Pension in Ireland: Start planning now

Thinking about a pension should be forefront in your mind if you are living or working in Ireland. We look at the different options available and what to do to avail of a pension in Ireland.

Planning for the ‘best age’ to retire is often a thing people postpone. It is difficult to think about the future, and even worse, about planning it. Making sure that you have a solid plan for a pension in Ireland is tantamount to ensuring that you are secure in your later years.

Wondering where we are going with all these aphorisms, let us be straight: retirement. What are you doing for your pension plan? How much are you saving for the future? How long are you willing to work? All these are questions that need answers and the sooner you begin preparing the better. We made a summary of the basic information you need to know to avail of a pension in Ireland.

State Pension (Contributory)

Most employers and employees (over 16 years of age and under 66) pay social insurance contributions (PRSI) into the national Social Insurance Fund. In general, the payment of social insurance is compulsory. The State Pension (Contributory) is paid to people from the age of 66 who have enough (PRSI) contributions. It is sometimes called the old-age pension.

The Social Welfare and Pensions Act 2011 made a number of changes to the qualifying age for State pensions. The qualifying age will rise to 67 in 2021 and 68 in 2028. So:

• If you were born on or after 1 January 1955 the minimum qualifying State pension age will be 67;
• If you were born on or after 1 January 1961 the minimum qualifying State pension age will be 68.

To qualify for a State Pension (Contributory) you must be aged 66 or over and have enough Class A, E, F, G, H, N or S social insurance contributions (PRSI). These are also called full-rate PRSI contributions.

You need to:

• Have paid PRSI contributions before a certain age and,
• Have a certain number of paid PRSI contributions and,
• Have a certain yearly average number of PRSI contributions since you first started to pay PRSI (this is the average rule) OR have a certain total number of PRSI contributions (this is the Total Contributions Approach). To get a State Pension (Contributory), you must have started to pay PRSI before the age of 56.

The date you first started to pay PRSI is known as your date of entry into insurance. Your date of entry into insurance is also important when you calculate your yearly average number of PRSI contributions.

• Social welfare means testing in Ireland

Your entry into insurance is taken as the date of the first paid PRSI contribution made when you started your first job. However, this is not always the case for people with mixed PRSI contributions or people who were self-employed.

Mixed PRSI: There are special rules if you have a mixture of full-rate PRSI contributions and modified-rate contributions. Modified-rate social insurance contributions are PRSI contributions at Classes B, C and D (paid by civil and public servants).

If you have mixed PRSI contributions and you paid your first full-rate employment contribution before 6 April 1991 and before you were 56, your entry into insurance can be the date you first started to pay the full rate of PRSI, if that would be to your advantage. You can find more information about State Pension (Contributory) here.

State Pension (Non-Contributory)

The State Pension (Non-Contributory) is a payment for people aged over 66 who do not qualify for a State Pension or who only qualify for a reduced contributory pension based on their social insurance (PRSI) contributions. To apply, you have to fill in a State Pension (Non-Contributory) application form. You can get an application form from your Intreo Centre or Social Welfare Branch Office, post office or Citizens Information Centre. You should send your completed application form to the address here. You should apply three months before your 66th birthday. Fill the form carefully, giving all the required information. You may be visited by a social welfare officer who will assess your means. You can find more details about State Pension (Non-Contributory) here.

PRSAs

A Personal Retirement Savings Account (PRSA) is a personal pension plan that you take out with an authorised PRSA provider. It is like an investment account that you use to save for your retirement. You can make regular contributions to your PRSA, and these are tax-deductible within certain limits. A PRSA provides benefits at retirement based on the amount of contributions paid and the investment returns earned on those contributions.

PRSAs are generally low-cost, private pension savings accounts. They are designed to give people a flexible way to save for retirement, to be owned by individuals (regardless of employment status) and to be transferable from job to job. They are available from a variety of providers. They are regulated by the Pensions Authority, a statutory body set up under the Pensions Act, 1990. The Authority regulates occupational pension schemes, trust RACs and Personal Retirement Savings Accounts (PRSAs) in Ireland.

• Tax on savings and investments in Ireland

The Pensions Authority and Revenue are jointly responsible for approving PRSA products. The Pensions Authority supervises the activities of PRSA providers in relation to their approved products and monitors compliance with PRSA legislation. The Central Bank of Ireland is responsible for the prudential supervision of PRSA providers and the supervision of the sales process of approved PRSA products.

You can find more information about Personal Retirement Saving Accounts in this booklet.

If you are over 40 and starting to wonder about investing in your pension plan, there are many organisations throughout the country which provide pre-retirement courses to help you to prepare for your future. The Retirement Council of Ireland offers a wide variety of meetings and educational programs to help you decide what is the best option for you. Going to the Pensions Authority website, you can find pension guides with more detailed information, according to your professional activity.

Finally, if you still have any questions or concerns, the Citizens Information Centre has dozens of offices around the country that are worth a visit. There, you will have all the help you need to be safe and start saving for the future.