Wednesday 7 December 2016

James Fitzsimons: Rich or poor, State pension is well worth investing in

How PRSI of €4.86 each week can fund a retirement pot worth €12,000 a year

James Fitzsimons

Published 30/12/2012 | 05:00

IF you've weathered the recession and still have a job or a viable business, keep doing what you are doing. Things will get better even if it takes a while before they improve. If you lost your job or your business, hang in there. Take a break from the rat race to organise what slipped when the Celtic Tiger was still alive. Retirement planning is one thing that most people neglect. It's always too far down the road to be a concern. Then one day it is too late.

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The State pension is not a lot, but it can be even less than you expect if you don't take steps to protect what you are entitled to. You need a yearly average of 10 contributions for the minimum pension and 48 for the maximum pension. The average is calculated from the time you become part of the PRSI system. If you dropped out of the workforce, without making voluntary contributions, the amount of your State pension in retirement may be cut drastically. But you can take steps to get around the cuts if you know what to do.

For one thing, since 1994, a person who takes time off work to look after a child or other dependent can ignore the years they were out of work when calculating their yearly average PRSI contributions. So the time they spend out of work will not dilute the value of their pension in retirement. This is a very valuable right for those it applies to. You need to return to work for it to be effective.

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