Farm Ireland
Independent.ie

Thursday 26 April 2018

Beat the pensions timebomb by securing your state entitlements

Now is the time to check what you have to do to secure your State pension in later years.
Now is the time to check what you have to do to secure your State pension in later years.

Martin O'Sullivan

Most people are blissfully unaware of what they require to qualify for a State Pension. Now, might be a good time to check exactly what you have to do to secure your income for your later years.

The current State Contributory Pension for a person over 66 who has a qualifying adult dependent is currently €436.39 per week or €22,687.60 per annum.

To receive the same level of pension through a private pension scheme would require an accumulated fund of around €600,000.

To build a fund of that magnitude over a 40-year working life span would require an average annual addition to the fund of €15,000 between contribution and growth whereas most people will only pay a fraction of that in the form of PRSI.

State pensions are incredibly good value but it is vital that you make the necessary PRSI contributions up to age 66.

The current qualifying age is 66 however if you were born on or after 1 January 1955 the minimum qualifying State pension age will be 67 and if you were born on or after 1 January 1961 the minimum qualifying State pension age will be 68.

Qualifying for a pension

Most will automatically qualify for a full pension but it is not unusual for people to discover, having made a pension application, that they are not eligible for the full weekly rate or their spouse or civil partner may not be entitled at all to the Adult Dependent Allowance.

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The most common problem that I have encountered over the years is in cases where the farm profit fell below the PRSI threshold, which is currently set at €5,000, and the farmer was not automatically chargeable to PRSI.

In such cases an application to Social Welfare should have been made to make a voluntary contribution, currently amounting to €500 per year, but in many cases no such application was made.

Generally it is not possible to make back payments as there is a relatively short time limit for applications to make a voluntary contribution. This may have resulted in that persons average annual contributions falling short of the required limit for a full pension.

Farmers with small enterprises who have been notified by Revenue that they are not required to make an annual tax return are classed as 'no net liability contributor' and are required to pay €310 per annum in respect of their PRSI contribution. It is important that these payments are made.

Checking contributions

If you are unsure of your PRSI contribution record and would like to establish if you are entitled to a full pension you can contact Central Records, Department of Social Protection, McCarter's Road, Ardarvan, Buncrana, Co Donegal. LoCall 1890 690 690 or make an online request at the online services and forms tab at www.welfare.ie.

Applications You should apply three months before your 66th birthday. Forms can be got from your local Department of Social Protection office or online on www.welfare.ie. Backdating of payment beyond six months is no longer possible so timely application is important.

NEXT WEEK

We look at the issues around spouses pensions and adult dependent allowance

Martin O'Sullivan is the author of the ACA Farmers Handbook. He is a partner in O'Sullivan Malone & Company, Accountants & Registered Auditors. www.som.ie Ph: 051 640397

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