retirement

After a lifetime of paying social security, one may expect that their pension will be a healthy one that will allow them to make the most of their golden years. However, many will undoubtedly find that the reality does not quite live up to their expectations.

The current (2022) maximum pension is set at €252.65 per week. When including the additional bonus (€3.12) and the cost of living adjustment (€4.07), the actual rate is €259.84.

When calculated on an annual basis, the maximum yearly pension stands at €13,511.68, lower than the minimum of €14,800 necessary for a single person without children to live an adequate life.

This figure, emerging from a recent study, does not take into account housing costs, meaning that anyone paying rent upon retirement could be in for a very nasty shock.

The current maximum pension is also well below the average salary as at 2019, which stood at around €20,000.

Whether or not around €1,000 every four weeks is enough for the kind of life you would like to lead, it is important to note that this maximum pension is only granted on two conditions.

First, eligible persons must have paid the full amount of social security contributions required – at least 50 weekly contributions (from 52 or 53 weeks per year) over a 35-year period. This increases to 41 years for those born from 1969 onwards, though six of these may be credited (for example, for educational or parental purposes), with the total amount of years for which the national insurance absolutely must be paid remaining 35.

Second, the pension is calculated at two-thirds of basic wage or salary during the best 10 calendar years over a 40-year period, for those born from 1962 onwards (and who are thus eligible to retire from 2027).

The wage on which the two-thirds limit is applied is expected to be around €27,000 by 2027, meaning that income above this amount (called the maximum pensionable income, or MPI) is not eligible for calculation.

This means that many workers will see their income drop by more than a third, whatever their expectation from the ‘two-thirds pension’.

As for those making under that amount, they can rely on their pension being two-thirds of their income – but whether they can rest on that being enough to maintain a good quality of life is another matter entirely.

Those over 50 may make use of the Social Security Department’s pension calculator to see how much they can expect to earn on their impending retirement.

For everyone else, it might very well be time to start considering your next move to ensure that you are ready for what comes after a lifetime of gainful employment.

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