For farmers and their partners, the main return of paying PRSI contributions is eligibility for the State contributory pension when they reach 66. The contributory State pension actually increased slightly since 10 March 2017. Currently, where both spouses qualify for a contributory pension in their own right, they receive a maximum combined payment of €476.60 per week. Where only one spouse qualifies, they get €238.30 per week.

However, the other spouse may be entitled to an additional payment, where they live with a “qualified adult” (see table). This payment is means tested and might be difficult to get if the partner has assets in their name.

Where a husband and wife work together as a partnership, each can make PRSI contributions in respect of their share of the partnership income. In the past, many spouses worked on the farm in informal partnerships and only one spouse declared income and paid PRSI.

It was a mistake that some put right by getting the Department of Social Welfare to accept there was an informal partnership and the years for which a wife was farming were recognised. These years are counted towards establishing whether the spouse was entitled to the State pension in their own right. Recent changes means it is easier for spouses to pay PRSI once they are assigned a minimum of €5,000 reckonable income from the farm a year. This enables them to pay €500 in PRSI contributions to get credits of 52 weeks for each year. This is one thing that every farmer should look at where both spouses work on farm.

Three elements to unlock State pension

Put simply, there are three parts to unlocking the State contributory pension. The first is the starting point, your entry into the system.

Entry into insurance

Your entry into insurance means the date on which you first started to pay social insurance. If you started to pay full insurance after 6 April 1991, it’s taken as the time you first paid any social insurance. The rules for before 1991 are complex, especially when full social insurance was paid for some of the time and modified at other times. There are also special entries into insurance rules for self-employed people. If you started to pay self-employed contributions on 6 April 1988 and had previously paid employee insurance at any time, then the date of entry into insurance can be either 6 April 1988 or the date on which you actually first paid insurance, whatever is to your advantage. I will go into more detail on this again.

Number of paid contributions

If you reach pension age on or after 6 April 2012, you will need to have 520 paid contributions (10 years of paid contributions). In this case, not more than 260 of the 520 contributions may be voluntary contributions.

Average number of contributions per year

The yearly average has become much more important with the introduction of more tiers in the payment system (see table 1). Under the normal average rule you need an average of 48 contributions (paid or credited) for each contribution year to get the maximum state contributory pension. You must have an average of at least 10 entitlements each year to get the minimum pension.

Pay-Related Social Insurance – what is it?

People in employment pay contributions to the Irish Social Insurance Fund.

The contributions depend on your earnings and occupation. That’s why it is called Pay Related Social Insurance (PRSI) contribution.

There are no fewer than 11 different PRSI Classes. They are A, B, C, D, E, H, J, K, M, S and P. The social insurance payments which you may become entitled to depend on the PRSI class you are in.

Most common

Class A is the most common PRSI clas. It applies to people in industrial, commercial and service type employment who are employed under a contract of service with pay of €38 or more per week from employment. It also includes civil and public servants recruited from 6 April 1995.

Farmers as self-employed people come in under class S. Class S contributors are not entitled to the full range of social insurance payments - the main one they are ruled out of is the job seekers benefit.

First step to get covered

Get a statement of contributions to identify exactly what contributions have been made for and by you to date. This can be got by contacting PRSI Records, Department of Social Protection, McCarter’s Road, Ardarvan, Buncrana, Donegal. The telephone number is 01-471 5898, but there is a lo-call number 1890-690 690.

If there are missing contributions they will ask you to provide P60s or P45s from that period. If you do not have these documents, they can be got by contacting your previous employer. Even if he does not have them, you are asked to write in a letter identifying when the contributions were missed. Ask your accountant each year about PRSI contributions before you submit preliminary tax returns.

In Brief

  • • PRSI contributions are important for your future.
  • • New extension makes it easier for farm partners to make contributions.
  • • Partners getting a wage from the farm are still excluded.
  • • To get the maximum contributory state pension. You must start paying PRSI before you are 56 years to hit the 520 contributions required.
  • • Have an average of 48 contributions per year.
  • • Get a statement of affairs to check your own situation.
  • • Talk to you accountant before you submit preliminary tax returns.