Your Pension if you are an Employee according to Year of Birth

Born on and Before 1951 and Worked as an Employee (No Service Pension)

If you are born on or before 1951, you are already retired and in receipt of a Social Security Pension.  The pension income that you receive is calculated as follows:

(a)  Yearly average of the best 3 consecutive calendar years within the last 10 consecutive calendar years.

(b)  You paid social security contributions of 10% on your basic wage to a Maximum Pensionable Income of €18,024 and an annual increase of the Cost of Living Allowance (COLA) awarded annually.

(c)  You retired at the age of 61 years (if you are a woman you may have retired at 60 years of age).

(d)  To qualify for a full pension regarding contributions paid you had to pay a maximum of 50 social security contributions annually for a maximum of 30 years.

(e)  There is a Guaranteed National Minimum Level (GNML) of Pension in place, which ensures that you are protected against poverty in the event that you did not pay the full contributions you were entitled to pay.

If you are in this category of pensioners, you can continue to work as an employee or self-employed person and still receive the   you are entitled to.

If you take up such employment, you will continue to pay your social security contribution until you reach 65.  It is important to note that such a contribution is not assigned to your contribution history but will be posted as an inter-generational contribution on your part.

Born between 1952 and 1961 and Worked as an Employee (No Service Pension)

If you are in this age bracket your Social Security Pension will be governed as shown in the Table below.

The State pension also provides for a Guaranteed National Minimum Level of Pension (GNML), which seeks to protect you against poverty.

Once you reach the retirement age, you can continue to work as an employee or in a self-employed capacity and earn an income whilst continuing to receive the full income from your Social Security Pension.  If you take up such employment, you will continue to pay your social security contribution until you reach 65.  It is important to know that this contribution is not assigned to your pension contribution history but is posted as an inter-generational contribution on your part.

You should know that if you accumulated a maximum of 50 yearly contributions for a period of 35 years you could retire when you reach the age of 61 years, if you have at least the last 10 years paid contributions prior to your retirement and any other paid 25 years.

Should you decide to retire if you meet these conditions you will not be allowed to continue in employment until you reach your statutory retirement age (62, 63, or 64 years of age depending on your date of birth).  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.

Born On or After 1962 and Work as an Employee (No Service Pension)

If you are born in this age bracket, your Social Security Pension is based on the rules showed in the Box below.

It is important for you to know that if you accumulated a maximum of 50 yearly contributions for a period of 40 years you can, should you wish to do so, retire when you reach the age of 61 years should you wish to do so.

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.

Example

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:

 

• Salary: €13,000
• Petrol Allowance: €500
• Performance Bonus: €800
• Overtime: €1,000

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 would have paid for 2016 will be €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 than the Maximum Pensionable Income cap is €22,803.

 Example

If you earned €25,000 as basic salary in 2016 and you were born between 1952 and 1961 the social security contribution that you pay is €1,793.48 and not €2,500.

If you earned the same amount of money in 2016 but you were born on and after 1962 the social security contribution that you pay is €2,213.64 and not €2,500.