State Pensions in Ireland: contributory and non-contributory pensions

For most people in Ireland, the state pension is a vital part of retirement income. Whether you're approaching retirement age or simply planning for the future, understanding how the Irish state pension scheme works is important. In this guide, we’ll explore the difference between contributory and non-contributory pensions, and what you could expect from old age pension entitlements.

There are two types of state pension (also called old age pension) available in Ireland. These are:

• The contributory state pension. To qualify, you must be 66 or over, have entered insurable employment before you turned 56, and have a minimum of 520 full rate PRSI contributions paid in Ireland.

• The non-contributory state pension. This is a payment for people aged 66 or over who do not qualify for a contributory state pension.

There are several reasons why some people may not receive the full state pension:

• Insufficient contributions: If someone hasn't accumulated enough qualifying contributions, they may receive a reduced pension or no pension at all.

• Partial contributions: Some people may have made contributions to the social insurance system but haven't accumulated enough to qualify for the full pension. In such cases, they may receive a partial pension based on the number of contributions they have made. Some pension systems allow individuals to make voluntary contributions to supplement their social insurance record and increase their pension entitlement. If someone hasn't made these voluntary contributions, they may receive a lower pension than those who have.

• Early retirement: In some pension systems, individuals who retire before reaching the full retirement age may receive a reduced pension. This reduction is often applied as a penalty for retiring early, and can result in a lower pension amount than if they had waited until reaching the full retirement age.

• Other sources of income: In some cases, individuals may have other sources of income in retirement, such as private pensions, savings, or investments, which can affect their eligibility for the full state pension or result in a reduced pension amount.

Social welfare pensions in Ireland are liable to income tax, but they are not liable to PRSI or USC. The income tax is not deducted from your social welfare pension when it is paid to you but is paid with your other income tax instead.

The primary state pension available in Ireland is the Contributory State Pension. This pension is based on your social insurance contributions throughout your working life. To qualify for the full Contributory Pension, you must have a certain number of paid social insurance contributions, typically made through employment or self-employment and are recorded under the Pay Related Social Insurance (PRSI) system.

As of 1 January 2024, the contributory pension in rates in 2024 for people who qualified after 1 September 2012 are as follows:

To get a contributory state pension at 66, you must have started to pay PRSI before the age of 56. Then, the number of paid PRSI contributions you need for the contributory state pension depends on your retirement date:

A non-contributory state pension is a form of government-provided financial support for retirees that is not based on your contributions to the Pay Related Social Insurance (PRSI) system in Ireland. Unlike contributory pensions, which require individuals to have paid a certain number of social insurance contributions to qualify, non-contributory pensions are typically means-tested, meaning eligibility is based on the individual's income and assets rather than their work history or contributions.

In Ireland, the non-contributory state pension is available to people who meet certain eligibility criteria, primarily based on their income, assets, and residency status. Here are the key factors determining entitlement:

• Age: The pension is generally available to people who have reached the qualifying age for state pensions. As of 2024, the qualifying age for the non-contributory state pension in Ireland is 66.
• Residency: To be eligible for the non-contributory state pension, you must be habitually resident in Ireland. This means that you must have a ‘substantial and enduring’ relationship with the country, such as living there for a certain period of time.
• Income: You must meet certain income thresholds to qualify for the pension. Income from various sources, including employment, pensions, social welfare payments, and other sources, may be taken into account during the means testing process.
• Assets: In addition to income, the value of your assets, such as property, savings, investments, and other possessions, may also be considered in determining eligibility for the non-contributory state pension.
• Other eligibility criteria: Certain additional criteria may apply depending on individual circumstances, such as marital status, residency status, and disability status.

As of 1 January 2024, the contributory pension in rates in 2024 for people who qualified after 1 September 2012 are as follows:

Yes, the non-contributory state pension is means tested. Means testing is a process used by governments to assess your financial situation to determine your eligibility for certain welfare benefits or pensions. During the means testing process, various factors such as income from employment or other sources, savings, investments, property ownership, and other assets are taken into account.

The purpose of means testing is to ensure that social welfare benefits and pensions are targeted towards those who have a genuine financial need. By assessing an individual's means, governments can allocate resources more efficiently and provide support to those who need it most.

You can have savings or assets of up to €20,000 and earnings of up to €200 per week from employment and still qualify for a full non-contributory state pension. The first €30 per week of means does not affect the rate of your pension. After that first €30, your pension is reduced by €2.50 for every €2.50 of means.

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