The State pension contributory is a very valuable benefit and is the bedrock of the Irish pension system. Therefore, it is important to ensure that those qualifying have made a sustained contribution to the Social Insurance Fund over their working lives. To ensure that the individual can maximise their entitlement to a State pension, all contributions paid over their working life from when they first enter insurable employment until pension age are taken into account when assessing their entitlement and the level of that entitlement.
Since 1961, when contributory pensions were first introduced, the average contributions test has been used in calculating pension entitlement. Once over 16 years of age, the date a person enters into insurable employment is the date used for averaging purposes.
To qualify for a state pension (contributory) a person must:
- have at least 520 paid contributions, and
- satisfy a yearly average condition (a yearly average of 48 contributions paid or credited is required for a full rate State pension (contributory), and reduced rates of payment may be payable for pensioners with lower averages).
The homemaker’s scheme makes qualification for State pension (contributory) easier for those who take time out of the workforce for caring duties. The scheme which was introduced in and took effect from 1994 allows up to 20 years spent caring for children under 12 years of age, or incapacitated people, to be disregarded when a person’s social insurance record is being averaged for pension purposes.
The State pension (contributory) is intended for those who have paid PRSI during their working lives, and/or have remained engaged with the labour force when they were not in a position to make such paid contributions (e.g. due to unemployment or illness). Where a worker becomes unemployed or incapable of work, s/he will generally be awarded credited contributions for the duration of their social welfare claim(s), or they may sign for jobseekers credits which are also used in the calculation of the yearly average for pension purposes.
For those with insufficient contributions to meet the requirements for a State pension (contributory), they may qualify for a means tested State pension (non-contributory) which has a maximum personal rate of €219.
It is expected that a total contributions approach to pension qualification will replace the current average contributions test for State pension (contributory) from 2020, although that date is subject to change.
