Why you should always confirm your PRSI credits

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Why you should always confirm your PRSI credits

With changes to qualifying for the State pension (contributory) well under way, people are urged to check their details. This is particularly important for anyone with earned tax credits from abroad. 

This is especially important for people that may have worked abroad for a number of years. In some cases, they could be totally unaware of their entitlements.  

This year, the State has begun phasing in significant changes in how people qualify for the State pension. Someone who worked abroad may no longer qualify for the full State pension here. But it may be possible to combine earned work credits from abroad to increase the amount they receive here.

Consumers are advised to confirm their personal details first.

In one recent case, I had a lady that worked in the US. She wrongly assumed she did not have enough US credits to qualify for social security there. But after confirming her details, she was entitled to an annual US pension of $16,500.

Had she foregone her US entitlements, and used her US credits here in Ireland, she would have only boosted her Irish State pension by about €3,500 annually.   

State pension rules are being simplified and made fairer. 

Under the previous rules for the Irish State pension, it was possible for someone to qualify for the full State pension by having 520 PRSI contributions (10 years). Under some situations, it was possible for some people, with fewer PRSI contributions to qualify for a higher State pension than others with more PRSI contributions.

UK pension buyback. 

For those that worked in the UK, there is still time to apply for the buy-back of years. There has been a lot of interest in this. But there may be an impression it is a very low-cost option to receive a massive pension boost. That is not always the case. In one situation, it cost a qualifying applicant £2,500. In return, they will receive an extra £230 per month. However, in another case, the buy-back would have cost £18,500. This is because there are various PRSI classes in the UK and some attract a higher buyback cost than others. The applicant simply did not have the cash to buyback the years. Plus, because they have a fairly significant Defined Benefit pension entitlement built up here in Ireland from their employment, they reasoned they didn’t need the extra money from the UK.

Combining credits from abroad.

For anyone that worked abroad, Ireland has a social security arrangement that allows people to combine social insurance contributions here with social security contributions in other countries. This includes countries in the EU, the UK and countries where Ireland has bi-lateral arrangements. Those include the USA, Canada, Australia and New Zealand, 

With a long history of emigration, it is likely there are many Irish people with tax credits in other countries. In some cases, they may be entitled to retirement benefits. They are advised to make contact with the State authorities to check their details.

Frank Conway is a Qualified Financial Adviser and Founder of MoneyWhizz

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