of contributions.

The Homemakers’ Scheme applies to anyone who provides full-time care for a child under 12 or an ill person or a person with a disability aged 12 or over. It applies equally to women and men. It does not apply to time spent caring before the scheme started in 1994.

It helps you most if you have worked outside the home for a number of years and then spent a number of years as a carer.

If you reach pension age on or after 1 September 2012

If you reach pension age on or after 1 September 2012, you can be assessed using either the average rules (see above) or the new Total Contributions Approach (TCA).

The TCA, also known as the Aggregated Contributions Method, does not use a yearly average to calculate the rate of pension. Instead, the rate is based on the total number of contributions you have paid before you reach the age of 66.

The TCA calculation includes the HomeCaring Periods Scheme which can allow for up to 20 years of homemaking and caring duties. The Homecaring Periods Scheme can only be used with the TCA.

Using the TCA, you will qualify for the maximum personal rate of State Pension (Contributory) if you have 2,080 or more PRSI contributions (or 40 years’ of employment).

If you have fewer than 2,080 contributions, you may still qualify for a high rate of pension because up to 1,040 HomeCaring Periods (20 years) and up to 520 credited contributions (10 years) can be used as part of your pension calculation.

However, your combined HomeCaring Periods and credited contributions cannot total more than 1,040 (20 years).

If your combined total of paid contributions, HomeCaring Period and credited contributions is less than 2,080, you will qualify for a reduced rate of pension. For example, a combined total of 1,040 paid contributions, made up of HomeCaring Period and credited contributions, would entitle you to 50% of the maximum pension (1,040 / 2,080 = 50%).

The Department of Social Protection (DSP) has published FAQs on Qualifying for the State Pension (Contributory). These can help you to work out whether you qualify for a State Pension (Contributory).

You can read FAQs on the changes, see examples of how the changes affect pensioners (pdf) and read the Policy options and recommendations on the changes at gov.ie.

If you have two jobs concurrently and pay PRSI for both, does that double your credits?