Case study 1: Calculating your pension under EU social security agreements
This example shows how entitlement to State Pension (Contributory) is calculated under EU social security agreements.
Peter is turning 66 years of age and wants to know if he will qualify for a State Pension (Contributory).
Peter entered into insurable employment 40 years ago. He started his working life in Ireland and worked in Ireland for 2 years in total. He has worked in Ireland for the last 5 years and before that he worked in Germany for 23 years and paid 1,196 contributions there. He doesn't have any breaks in his employment record in Germany, that is, he worked in Germany continuously for 23 years immediately before coming back to Ireland. He therefore has 364 Irish contributions and 1,196 German contributions.
Peter's wife Maria is 61 years of age, her only income is from work. She earns €250 per week.
Firstly you must check whether Peter would qualify for an Irish State Pension based on his Irish contributions alone.
Peter's Irish contributions: 364
Total number of years worked (since entering into insurable employment to the end of the last complete tax year before reaching pension age): 40 years
Total number of contributions by the number of years worked: 364 ÷ 40 = 9.1
Peter's yearly average number of contributions is 9.1. He would not qualify for an Irish State Pension (Contributory).
Calculate Peter’s notional rate of pension. This is the rate of State Pension (Contributory) Peter would be entitled to if all his contributions were assessed as Irish contributions.
To calculate the notional rate of pension, find the total of all Peter’s contributions (both foreign and Irish) divided by the number of years since he entered into insurable employment to get his yearly average.
Total of all Peter's assessable contributions: 364 +1,196 = 1,560 contributions
Total number of years since entering into insurable employment to the end of the last complete tax year before reaching pension age: 40 years
Total number of contributions by the number of years worked: 1,560 ÷ 40 = 39.
Peter's yearly average number of contributions is 39.
Peter's notional rate of pension is €238.50 (the rate paid in 2023 for people with a yearly average of contributions between 30 and 39).
He is entitled to an increase in his payment for his wife. However, he is not entitled to the maximum rate of increase for a qualified adult because she is earning €250 per week. The rate of qualified adult increase payable is tapered for earnings between €100 and €310. The increase for his wife as a qualified adult is €71.70.
Add Peter's rate of notional pension together with the increase he gets for his wife: €238.50 + €71.70 = €310.20.
Total notional pension rate: €310.20
Then apply the formula (A x B) ÷ C = rate of State Pension (Contributory)
A = the notional rate of pension
B = the number of Irish contributions
C = total number of contributions (Irish and foreign)
You take the figure for the notional rate of pension and multiply by the total number of Irish contributions:
€310.20 x 364 = €112,912
Next divide €112,912 by the total number of Irish and foreign contributions which we calculated earlier to be 1,560:
€112,912 ÷ 1,560 = €72.38
Peter’s rate of State Pension (Contributory) including an increase for his wife as a qualified dependant is €72.38