I’ve focused on private pensions for this whole retirement series but today I’m going to talk about the state pension.

State benefits in retirement – contributory state pension

The contributory state pension is not means tested. At the age of 66 (note that from 2021, it will be 67 and from 2028, 68), everyone who has paid enough pay-related social insurance contributions (PRSI, also known as stamps) over the years will get it. That’s why it’s known as the contributory state pension.

Incidentally, you’ll get it whether you’re officially retired or not, because it’s not means tested. Sweet. But don’t take for granted that you’ll get the full whack.

If that is you, you may be able to do something about it, but like most things financial, it takes a bit of planning ahead. But first I want to illustrate what you could be missing out on.

What difference would €7k a year make?

The current maximum state contributory pension is €248.30 per week. The minimum is €99.20 per week. If you’ve taken time out of working to look after children, to volunteer, or if you’ve worked abroad for example, your entitlement could be closer to the minimum than the maximum because you haven’t paid enough PRSI. (Incidentally if you were receiving state benefits during that time, you will have paid PRSI)

The difference between the minimum and the maximum adds up to over €7, 753 a year. Let’s say you live to 85, you’d have missed out on €147,000!

In a minute I’ll explain what you can do to check and rectify your PRSI status, but first here’s a very common scenario that could lead to you being short.

Is this you?

Say you’re planning to take early retirement at the age of 60. Between then and your 66th birthday, which is the age at which the state pension kicks in you won’t normally be paying PRSI (unless you’re in receipt of some other state benefit), therefore your PRSI ‘account’ will not be ‘paid up’.

Here’s what to do

You may be able to arrange to pay PRSI voluntarily, but, and this is important: you can’t back-date contributions, so if you realise you’ve missed a few years, there’s nothing you can do about it. That’s why it’s so important to plan ahead.

  • Order a print-out of your PRSI contributions

There are lots of other circumstances that could lead to your not having made full PRSI contributions, so my advice is to request a record of your PRSI contributions to date. You do this by contacting Welfare Records on 1890 690 690. It’s very easy.

  • Make an appointment with Citizens Information

It’s a complex area. Periods of unemployment, redundancy, time out of the workforce caring for children: there are lots of factors that could affect your pension entitlement. Citizens Information will be able to analyse your PRSI contributions and tell you what you’ll be entitled to.

  • Make voluntary social insurance contributions

If you voluntary social insurance contributions are an option, check out the relevant section on the Department of Social Affairs website or call the Voluntary Contributions Section on 01 4715898 or LoCall 1890 690 690.

EVERYTHING YOU NEED TO THINK ABOUT IN RETIREMENT IN ONE HANDY GUIDE

I’ll be pulling together the seven articles in this retirement series into an e-book (a downloadable PDF) which will include lots more detail on everything we’ve touched on in the blogs. If you’d like to receive it, free of charge, sign up here.