social insurance contributions and contributory pension

Hannaho

I have just requested my social insurance record of contributions for my contributor pension, which I will get at the grand old age of 68 in 14 years time. I am confused about it. I worked in the UK for 6 years - I contribute NI contributions there and have 20 years of contributions now paid there - though unsure what Brexit will mean for this. In my Irish contribution record, I have gaps for when I was caring for my children when they were under 12 - 4.5 years in total. I currently have a total aggregate of 1568 contributions - not considering the credits I will be able to get from Homemaker's scheme and caring for children under 12 - by the time I finish employment I should have well over the aggregate contributions of 2080 to get a full contributory pension? Am I correct in this? Is it now an aggregate of contributions, or are you supposed to have 48 paid contributions in each year. Some years when I was first starting work - I might have had 18 or 20 contributions. Just wondering is it an aggregate of contributions now, or do you have to have 48 contributions in each year to get full State pension?

coylemj

Since 2012, you can pick whichever calculation gives you the greater benefit- the old averaging system or the newer Total Contributions Approach (TCA). Though in 14 years time when you're eligible, TCA will be the only game in town and that's an aggregation method which will suit people like you who have gaps in their contributions history.

Under TCA, 2,080 contributions will get you the full contributory pension.

Hannaho

Thanks, Coylemj, that's explains it really clearly and puts my mind at rest. Looking at that then, I could take a 6 month break from work at age 59/60 - presuming I'm sill healthy and go travelling for 6 or do a cookery course for 3 month, without worrying that I have to have 48 contributions in each year?

TheBeach

Yes that's correct. With the total contributions approach you really could have 12 years of a gap on your record and it shouldn't affect your pension entitlement. (If we consider a working life as age 16-66).

coylemj

Hannaho wrote: »

Thanks, Coylemj, that's explains it really clearly and puts my mind at rest. Looking at that then, I could take a 6 month break from work at age 59/60 - presuming I'm sill healthy and go travelling for 6 or do a cookery course for 3 month, without worrying that I have to have 48 contributions in each year?

Yes. If you've clocked up 2,080 (52*40) contributions, you will qualify for the full pension and if you stop working before reaching the pension age, there will be no need to sign on for credits.

If only the averaging system applied then if you're not working and can't pass the means test for Jobseeker's Allowance, you can sign on for credits and use up to 10 years credits when building up your contributions history and to keep up your average. That's on top of the 4.5 years you mentioned that you'd be eligible to claim as credits for caring for children under 12. You can claim a maximum of 20 years credits, provided you have at least 520 (10 years) paid contributions.

The averaging system still suits some people better than TCA, especially if they have a continuous payment or credits history (no gaps) but cannot reach the magical 2,080 contributions. This is because the averaging system is more forgiving of people who don't reach the maximum number.

Under the averaging system, having an average of 48 annual contributions got you the maxium pension but you didn't fall off a cliff if you were marginally below 48. The current state contributory pension is €248.30 p.w. if your average is 48 or higher but you lose less than €5 if you fall into the next lower band which is 40-47 and your pension will be €243.40 p.w. So although you might have only an average 40 contrbutions (83.33% of the max. 48), you'd still get 98% of the weekly maximum pension. Whereas the TCA method is straight linear and the drop would be higher.

The bands and applicable weekly rates when assessed under the averaging system are shown here .. https://www.gov.ie/en/publication/927721-state-pension-contributory-rates/