Several weeks ago, Family Money highlighted the extension of the Old Age Contributory Pension scheme to some self-employed by the Department of Social, Community and Family Affairs.
Qualification for the extension is based on the number of contributions made since April 6th, 1988. To qualify, an individual needs a minimum of 260 PRSI contributions made on a compulsory basis over five years.
A reader from Bandon, Co Cork, wrote to say that this was only the good part of the contributory pension story. "There is a group of people, of whom I am one, who had reached the age of 63 by April 1988 when self-employed PRSI was introduced." This reader contributed, as required, for two years until the age of 65.
Since our reader only had two years of contributions, he did not qualify for the contributory old age pension. As a result, 53 per cent of the contributions, or that which related to the Old Age Contributory Pension, were refunded to him. The other 47 per cent was retained to fund the Widows' Contributory Pension. This has since been extended to widowers and is now called the Survivor's Pension.
In order to qualify for the Survivor's Pension one needs 156 (three years) contributions. Since our reader paid for only two years he is not entitled to this pension.
He believes there should be "a pro rata pension for widows and widowers of people like me for those who had paid in at least 78 contributions or, in the alternative, there should be a refund of the 47 per cent with interest".
A spokeswoman for the Department of Social, Community and Family Affairs said that although it was understandable our reader was frustrated at paying into the scheme even though he could never qualify, "our policy is that we do not refund widows and orphans contributions".
The Survivor's Pension is the easiest contributory scheme for which to qualify but unfortunately some people fall outside the qualification net. "We don't just leave people high and dry but we're trying to get some balance between what's paid in and what's paid out," she said.
Our reader may have other options open to him, said the spokeswoman. "Anybody who doesn't qualify for contributions may qualify for a non-contributory scheme." Unlike contributory schemes, non-contributory schemes are means tested so savings and investments are taken into account.
A full pension is available to single persons with £6,160 savings or less, while a couple may have £12,320 or less. To receive a reduced pension, a single person may have up to £38,348 savings and a couple up to £76,696. Therefore, our reader may be entitled to both a non-contributory pension and payment if his income and savings fall below a certain level.
The full non-contributory survivor's payment of £72.50 is available for those with savings of £6,160 or less. This payment amount reduces incrementally as the savings amount increases, so £10,320 savings means a £66.50 payment while £11,706 means £64.50. The highest saving amount allowed is £37,654, but it delivers a measly £4.50 payment.
Unfortunately for our reader, where an old age pension contribution refund is paid no non-contributory old age pension is payable. Depending on the amount of the refund, it may be worth the reader's time to see if he may return the refund in exchange for the non-contributory pension payments.
