Pension shake-up may hit returning emigrants hardest

Ireland's Ambassador to Australia Breandán Ó'Caollaí

Ireland's Ambassador to Australia Breandán Ó'Caollaí

IRELAND’S Ambassador to Australia has played down concerns that returning emigrants could be worse off by proposed Irish pension reforms, saying most people’s entitlements would be largely the same.

Breandán Ó Caollaí said the proposed overhaul of how a person’s State pension is calculated (see below) would be “a fairer approach for all.”

One of the more controversial proposals is that a person may need to make 40 years of social security contributions to claim the full State pension. This is in contrast to the current system where someone could qualify for a full pension based on just 10 years’ payments, provided they had no gaps in their employment record.

Mr Ó Caollaí said this scenario was “quite rare” and “an anomaly”. 

The example given in the Government’s consultation paper is of someone who worked in the UK between the ages of 17 and 52 and worked up to a full UK pension, then moved to Ireland and worked for 13 years before retirement. Under the current system, they would also get a 100 per cent Irish pension on top of their British one.

It is in contrast to other scenarios in the consultation paper of people who worked for much longer but got a smaller pension. 

One is a woman who worked from the ages of 17-20 and then cared for children for 20 years. She went back to work for another 22 years but would only receive an 85 per cent pension under the averaging system.

Under the new way of calculating pensions, the person in the first scenario would only get a 33 per cent pension while the second person would get 100 per cent. 

While these scenarios had very different outcomes under the old and new systems, Mr Ó Caollaí said that people with "normal emigration patterns" would have mostly similar entitlements.

“Most people can claim pensions from both jurisdictions they worked under, and receive two pensions,” he said. “While both pensions might be at a reduced rate, their combined payment will quite possibly be greater than a single pension.” 

Emigrants returning to live in Ireland may be disadvantaged by new rules for state pensions.

Emigrants returning to live in Ireland may be disadvantaged by new rules for state pensions.

People who worked in Australia also have the option of claiming a pro-rata pension under the Irish Australian Social Security Agreement if this is more beneficial to them.

Under the agreement, periods of working life in Australia are treated by Ireland as periods of insurance, and vice versa. These periods are added together to meet the minimum periods required for the pensions offered by each country.

Ashley Johnston of the Irish Welfare Centre in Sydney said they could direct people of pension age to the appropriate social welfare service “to receive sound and comprehensive
advice regarding their entitlements and pension queries.”

The proposals are explained in a consultation paper, on which interested Irish citizens can give feedback on until September 3, 2018. To make a submission go to and clicking ‘consultations’. 

How are Irish State pensions currently calculated?

State pensions are currently calculated using the yearly average approach. Your total number of social security contributions is divided by the number of years between first starting work and the last full year before retirement. A yearly average of 48 is required for a full pension. This method penalises those with big gaps in their employment record, eg for child-rearing. Under the proposed reform, pensions would be calculated using the Total Contributions Approach (TCA). Pensions would be based on the total number of Social Security Contributions a person made. Controversially, as many as 40 years of contributions could be needed to get a full State pension, although the Government stresses the number of years has not been decided yet. People who left the workforce to care for children will receive credited contributions that will count towards their pension entitlement.

Is applying for a pro-rata pension under the Social Security Agreement between Ireland and Australia a separate application process? Do you choose one or the other?

No, you apply for the State pension in the ordinary way. The application form requests (among other things) details of any employment abroad. When assessing your claim, the official will first see if you can qualify for a full rate pension in the normal way. If you do, there is no need to check overseas contribution records etc. If you do not, he or she will then go through a number of checks to see what method of qualification will give you the highest possible payment. If you have indicated you have a foreign employment record, this will be one of the options considered.

Answers supplied by the Department of Foreign Affairs.