State Pension 2024 Changes: Increase, Flexibility, and New Calculation
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State Pension (Contributory) Increase From January 2024, the State Pension (Contributory) personal rate has increased by €12 per week to €277.30 per week, equating to an annual increase of €624. Before this increase, the personal rate was €265.30 per week.
Increased Flexibility in State Pension In late 2023, the Department of Social Protection introduced flexibility regarding the age at which the State pension becomes payable. From 1st January 2024, individuals born after 1st January 1958 can choose to begin receiving their State Pension (Contributory) at any age between 66 and 70. For those born before this date, the pension age remains fixed at 66, with no deferral option available.
These changes aim to offer more choices and potentially higher State pension payments upon retirement. They also allow individuals who began working later in life to work longer to qualify for the State pension.
Previously, Pay Related Social Insurance (PRSI) contributions ceased at age 66, aligning with the start of State pension payments. However, the option to defer the State Pension (Contributory) now means that individuals reaching age 66 after 1st January 2024 will continue to be liable for PRSI if they choose to defer the pension. Consequently, their employers will also remain liable for PRSI until the pension is drawn, up to age 70.
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Benefits of Deferring the State Pension
- Delaying the State Pension (Contributory) results in a higher pension payment after the deferral period.
- PRSI will continue to be payable beyond age 66, allowing individuals to improve their PRSI contribution record before drawing the State pension.
- Individuals without sufficient PRSI contributions to qualify for the State Pension (Contributory) at age 66 can continue to pay PRSI until they become eligible or reach age 70.
- The decision to defer the State Pension (Contributory) will impact PRSI status and the taxation of withdrawals from Vested-Personal Retirement Savings Accounts (PRSAs) and Approved Retirement Funds (ARFs).
From 1st January 2024, eligible residents can choose to retire between the ages of 66 and 70. Delaying retirement can increase the State Pension (Contributory) personal rate to a maximum of €337.20 per week by age 70. See the table below for the maximum weekly pension rates:
Retirement Age
Maximum Weekly Pension Rate
66
€277.30
67
€290.30
68
€304.80
69
€320.30
70
€337.20
These rates are as of January 2024 and may change in future budgets. For more information, refer to the press release from Minister Humphreys.
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Long-Term Carers Contribution From January 2024, individuals who have cared for someone for 20 years or more may receive a long-term carers contribution on their PRSI record for each week of full-time care. These contributions can only be used to help qualify for the State Pension (Contributory). More information on Long-Term Carers Contribution is available here.
Increase in PRSI Contributions From October 2024, all PRSI contribution rates will increase by 0.1%. This applies to employees, employers, and the self-employed. The Government states this increase aims to replenish the Social Insurance Fund and support maintaining the State Pension Age at 66.
The Government’s PRSI Roadmap outlines incremental increases in PRSI contributions over the coming years:
- 2024: 0.1%
- 2025: 0.1%
- 2026: 0.15%
- 2027: 0.15%
- 2028: 0.2%
Total Contributions Approach for Pensions From January 2025, the Government will phase out the Yearly Average Method (YAM) of calculating contributions over ten years. By 2034, all pensions will be calculated using the Total Contributions Approach (TCA).
During this transition period, pensions will be calculated using both methods. More information on the new system is available here.
For trusted advice on these changes and how they may impact your pension, contact Alan McCarthy at alan.mccarthy@mbcfinancial.ie.