As an accountant, it’s crucial to stay updated on changes that affect our clients’ financial futures. One such change impacting retirement planning in Ireland is the revision to State Pension regulations, with significant adjustments starting from January 2024.

The State Pension serves as a vital income source for many retirees, currently amounting to approximately €14,500 annually. However, understanding the recent modifications is essential for making informed decisions regarding retirement income.

Changes from 2024

From January 1st, 2024, individuals reaching the age of 66 or older (born after January 1st, 1958) face a new option regarding their State Pension:

  1. Cease paying PRSI and claim your pension at age 66, or
  2. Continue paying PRSI and defer it until a later age, up to a maximum of age 70.

It’s important to note that deferring the pension results in higher weekly payments, increasing by approximately 5% for each year deferred.

To Defer or Not?

While deferral may seem appealing for some, it’s crucial to weigh the pros and cons.

For example, opting to defer claiming the pension could result in a prolonged period of repayment, potentially extending up to 4 years. This strategy may not be beneficial for those entitled to the maximum State Pension at 66. This is because you are missing out on 4 years of full pension.

Deferring the pension may be advantageous for those aiming to improve their PRSI record as they do not qualify for a full State Pension.

There are various ways to continue contributing to your PRSI record, such as

  • Continuing Employment
  • Through certain Social Welfare benefit or Credits
  • Voluntary PRSI contributions
  • Self Employment in excess of €5,000 per annum
  • Approved Retirement Fund (ARF) withdrawals in excess of €5,000

How is it Calculated?

Understanding how the State Pension is calculated is also crucial. In 2024, the pension amount is determined by the higher value calculated using either the Total Contributions Approach (TCA) or the Yearly Average basis.

The Total Contributions Approach (TCA) considers the total number of reckonable contributions, aiming for a minimum of 2,080 (equivalent to 40 years of contributions) for maximum pension eligibility.

On the other hand, the Yearly Average basis calculates the pension based on the average weekly contributions throughout a person’s working life.

From January 1st, 2025, the Yearly Average basis will be phased out over ten years, favouring some while potentially reducing pensions for others. This transition may impact individuals differently based on their contribution history and career trajectory.

Clients approaching retirement age, especially those over 60, should review their PRSI records and consider these options carefully. By staying informed and taking proactive steps, individuals can optimise their retirement income and enjoy greater financial security in their golden years.


For further assistance or guidance on navigating these changes, feel free to reach out to our us.