Pensions: the dos and don’ts

Pensions are pretty straight forward if you spend your working life in a regular job and make the required contributions. However, if you have had a seasonal or irregular work history, took time out to rear children or care for an incapacitated adult, then it’s a different story entirely.

Through his work with An Post and having seen many people lose out on their entitlements, Noel Leahy set out to assist people in claiming their full entitlements. He has the forms, knowledge and experience to help those losing out.

First steps

So exactly how much is the contributory pension worth and what can you do to ensure you are getting every cent you are entitled to?

The maximum contributory pension is €248.30 per week. Over the course of six rate bands it falls to a minimum of €99.20 per week for people who have an average of 10-14 yearly contributions. To get the maximum pension you need a yearly average of 48+ contributions over your working life. It takes a minimum of 520 full rate contributions to get the minimum state pension.

There are six rate bands in total (see figure A). Prior to September 2012 there were fewer bands and it was easier for people to qualify for a bigger pension.

Noel would advise everyone who reaches the age of 60 to contact the Department of Social Protection, McArthur’s Rd, Buncrana, Co Donegal, or alternately call 1890-690690 and get a copy of their social welfare record.

“If people are caught short on contributions they might be able to do something about it. It can be next to impossible to deal with the situation when you turn 67 and find you only qualify for a small pension or worse, still have been refused a pension. People need to know where they stand and it’s up to them to have the right information,” says Noel.

If you don’t have 520 contributions you will get no contributory pension and will have to depend on being means tested for a non-contributory pension or the adult dependent allowance on your spouse’s pension.

“People don’t appear to understand the seriousness of making PRSI contributions. They think getting a pension is automatic. It’s anything but,” he adds.

Maximising entitlements

While 520 contributions gets you the minimum contributory pension, there are schemes to help you maximise whatever pension you get.

Take Jack a drystock farmer. His wife Kate, who is a nurse in her own right, was involved in a traffic accident and had to give up work. Jack cared for her. However, farm income suffered and he made no PRSI payments for eight years. When it came to pension age, he had an average of 18 contributions per year. This qualified him for a contributory pension of €161 a week.

After Noel reviewed Jack’s case, his total contributions were divided by 42 instead of 50 and this brought him into the 20-29 contribution bracket. “We applied for the Home Makers Scheme and got the eight years that he cared for his wife taken off his record. He now gets €211 per week.That’s an extra €2,500 per year, which mounts up to a tidy sum over the years.

SCOPE

The next scheme that can help improve your contribution history, especially if you are a woman, is SCOPE. In certain cases, a farmer’s wife can pay PRSI in arrears. However, to do this they have to prove they were actively involved in working the farm. If their name is on the deeds that’s a big help. It helps if they are a co-signature on the joint cheque book too. There are eight conditions but they don’t all have to be met.

“Improving your contribution history is not that difficult through SCOPE. It may mean a one-off payment for the missed years is required but the benefit far outweighs what has to be paid over,” says Noel.

What is absolutely essential when applying for SCOPE is that the person over 66 MUST have at least one year class S contribution paid before they are aged 66. If they haven’t the one year paid and are over 66 then the window is closed and there’s no pension. This does not concern anyone who is aged under 66.

Noel recommends that all farming women who are short PRSI contributions should get their file reviewed by a professional or contact SCOPE (see contact details below).

“Farm wives who face a means-tested non-contributory pension in many cases could be entitled to the non-means[tested contributory pension.”

Recent reports suggest only half the pensioners who are currently having their files reviewed are seeing an increase in their pensions. This review is being carried out on those who were impacted from September 2012 when Joan Burton introduced six bands of pension rates. The new bands made it harder for people to achieve near enough to a maximum pension.

Income assigning

In 2014 a new scheme was introduced to assist farm women make PRSI contributions. Once they are assigned a minimum farm income of €5,000 per year and do the same or ancillary work, they get 52 class S contributions for a state pension. This suits people who are not in full farm partnerships but who do some work on the farm.

This scheme can be very beneficial for farmer’s wives who are retiring early from the public service. It helps them qualify for a pro-rata pension (260 contributions) or the first band of state pension (520 contributions).

From 2017 a person can make a voluntary contribution for years they missed backdated for five years. So someone today who hasn’t made contributions can go back as far as 2014 and pay any arrears due. Along with SCOPE and Homemakers, this helps people qualify for the maximum weekly payment.

Pro-rata pensions for public servants

Pro-rata pensions work for people who worked in the public and private sectors at different times in their working lives. Anyone with 260 Class A contributions (five years) in private employment can qualify for a pro-rata pension. It’s worth between €40-€70 a week. For example, nurses usually have 200 of these contributions from their training years. Secondary teachers who spent a while teaching before securing permanent employment. For public servants retiring early it is an ideal way of toping up their pension.

An income of €38 a week is required to get an A contribution. Four cases of pro-rate pensions handled by Noel left the pensioners with an average additional pension of €60 per week for the rest of their lives.

“One lady, a retired nurse aged 80, missed out on 14 years because sadly the Department of Social Protection only pay six months arrears. I really believe this is a support that thousands of people are missing out on because they don’t know it exists.”

Adult dependent allowance

The maximum payment is €222 per week and for those aged under 66 it is €165 per week. It’s a means-tested payment and it is only the dependent that is means tested. This is in contrast to the non-contributory pension where both parties are means tested jointly.

A person can be earning €100 per week without any deduction. If they earn €310 or above then they get no pension payment. There is a deduction for savings of over €20,000 held by one person or €40,000 in the case of a couple.

Noel Leahy offers private services for a fee. To contact Noel, email noelpatleahy2@gmail.com or write to Noel Leahy, Donohill, Co Tipperary.