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Friday 9 December 2016

Do I qualify for State pension after spending 19 years looking after my children at home?

Gerry Stewart

Published 10/01/2016 | 02:30

'Any years that a person spends as a homemaker (since April 6, 1994) are ignored or disregarded when working out your yearly average contributions to see if you qualify for a contributory State pension'
'Any years that a person spends as a homemaker (since April 6, 1994) are ignored or disregarded when working out your yearly average contributions to see if you qualify for a contributory State pension'

I have a query in relation to the homemakers scheme. I understand that those who fall under that scheme may be entitled to the contributory state pension.

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I am 66 years of age. I started work in September 1965 and worked until December 1973 when pregnant with my first child. I have four children and I stayed at home while all of them grew up. My first child was born in May 1974 and my fourth was born in August 1981. So my fourth child would have been 12 years of age in 1993. In total, I worked 19 years as a homemaker and after that time, I was unable to get a job. I contacted the Department of Social Protection in relation to my eligibility for a contributory state pension - but was advised that I didn't have enough contributions.

I wondered if I might be eligible for the homemaker's scheme - and therefore more likely to qualify for the contributory State pension?

Mary, Tralee, Co Kerry

 

One of the conditions you must meet to qualify for the state contributory pension is that you must have paid an average number of social insurance contributions since you first started work. Under the homemaker's scheme, a homemaker is a man or woman who provides full-time care for a child under the age of 12 - or an ill or disabled person aged 12 or over.

Any years that a person spends as a homemaker (since April 6, 1994) are ignored or disregarded when working out your yearly average contributions to see if you qualify for a contributory State pension. As a result, any state contributory pension entitlement may be higher if this scheme is availed of.

There are other qualifying criteria, such as that you must have started insurable employment or self-employment on or after your 16th birthday and before the age of 56. You also cannot work full-time - however, you can work and earn less than €38 gross per week, so there is some flexibility for part-time employment.

Another important point is that you must register for the scheme - unless you already claim child benefit, carer's allowance, carer's benefit or the respite care grant. If you already claim these benefits, these are automatically treated as an application to be registered for the homemaker scheme.

I am sorry to say, however, that you do not qualify as the scheme was only introduced on April 6, 1994. You explained that your fourth child would have been 12 in 1993 - which was the year before the scheme was introduced.

Furthermore, and as I mentioned earlier, once your child is 12, the benefit of the scheme ends unless you are caring for someone who is ill or a disabled person aged 12 or over.

I started work in the public service in January 1985 and paid Class A1 PRSI until the end of 2013. I am still working in the public service but am now paying Class D1 PRSI. I hope to retire at the age of 62 with 40 years service.

 

What is the difference between paying Class A1 and D1 PRSI - and how does this affect my social welfare entitlements?

Will I be entitled to the State pension at 66 - and if so, at what rate?

And if I was to retire at 60, would this affect my entitlement to the State pension?

Rory, Dundalk, Co Louth

 

Class D1 PRSI normally applies to public service workers recruited before April 6, 1995.

The difference between Class A1 and Class D1 PRSI for contributory State pension purposes is that Class D1 covers a limited number of social insurance payments and excludes the state contributory pension, whereas Class A1 includes the state contributory pension. So assuming you did in fact pay Class A1, then you may be entitled to the state contributory pension.

Even though you say you are retiring at the age of 62 with 40 years' service, you are correct that the state pension currently begins at the age of 66, so you would have four years where you are not getting the state contributory pension.

As you state that you paid Class A1 PRSI from 1985 until the end of 2013, that is 28 years of social insurance contributions. I am going to assume you paid PRSI for 52 weeks per year. That would mean you have built up 1,456 contributions and credits over those 28 years.

This 1,456 is divided by the number of years between the date you first started work - and the age of 66.

As you have said you will have 40 years service based on you retiring at age 62, then it should be 44 years between the date you first started working in this job and the age of 66. This gives you a yearly average of 33 contributions and qualifies you for a state contributory pension of €207 per week.

(Of course, it may not be the case that you have paid 1,457 social insurance contributions over your working life. You can request a copy of your social insurance contributions record on www.welfare.ie to get your exact amount of annual contributions.)

You may also be entitled to a pension for a qualified adult. If you retire at the age of 60 (with 38 years' service), there would still be 44 years between the date you first started working and the age of 66 - so you would most likely still qualify for the same €207 per week contributory pension (as long as that rate hasn't changed by the time you retire).

Should you decide to retire at the age of 60 with 38 years' service, you should be able to make contributions to an Additional Voluntary Contribution (AVC - a top-up pension) and this should boost your pension tax-free lump-sum entitlement.

This is an area not to be overlooked as you are entitled to tax relief at your marginal rate on any money you contribute to an AVC pension before retirement.

 

I recently gave up full-time work to become self-employed. I am paying PRSI as a self-employed individual.

If I continually pay my PRSI while self-employed and have no gap in my self-employment as such, will I still qualify for the state contributory pension when I retire?

Or were the PRSI contributions which I made as a full-time employee worth more (for the contributory state pension) than the PRSI contributions I'm making as a self-employed individual?

John, Newbridge, Co Kildare

 

Yes, you will still qualify for the state pension, provided you continue to pay PRSI as a self-employed person. Ordinarily the PRSI class for an employee is A1 and the class for the self-employed individual or business owner is S1. Both classes are regarded as 'full rate' social insurance contributions.

To qualify for a contributory state pension, you must have started paying social insurance before the age of 56, have paid at least 520 full rate social insurance contributions and have either a yearly average of at least 48 paid/credited full rate social insurance contributions from 1979 to the end of the year before you turn 66 - or a yearly average of at least 10 paid/credited full rate contributions from 1953 to the end of the year before you turn 66.

Don't panic though, if you don't qualify for the full pension under the yearly average rule, you should still qualify for a reduced contributory pension if you have a yearly average of 10 full rate contributions, or more.

 

Email your questions to lmcbride@independent.ie or write to 'Your Questions, The Sunday Independent Business Section, 27-32 Talbot Street, Dublin 1'.

While we will endeavour to place your questions with the most appropriate expert to answer your query, this column is a reader service and is not intended to replace professional advice.

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