State Pension (Contributory )

Rules

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.

You need to:

1. Have paid social insurance contributions before a certain age
2. Have a certain number of social insurance contributions paid and
3. Have a certain average number over the years since you first started to pay

1. Paid insurance before a certain age

You must have started to pay social insurance before the age of 56. (The age limit is higher for people born before 1922.)

Entry into insurance

Your entry into insurance means the date on which you first started to pay social insurance.

The rules that determine when you entered into insurance are quite complex for those with mixed insurance, that is, full social insurance for some of the time and modified at other times.

Normally the date of starting insurable employment is taken as the date of the first paid employment contribution.

However if you have a mixture of full- and modified-rate contributions and paid your first full-rate employment contribution before 6 April 1991 and before you reached 56 years of age, your entry into insurance can be the date on which you first started to pay the full-rate of insurance if that would be to your advantage.

If you started to pay full insurance after 6 April 1991, your entry into insurance is the time you first paid any social insurance.

There are also special entry into insurance rules for self-employed people. If you started to pay self-employed contributions on 6 April 1988 and had previously paid employee insurance at any time, then the date of entry into insurance can be either 6 April 1988 or the date on which you actually first paid insurance, whichever is to your advantage.

2. Number of paid contributions

If you reach pension age on or after April 6 2012, you need to have 520 paid contributions (10 years paid contributions). In this case, not more than 260 of the 520 contributions may be voluntary contributions.

However, if you were a voluntary contributor on or before April 6 1997 and you have a yearly average of 20 contributions, you may meet the requirement if you have a total of 520 contributions (of which only 156 need to be compulsory paid contributions).

If you reached pension age on or after 6 April 2002, you needed to have 260 paid contributions (effectively 5 years contributions but they need not be consecutive).

If you reached pension age before 6 April 2002, you needed 156 qualifying paid contributions (a total of 3 years but they did not have to be consecutive).

Note that social insurance contributions fall into the four groups below.

• Full-rate social insurance contributions are PRSI contributions at Classes A, E, F, G, H, N and S or at the 'ordinary' rate before 6 April 1979.
• Modified-rate social insurance contributions are PRSI contributions at Classes B, C and D (paid by civil and public servants).
• Voluntary contributions are made by people under age 66 who are no longer covered by compulsory PRSI provided they satisfy certain conditions.
• Credited contributions ('credits') are similar to the social insurance contributions you pay while employed and are usually awarded at the same rate as your last paid social insurance contribution. You may get credits when you are claiming a social welfare payment. Credits are not allowed after self-employed contributions (Class S).

3. Average number of contributions per year

You must meet the average condition. This is probably the most complex aspect of qualifying for a State Pension (Contributory).

Normal average rule

The normal average rule states that you must have a yearly average of at least 10 appropriate contributions paid or credited from the year you first entered insurance or from 1953, whichever is later to the end of the tax year before you reach pension age (66). An average of 10 entitles you to a minimum pension; you need an average of 48 to get the maximum pension.

Alternative average rule

This alternative average only applies to people who reach pension age on or after 6 April 1992.

It requires that you have an average of 48 Class A, E, F, G, H, N or S contributions (paid or credited) for each contribution year from the 1979/80 tax year to the end of the tax year before you reach pension age (66). This average would entitle you to the maximum pension. There is no provision for a reduced pension when this alternative average is used.

So, if you reach the age of 66 on or after April 6 1992, your average will be looked at in two ways - the usual average will be assessed and the alternative average will be assessed. Most employed or formerly employed people will be able to meet the alternative average. The alternative average will probably be looked at first because it is easier to assess. If you do not have an average of 48 contributions from 1979 then the normal method of assessing the average will be looked at and you may get a reduced pension (if you do not meet the alternative average, it is virtually impossible for you to have an average of 48 using the normal average rule).

Working in the home and State pensions

In 1994, regulations were made that should make it easier for people who take some time off work to care for family members to qualify for pensions. The Homemakers' Scheme is for people who have been carers since or after 1994. It does not affect people who were carers before April 1994 and it is not of much use to those who give up work permanently. It is of greatest importance for those who work outside the home for a number of years, then spend a number of years as carers and then return to the workforce. It applies equally to women and men.

From 5 April 1994, any contribution year spent as a homemaker may be disregarded in the calculation of the yearly average up to a maximum of 20 years. So, the fact that you do not have any contributions in those years will not affect your entitlement to a pension.

Pro-rata pensions

There are a number of pro-rata pensions, which were introduced because of the exclusion of some people from the social insurance system at particular times.

Pro-rata pension for mixed insurance

Pro-rata pensions were introduced for people with mixed insurance records. Mixed insurance arises when a person spends part of his/her working life in the public service paying modified social insurance contributions and part in the private sector paying full rate social insurance contributions.

Many people have had a career in both the public and private sector but do not have mixed insurance. This is because no insurance was payable by people whose incomes were above certain limits before 1 April 1974. Certain groups who are now insured were outside the scope of the system - Gardai are insurable since 1 April 1974; certain members of religious orders since 6 April 1988 and doctors and dentists in the civil service since 6 April 1988.

People with mixed insurance may have enough full rate contributions to enable them to qualify for a State Pension (Contributory). This depends on the exact circumstances of each case. It could happen that one person would qualify while another, who might have more contributions, would not qualify.

Since 1991, a State Pension (Contributory) may be payable on a pro-rata basis to people with mixed insurance. If you reach pension age on or after 6 April 2012, you need to have a total of at least 520 full rate and modified rate contributions paid.

You must also have:

• At least 260 paid contributions at the full rate since entry into insurance or 1953, whichever is later
• A mixture of full and modified contributions, which when added together give you a yearly average of 10 (for the State Pension Contributory) from the time you first entered insurance or 1953, whichever is later, to the end of the contribution year before your 66th birthday.
• Failed to qualify for a pension under EU regulations or under reciprocal arrangements with other countries or only qualified for a pension at a lower rate than this pro-rata pension would give you.

If you meet all these requirements, you may qualify for a pension proportionate to the number of contributions that you have at the full rate. To take a very simple example, if you worked for 40 years up to age 66 and 10 of those were in the private sector, you would get one-quarter of the normal pension.

The amount paid is in proportion to your full rate contributions as a percentage of your overall contributions. To calculate your pension you add contributions at the full and modified rates together. The average is then measured in the normal way. If you have an average of at least 10 then you may qualify. Then the number of full rate contributions is divided by the total number of contributions to find out what proportion are full rate; you then get that proportion of the pension. The Increase for a Qualified Adult payable with this pension is proportioned as well.

Pro-rata pension for intermittent insurance

This pension applied to people with intermittent insurance and who had a yearly average of under 10. It no longer applies to new applicants (from January 2013).

This pro-rata pension was only payable to people who meet specific conditions. That is, they had to have a broken insurance record and have re-entered insurance in 1974 because of the removal of the income limit. Their average is measured in the usual way and if that average is 10 or more they got a pension in the normal way. However, if it was between 5 and 9 they got a special partial pension which was one quarter of the maximum pension.

See Further information below for more information on other pro-rata pensions that no longer apply to many people (because most people who would qualify are now over 66).

Pro-rata EU pensions

If you have worked in Ireland and one or more EU states your social insurance contributions from each EU state will be added to your Irish social insurance contributions to help you qualify for a social welfare payment. More information about combining your social insurance contributions to qualify for a state pension is available.

Increases for a qualified adult and pensioners over 80 years of age are calculated in the same way as the personal rate of pension. Increases for a qualified child are payable from one country only and, if from Ireland, are paid in full.

Bilateral social security agreements

Ireland has bilateral social security agreements with Canada, the USA, Australia, New Zealand, Austria, Japan, Republic of Korea and Quebec (which has a separate system from the rest of Canada). These agreements are broadly similar and they generally provide that social insurance paid in Ireland and the other country can be combined to help people qualify for old age and retirement pensions. Again, in general, the method of calculation is similar to the EU rules.