Is the OAP enough?

The current maximum rate of OAP payable is €248.30 pw* Wallace Financial asks you the question:
Is €248.30pw enough to retire on? *as at 1st September 2020

Is the OAP enough?

The State Pension (Contributory) may become payable to a client at their State Pension age, which varies by their year of birth:

Where an individual qualifies for the OAP in e.g. 2019, the rate of OAP payable is the higher of the Pension determined on the following two bases:

1. Yearly average test or
2. Total contribution approach

The OAP is increased on a per week basis if you meet the following conditions:

1. By €10 pw when the individual is aged 80 or over and or
2. By €9 pw if living alone.

Retirement Before State Pension Age

A client may retire from work, early or normal, before their State Pension age or OAP age. The loss of future reckonable PRSI payments which would have been paid had he or she worked on to the State Pension age may sometimes reduce the client’s OAP entitlement, depending on the pattern of their reckonable PRSI contributions, and whether the Yearly Average test or the Total Contributions Approach gives the best OAP.

Eligibility for OAP

The key requirements for a client to qualify for the State Pension (Contributory) at their State Pension age are that he or she:

1. Has sufficient paid and credited1 PRSI contributions of the required classes which are sometimes referred to as ‘reckonable’ contributions as they are taken into account or ‘reckon’ for the purposes of qualifying for the State Pension (Contributory);
2. started paying PRSI before age 56;
3. paid at least 520 weekly reckonable PRSI contributions; and
4. has an annual average of at least 10 weekly paid or credited reckonable PRSI contributions, from the year the client first started paying PRSI to the end of the year before he or she qualifies for the SPC.

The main PRSI contribution classes which are reckonable for the SPC are:

A, most private sector employees, and public service employees recruited after 6th April 1995; and
S, self-employed sole traders, partners, and proprietary directors.

Entitlement to the SPC is not means tested; it’s based solely on the client’s PRSI record.

Therefore, a client can have other private pensions and/or regular withdrawals from an ARF or PRSA and still get the OAP, if they meet the required conditions. Neither is it a requirement to retire from work, to qualify for the OAP. So, a client can get the OAP at their State Pension Age and continue working, if they want to.

The main category of workers who do not qualify for the SPC are public service employees recruited before 6th April 1995, i.e. PRSI Class B, C and D, who have not worked in the private sector at any time. These PRSI classes are sometimes referred to as modified rate PRSI contributions and are not reckonable for the State Pension (Contributory).

For more information on the State Pension (contributory & non-contributory), please visit www.gov.ie or www.citizensinformation.ie