I read your article on pension eligibility with great interest. While you’ve covered women who take time off work to raise children and how they can claim their weeks of insurance, I was wondering what happens if you’ve been living abroad for an extended period of time?
I know within the EU it is possible to include equivalent PRSI contributions but I’m not quite sure how that works. Can you address this aspect because I know many people who come back to live and work in Ireland and who have spent ten years abroad.
Ms RP, e-mail
That’s a good point. So often we look at how some personal financial arrangements work in Ireland, forgetting that for many people this is only part of the picture.
Emigration means that Irish workers are traditionally more mobile than those in many other countries. The more mobile nature of the modern workforce has only added to this scenario. The result is that many people nearing retirement have contributed to social insurance in a number of different countries over the course of their working lives.
Taken individually, as under the Irish annual average system where you need 10-year PRSI contributions (520) to qualify for a contributory state pension, such a person might not be entitled to a pension here only on the basis of his Irish work history.
Many other countries have similar eligibility restrictions – 15 years in Spain apparently, and five in Germany to name just two – so this can be very confusing for an individual.
However, one of the advantages of the European Union is that you automatically – well, almost automatically – get credit for PRSI or equivalent payments made in any EU state.
The result is that although you would not be entitled to a state pension here (or perhaps elsewhere) based on local payments, you will be entitled to a pension from one or more states depending on the part. of your professional life spent there.
So how does it work?
If you live in Ireland, your first port of call is the Department of Social Welfare. If you are elsewhere in the EU, you contact the local equivalent.
The department will check your file and, if your last job was here, it will take control of the process: if you most recently worked elsewhere before returning to Ireland to retire, the department will forward your application to that country.
Thus, the country in which you last worked is the one responsible for collecting all your social insurance records from other EU Member States.
There are also minimum periods of social insurance required by many countries before they consider processing a pension. In the case of Ireland – and many others – you’ll need a minimum of 52 weeks of PRSI contributions before the state takes up a pro-rated pension payment.
Of those 52 weeks, at least one must be paid employment. Others can be credited.
This 52 week threshold is completely separate from the minimum 520 weeks required to qualify for an Irish state pension. We’ll come back to that larger number in a minute.
If you don’t meet that 52-week âentryâ threshold, don’t worry; the credit for this work will not be lost but will be “transferred” and taken into account in the calculation of your pension by the countries where you have worked longer, according to the EU.
So the country that handles the calculation of your state pension totals all the social insurance contributions you have and comes up with a notional amount of credit that you would have if all that time had been worked in one country. Let’s say, for the sake of argument, that you last worked in Ireland for eight years (416 weekly PRSI contributions) but previously worked in Spain for 20 years (1040 contributions) and in France for 12 years (624 contributions).
As your most recent job was here, the Department of Social Protection will take care of the matter – although at 416 contributions your Irish social insurance record does not in itself entitle you to a pension. here because it is lower than the 520 minimum contributions.
But when the ministry finds your French and Spanish records, it confirms that you have in fact made 2,080 social insurance contributions during your working life.
That’s well above the low of 520, but the Irish Social Insurance Fund doesn’t suddenly find itself bearing the full cost of a pension it would not have paid at all on the basis of your employment record. Irish. Instead, it prorates what each country should pay you.
To do this, each country uses the same formula: (A x B) / C.
A is the payment rate you would be entitled to in this country if all of your contributions were local. B is the number of weekly contributions paid in this country and C is the highest total number of contributions in all EU states.
Take Ireland as an example. As we said last week, for anyone retiring since September 2012, the Ministry of Social Protection assesses their pension rights against two separate systems: the old annual average and the more modern approach to pensions. total contributions.
Under an annual average, the department notes that your first PRSI payment was back in Ireland as a student, aged 18. It therefore assesses your 2,080 EU-wide contributions against a working life of 48 years and decides that you have an annual average of 43 contributions per year. year.
I know I’m rounding off to even years rather than fractions of years here, but there are enough numbers to confuse readers without further complication. The Department will work on a weekly / monthly basis.
Either way, with an annual average of 43 stamps, you qualify for a weekly pension in Ireland of â¬ 243.40, just below a full pension. So 243.4 equals A. B in this case is the 416 contributions you paid in Ireland and C is the total of 2,080 contributions. So you have (243.4 x 416) / 2080.
(243.4 x 416) is 101,254.4. By dividing that amount by 2080, you get 48.68, so the Irish state will pay you a pension of â¬ 48.68.
Under the New Approach to Total Contributions (TCA) the figure is slightly different because your 2,080 EU-wide contributions equate to 40 full years of social insurance and, under the TCA, this would entitle you to a maximum weekly pension of â¬ 248.30 if the stamps had all been paid in Ireland.
Your formula is therefore now (248.3 x 416) / 2080. And that gives you here a weekly pension of 49.66 â¬. As the Irish state is committed to paying according to the benefit-individual approach, you would have an Irish weekly pension of â¬ 49.66.
The same formula applies to other countries. The state pension agencies in each of them would assess what you would be entitled to for the stamps you paid in each of their countries. Obviously, they wouldn’t compare your entitlements to the â¬ 248.30 or â¬ 243.40 that the Irish system would pay you for 2,080 contributions over your working life, but regardless of their own pension payment for this file. social insurance.
In this case, you will likely receive state pension benefits from three different countries.
Apply in advance
One important thing to note is how long it can take. It is strongly advised to apply for a pension at least six months before reaching retirement age, especially if there are complications such as researching and collecting the necessary documentation in multiple jurisdictions.
It may take a lot longer than you think.
Another problem that people often forget is that different countries have different retirement ages. In most cases, this age is increasing – which is the subject of an ongoing debate in this state – but at present it can range from just over 62 in Slovakia to 67 in Greece. and in Italy.
This is important because, if you have worked, for example, in Italy, the Ministry of Social Protection will use this file to assess your overall eligibility. But if, as a result, it is determined that you are entitled to a pro-rated pension in Ireland and Italy, you will not start receiving the Italian pension payment until you are 67 years old, although you may receive the Irish pension at 66. .
Finally, the rules for working with non-EU countries vary depending on the relationship Ireland has with them. This is something we could come back to in the coming weeks.
Please send questions to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email firstname.lastname@example.org. This column is a reading service and is not intended to replace professional advice. No personal correspondence will be exchanged