independent

Saturday 26 July 2014

It's very important to think of your pension

Published 10/12/2013|05:42

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THE call-off of the looming ESB strike is good news for all. Neverthelss Irish Rail's Barry Kenny must be dancing for joy that Brendan Ogle no longer works for Irish Rail.

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In another life Ogle was a locomotive driver with Irish Rail but these days he is secretary of the ESB group of unions and the man who was threatening to pull the plug in arow over pensions before a deal was reached on Sunday.

Once I hear the word pensions I get confused. But what I am well versed on these days is the State Pension (Contributory), formerly called the Old Age Contributory Pension.

Everyone who pays a social insurance contribution should keep an eye on how much they have paid into the scheme. Simply log on to www.welfare.ie and request the Department to post you notification of your contributions. It's something you should keep an eye on and check it every 18 months. Far too many people begin to worry about their pension when it is too late.

The Old Age Pension (Contributory) is a complicated animal. It's an Irish solution to an Irish problem and one could well question the fairness of it. To qualify you must have started to pay qualifying social insurance contributions before the age of 56.

If you reach pension age after April 2012 you need to have 520 paid contributions to qualify. Someone working a full year earns 52 credits for the year. If you are unemployed and entitled to benefit you gain full credits during that period. That's why it's important always to keep in touch with your Social Protection office.

If someone moves from employee to self-employed status, depending on their income, they will pay Class S contribution. However if their income is below the contribution limit then it is vital to pay a voluntary contribution.

A hypothetical case. Say you never pay a contribution until you are 55 then begin full-time work, pay your full social insurance contributions until you retire at 65/66 you are then entitled to your full State Pension (Contributory).

On the other hand if someone paid social insurance at the beginning of their working life, say in their early 20s and then became self-employed, which meant that they paid no further contributions until 1986, when the self-employed first started paying PRSI, then their pension is calculated on a yearly average from the date they commenced employment to the date they retire.

Therefore a person now reaching retirement age, who was employed for a few years in their early 20s and has been self-employed since then will have a much reduced pension due to this anomaly That someone can just work from 55 until 66 and be entitled to a full contributory pension seems crazy.

And then there are other people who may have worked for years but because of the way the system is calculated may be entitled to little or no contributory pension.

People who do not qualify for the State Pension (Contributory) can always apply for the State Pension (Non-Contributory), which is means tested. Check your pension contributions.

If you don't have access to the internet, you can call 1890 690 690 or write to Social Welfare Services, Department of Social Protection, McCarter's Road, Ardavan, Buncrana, Co. Donegal. The State Pension (contributory) may be nothing like what the great and the good have given themselves but every cent counts and make sure to keep your eye on the ball.

Wexford People

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