Covering gaps in my PRSI record to maximise my pension

I lost my job during the financial crisis (mid-2009) and remained on the dole for the following year. As jobs were difficult to come by, I decided to start my own business and availed myself of a Back to Work Scheme.

I was not aware that the Back to Work scheme does not qualify for PRSI credits. As a result, I have a two-year gap in my PRSI contributions and that is going to affect my future pension. Is it possible at all to back pay PRSI in Ireland, the same as in the UK? I could not find any information online about that.

My business is doing well and I have been making full PRSI contributions since then, but I am 62 and quite worried about my future pension.

Ms JD email

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With the great recovery, and since then the focus on the pandemic, many people forget just how traumatic the financial crash of 2008 was. While rising property prices have helped many of those who fell into negative equity and the recovery provided jobs for many who lost theirs at the time, there are still legacy issues from that time affecting thousands of families across the State.

In most cases, that relates to mortgage debt that became unmanageable in those years and is still a worrying burden. But there are others, like you, who only now that they are back on an even keel realise that there are legacy issues that could affect them down the line.

And it is easy to see how, during such a stressful period, you might inadvertently allow gaps to build up in your social insurance record. While you were on jobseekers' benefit or jobseekers' allowance during your period of unemployment, you would have been getting credited PRSI payments.

These are paid for those on benefit. And, for those on jobseekers’ allowance, they are credited where you have either paid or credited payments in the previous two years.

As the Back to Work Enterprise Allowance Scheme allows you to keep a proportion of your welfare payment – 100 per cent in the first year and 75 per cent in the second year – it would be understandable to assume that social insurance credits would continue to be applied. But that does not appear to be the case.

Working life

It is important, as you note, but not necessarily critical in terms of your State pension. As it stands, anyone retiring is currently assessed in two separate ways, if necessary, to ensure they do not lose out.

Under the newer, total contributions approach, you get a full State pension if you have 40 years of contributions over your working life. That includes up to 10 years of credits. It also covers up to 20 years out of the workforce for homecaring – ie raising a family or caring for elderly or dependent relatives. Between them, credits and homecaring can account for a maximum of 20 years.

It could be that even without these two years, you would hit the 40-year threshold over your working life.

You can also, for now, still be assessed under the older “yearly averaging” approach. This requires you to have a minimum of 48 weekly PRSI payments for every year of your working life. If you had worked 40 years continuously – including these missing two years – you would still hit the annual average of 48.

Of course, the issue for many is that yearly average starts counting when they first secured part-time student work as teenagers so you need to hit that minimum average of 48 contributions a year over a 50-year period. It just depends on your circumstances.

There is also provision under the recently published report of the Pensions Commission to defer taking the State pension for a few years and continuing to make PRSI payments in that time to work towards the 40-year threshold for full payment of pension – presumably by extending your working life.

This proposal is before the Government – alongside many others in the commission report. A decision on which reforms will be adopted is expected next spring.

General dispensation

You're right when you say that the UK system does allow you to back pay national insurance contributions but it is not an open-ended arrangement. Most particularly, the general dispensation is that you can look back six years when paying voluntary contributions to cover gaps.

Even in the UK, that would not cover someone in your position who is looking to cover gaps in your PRSI record that go back a decade.

However, there also appears to be an additional provision that, depending on your age, allows you to go back a further decade in making voluntary contributions to cover gaps. The threshold for men appears to be under the age of 70 while, for women, it appears to be 68, though I am open to contradiction on that.

There are also other rules in place. Most notably, you must have been eligible to make national insurance payments during the period you are looking to cover.

Real time

In Ireland, there are also arrangements in place to cover voluntary contributions but most of these are focused on paying the contributions in real time – ie at the time you are out of paid PRSI coverage rather than looking back to cover historic gaps, such as in your situation.

However, there is some provision for making voluntary contributions outside this window.

The catchily titled Social Welfare (Consolidated Contributions and Insurability) (Amendment) (No. 1) (Voluntary Contributions) Regulations 2017 – otherwise know as statutory instrument #38 of 2017 – sets out these provisions among other things.

It notes that an application under section 24 of the Social Welfare Consolidation Act 2005 – which governs who can make voluntary contributions – the application to become a voluntary contributor "shall be made to the Minister, in writing in the form for the time being approved by him or her for that purpose, within 60 months after the end of the contribution year" in which you were either employed, self-employed or receiving PRSI credits "or such longer period as the Minister, having regard to the circumstances of the particular case, may allow".

This is the critical bit. So, in general, this regulation says you can back-pay five years – which is not far from the UK provision – but you can make a case to the Minister (in reality, I am assuming, the Department of Social Protection which would stand for the Minister in these circumstances) if you fall outside that window.

So there is scope to appeal in the case of extenuating circumstances.

I can’t guarantee that it will work but that provision certainly allows for you to make your claim that you have this gap in contributions as you inadvertently assumed your PRSI credits would continue during your time on the Back to Work Enterprise Allowance as your welfare payments were still being paid over the period.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into