EnglishPersons who were 45 years of age at the time of the reforms introduced in 2007; born on or after 1962; were exposed to the full brunt of the reform. These persons were categorised at switchers.
If you are born in this age bracket, your Social Security Pension is based on the rules showed in the Box below.
Your Retirement Age
65 years.
Social Security Contribution to be Accumulated
Minimum of 50 weekly contributions for a period of 40 years.
Calculation of your Social Security Pension
The yearly average of the basic wage or salary during the best 10 calendar years over a 40-year period.
Calculation of Social Security Pension Income
2/3 of basic salary up to a Maximum Pension Income of €22,138. In order to ensure that maximum pension income does not lose value to to inflation and does not devalue when compared to the average wage, the maximum pensionable income will increase annually subject to a pre-defined formula. The Maximum Pension Income for this age cohort is explained in detail below, as this will change annually subject to a pre-defined formula.
Increase in the Maximum Pension Income
The Maximum Pension Income will increase annually by the following formula:
Maximum Pension Income = Maximum Pension Income + [(70% of Increase in Wage Inflation) + (30% of Increase in Inflation)].
Based on this formula, the Maximum Pensionable Income between 2013 and 2014 increased as shown in the table below.
Year
2013
2013
2013
2013
Maximum Pension Income (€)
20,964
21,431
21,749
22,138
Annual Increase (€)
–
467
318
389
Estimated Maximum Pension Income in 2027
In 2027, the first cohort of persons under the switcher group will retire at 65 years of age. Assuming an average annual increase of €391 (average of increases in the Maximum Pensionable Income between 2016 and 2016), the Maximum Pensionable Income on which their premium is calculated is estimated to be €26,442.
Increase in your Social Security Pension income
Your State pension income will annually increase by the percentage sum of the following formula:
Percentage sum = [(70% of Increase in Wage Inflation) + (30% of Increase in Inflation).
This formula is introduced to (i) retain a relationship between your annual State pension income and the average wage; and (ii) to provide you with a degree of protection against the erosion of your pension income’s purchasing power as a result of inflation.
Protection Against Risk of Poverty
You are entitled to a Guaranteed National Minimum Pension (GNMP) which protects you against the risk of poverty. The GNMP establishes that the minimum Social Security Pension income paid will not be less than 60% of the median income.
It is important for you to know that if you accumulated a minimum of 50 weekly contributions for a period of 40 years, you can, should you wish to do so, retire when you reach the age of 61.
Should you wish to retire, if you meet these conditions, you will not be allowed to continue in employment until you reach your statutory retirement age of 65 years. This is a ‘social cost’ that you are asked to incur for the decision you made to choose ‘leisure’ as against continuing to contribute productively up to your retirement age.
The social security contribution you pay is only on the basic wage or salary. In paying your social security contribution additional income such as car allowance, performance bonus, production bonus, overtime, petrol allowance, etc. is excluded.
Calculating your pension income
Example 1:
You have a compensation package that consists of a salary, petrol allowance, overtime, and a performance bonus. In 2016 the total income earned from your employer was €15,300. This consisted of:
You do not pay the 10% social security contribution on €15,300. You pay your 10% social security contribution on your salary of €13,000. Thus, the annual social security contribution you will pay is €1,300 and not €1,530.
The 10% social security contribution you pay on your salary is capped. This is known as the Maximum Pension Income.
Following the 2007 pension reforms, there are in place two Maximum Pension Income caps. These are :
If you are born between 1952 and 1961 than the Maximum Pensionable Income cap is €18,024.
If you are born on and after 1962 you will retire in after 2027. It is estimated, on the basis of a three year average, that in 2027 the Maximum Pensionable Income will be €26,442.
The table below shows the estimated pension income you are entitled to on retirement:
Date of Retirement
Maximum Pensionable Income
Basic Salary / Wage
Contributions paid in Final Year of Work
Pension Income on Retirement
You are born between 1952 and 1961
2017
€18,024
€13,000
€1,300
€8,667
You are born on and after 1962
2027
€26,442
€13,000
€1,300
€8,667
Example 2:
Your basic salary is of €25,000. The table below shows the estimated pension income you will be entitled to on retirement.
Date of Retirement
Maximum Pensionable Income
Basic Salary / Wage
Contributions paid in Final Year of Work
Pension Income on Retirement
You are born between 1952 and 1961
2017
€18,024
€25,000
€1,802
€12,016
You are born on and after 1962
2027
€26,442
€25,000
€2,500
€16,667
Example 3:
Your basic salary is €35,000. The table below shows the estimated pension income you will be entitled to on retirement:
Date of Retirement
Maximum Pensionable Income
Basic Salary / Wage
Contributions paid in Final Year of Work
Pension Income on Retirement
You are born between 1952 and 1961
2017
€18,024
€35,000
€1,802
€12,016
You are born on and after 1962
2027
€26,442
€35,000
€2,644
€17,628