I\u2019ve just been reading about the contributory State pension changes that will be phased in by 2034. <\/b><\/p>\n
As I understand it, people who reach retirement age after that date will need to have 40 years of contributions to qualify for the State pension.<\/b><\/p>\n
As someone who worked \u201ccash in hand\u201d for unscrupulous employers in my early 20s <\/b>when I was more naive, I\u2019m concerned that I would fall just short of the magic 40 years by then.<\/b><\/p>\n
I\u2019m fortunate to have started a private pension, but I was only able to afford that in my late 40s so it might not grow enough to live on. <\/b><\/p>\n
I\u2019m also thinking of people who left the workforce because of illness (as my wife had to) or to raise children or care for family members. How will the changes affect us?<\/b><\/p>\n
Concerns about qualifying for the full State pension<\/a> have become \u201cincreasingly common\u201d, particularly due to the changes referenced by the reader, according to financial adviser Daniel Hardiman.<\/p>\n One of the most common pension mistakes people make is \u201cassuming their State pension will automatically fall into place at 66\u201d, according to Hardiman, who is managing director of Hardiman Life & Pensions in Tuam, Co Galway.<\/p>\n He notes a lack of awareness surrounding the total contributions approach (TCA) by 2034, which can result in a reduced State pension.<\/p>\n Under this system, pensions are calculated based on the total number of PRSI contributions built up across a working life, with around 40 years of contributions required to qualify for the full rate, he says.<\/p>\n \u201cHowever, having fewer than 40 years does not mean someone loses the pension entirely. Instead, the pension is paid on a sliding scale depending on the number of contributions built up.\u201d<\/p>\n He notes that not all gaps in a PRSI<\/a> record automatically reduce a pension, saying those who cannot work due to illness, like the reader\u2019s wife, may receive credited contributions which help to protect their entitlement.<\/p>\n Similarly, he advises parents who leave the workforce to raise children to consider the HomeCaring Periods Scheme, which recognises periods of up to 20 years spent caring full-time for children under the age of 12.<\/p>\n \u201cOne of the most important things people can do is check their PRSI record early. Too many people only discover gaps when they apply for their pension at 66, when it can often be too late to address them,\u201d he says.<\/p>\n