Making Voluntary Contributions
Individuals may make voluntary social insurance contributions in order to enhance retirement benefits. If a person ceases to be an employed or self-employed contributor and has qualifying contributions of less than 260 weeks, he is entitled to become insured by paying contributions as a voluntary contributor. This must be done within 12 months of the end of the tax year in which they last paid or credited PRSI.
Voluntary contributors cease to be so if they become self-employed contributors. Voluntary contribution does not apply after retirement age.
Former employed contributors pay voluntary contributions at the rate of 6.6% (former Class A, H and E contributors) and 2.6% (former modified rate contributors), subject to a minimum payment. The minimum payment for former Class A, H and E contributors is being increased from €317 to €500 and for former modified rate contributors from €126 to €250, with effect from 1 January 2013.
Previously Insured/ Employed
Voluntary contributions for a previously insured person are based on a percentage of income up to the income level for the year The percentage rate applies to the income of the contributor in the preceding contribution year or where there is no income or income below a level, a minimum contribution set out below is payable.
The percentage contribution payable by voluntary contributors are as follows.
- 2.6% where the contributions previously paid as an employed contributor did not insure the state pension
- 6.6% where the contributions paid did cover state pension.
Contributors paying a rate of 2.6% are insured for widows’ pension and bereavement grant. Those paying 6.6% rate are also covered for the state pension.
Voluntary contributions may arise for an individual who retires early before normal retirement age.
Contributions of the greater of €126 (2.6% rate) or €317 , 6.6% rate or that percentage of his reckonable earnings for the immediately preceding year.
Persons previously self employed may make voluntary contributions. The rate is €253 per year. It covers the state pension, widow and widower’s pension.
Voluntary contributions may be paid by a lump sum before the end of the contribution year or by quarterly or half-yearly installments during the period.
The 2012 Act provides for an increase in the rates of voluntary contribution payable by former self-employed and former employed contributors in line with the increase in the minimum self employment contribution, with effect from 1 January 2013. The flat rate voluntary contribution payable by a former self-employed contributor is increased from €253 to €500.
A special rate of voluntary contribution was payable by certain people who ceased to be compulsorily insured for social insurance purposes because of the operation of the earnings limit applying to non-manual employees prior to 1974. As there are no longer any voluntary contributors in this category, The 2012 Act abolishes this rate of voluntary contribution with effect from 1 January 2013.