Is it worth paying the voluntary contributions to the PRSI?

I stopped working at age 55 and signed up to pay voluntary PRSI payments to protect my state pension rights. I do not intend to return to work, but I have paid PRSI continuously for the past 35 years.

I wonder if I will get any benefit from paying voluntary contributions for the next 10 years or more or if my past contributions will be enough to qualify for the maximum state contributory pension.

Mr. PC, email

For those who can afford it, voluntary PRSI contributions are a good way to ensure you maximize your potential state pension, even if you are not currently working in a job where they are regularly deducted.

But it’s important to note that voluntary contributions will not give you access to all the benefits that PRSI normally provides.

Currently, there are a few different rates paid and which one applies will depend on what you were paying at your previous job.

For most of us in the private sector, who have been paying Class A PRSI contributions throughout our working lives, the voluntary rate at which we will be paying is 6.6 percent of your previous tax year’s eligible income. . The minimum you can pay for contributions to count towards benefits is €500 per year.

But, as I said above, voluntary aid will not entitle you to many of the social benefits that you could have enjoyed by contributing to the PRSI during your working life. That includes things like: job seeker benefits, maternity/paternity benefits, workers’ compensation, sickness, and health and safety benefits; disability pension; caregiver benefit, adoption benefit and access to dental, optical and hearing treatment.

For what does count is the State contributory pension, the contributory widow’s pension and the payment of the contributory guardian.

Class A also includes public servants hired since April 5, 1995.

Pensionable permanent public servants hired before that date pay any voluntary contribution at a rate of less than 2.6 percent -with an annual minimum of €250- but, like that generation of public servants, they are not entitled to the pension. of the State.

Since the real benefit of voluntary contributions is to ensure you don’t lose out on a full state pension, your question about ongoing payments is perfectly valid.

Until recently, what you received as a state pension depended on the average of your social security contributions (PRSI) throughout your working life. Working life was defined as the period from when you start working until you reach State retirement age.

While traditionally 65, it increased in 2014 to 66 and was due to increase again this year to 67 and 68 in 2028. Those further increases are currently frozen pending an ongoing review of pensions after the issue caused a storm. at the gates in the last general election. That review has already missed its reporting deadline.

Average

So in a case like yours where you have worked for 35 years and have another 10-13 years left before you reach retirement age, you would need to average 48 contributions per year for that entire period.

On that basis, you will need to make your voluntary contributions for the next 10 or even 13 years, as appropriate.

However, under the new rules, the State is moving to what it calls a Full Contributions Approach. It will only require you to pay 40 years of contributions to the PRSI (2,080 weekly contributions). Based on this, you only have to contribute to social security for the next five years, since you already have 35 years of deposited contributions.

That would save you five to eight years of payments, which is significant.

Although, as in everything related to pensions, the legislative reform necessary to fully implement this new approach has been delayed, those who retire after September 1, 2012, like you, are currently being evaluated, which of the two approaches benefits more.

In your case, it is clearly the second way, so you should consider paying PRSI only for the next five years, regardless of when you will start receiving the state pension.