State Pension Deferral & Key Changes from 2024

Deferral of the State Pension (Contributory)

The State Pension becomes available starting at age 66. However, you have the option to defer claiming your pension until as late as age 70 if your 66th birthday is after the 1st January 2024, with a view to receiving a higher pension amount.

However, deferring your pension claim to a later date might not necessarily increase your pension so it is important to seek advice in advance of opting for a deferral period. This is particularly relevant with the phasing out of the Yearly Average method for determining the pension benefit starting from 1st January 2025.

It is also important to note that whilst an individual’s liability for PRSI usually ends at age 66, it will continue to be applicable on any income, including withdrawals from an Approved Retirement Funds (ARF) and vested Personal Retirement Savings Accounts (PRSA), until you start drawing the State Pension (Contributory), which needs to be drawn by age 70. It is for this reason that deferring your State Pension entitlement could be beneficial if you do not meet the minimum requirement of 520 paid reckonable contributions at age 66.

By continuing to work or paying PRSI on other forms of income, such as withdrawals from an ARF, after age 66, you may reach the minimum 520 contributions by a later age (up to 70) and qualify for some level of pension or furthermore, increase your weekly level of pension through this higher number of overall contributions. If taking this approach, it is important to ensure that you are drawing an income of at least €5,000 per annum as that is the threshold whereby PRSI contributions are made.

To communicate deferment of the State Pension, one communicates with the State Pension (Contributory) section in Sligo which is contactable at state.con@welfare.ie.

Benefit payment for 65-year-olds (BP 65)

The Benefit Payment for 65 Year Olds (BP 65) is designed for individuals aged between 65 and 66 who have stopped working, either as employees or self-employed, and who meet specific PRSI contribution requirements.

Whilst similar to jobseekers benefit, this payment does not require recipients to actively seek employment or to "sign-on" at their local social welfare office.

To qualify for the Benefit Payment for 65 Year Olds (BP 65), you must meet the following PRSI conditions:

If you were an employee, you must have paid at least 104 PRSI contributions at Class A, H, or P.
Alternatively, if self-employed, you must have paid at least 156 PRSI contributions at Class S.

AND

Have paid or credited at least 39 reckonable contributions at class A, H or P in the governing contribution year (A minimum of 13 weeks must be paid contributions). If you don’t have 39 PRSI contributions in the governing contribution year, you can use 26 PRSI contributions paid in the governing contribution year and 26 paid in the year immediately before this.

The Governing Contribution Year is the second last complete tax year. For example, for a claim in 2024, the second last complete tax year is 2022.

The 2024 rates of this benefit are set out below:

*You may get a reduced rate if your qualified adult has earnings or income in excess of €100 and up to €310 gross a week.

**You can get a weekly increase for each qualified child if you qualify for an increase for a qualified adult or if you are parenting alone. If you do not qualify for an increase for a qualified adult, you may get a half rate qualified child increase, if your qualified adult has income of €400 or less a week.

Summary of changes from 2024

Here's a summary of key changes and options related to the State Pension in Ireland:

Deferring the Age Pension
- From January 1, 2024, individuals can choose to defer their State Pension entitlement anytime between ages 66 and 70.
- You continue to be liable for PRSI until you apply for the State Pension (up to a max age 70) thereby allowing individuals to potentially increase their State Pension (Contributory) entitlement amount by deferring their application.
- For those with rental properties, continuing to pay PRSI contributions on rental income (Class S) can be a strategic choice to benefit from a higher pension rate.
Long-term Carers Contributions
- Individuals who have provided care for someone for at least 20 years (1,040 weeks or contribution periods) can claim long-term carers credits towards the State Pension (Contributory). These credits are counted as reckonable pensionable contributions.
- The eligibility for these credits depends on meeting specific criteria related to the person being cared for.
Transition in Calculation Method
- Starting January 2025, there will be a 10-year transition period to exclusively using the Total Contributions Approach for calculating pensions.
- During the transition, the weighting of contributions will change over the 10 years. It's important to note that the change is due to discrepancies in pension entitlements under different calculation methods. For instance, using an example where there are 1,323 reckonable contributions, the Total Contributions Approach resulted in a pension of €176.40, whereas the Yearly Average yielded €277.30. This demonstrates why the shift to the Total Contributions Approach is being implemented

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