Entitlement of farming spouses to State pension
To recap on last week’s article, in order to receive the state pension:
(1) You must have started paying PRSI before you reached the age of 56.
(2) If you reach pension age before April 6, 2012, you must also have at least five years of PRSI contributions paid or, if you reach pension age after April 6, 2012, you must have paid PRSI for at least 10 years, and
(3) To qualify for the maximum contributory pension of €230 per week, you must have paid PRSI for each of the years (or at least 93% of that time) from when you first started paying PRSI. If you have paid PRSI for at least 40% of the time since you first started working, the State pension is reduced slightly, to €225.80.
Historically, it was common for a farmer’s wife to stop working outside the home for a number of years, while a family was being reared. This resulted in a break in the PRSI contribution history, and consequently the individual would not normally be entitled to the maximum contributory pension in their own right. In recognition of this, the Government introduced the Homemakers Scheme, where the spouse who gave up work after April 5, 1994, to care for a child up to the age of 12, is entitled to be treated as if PRSI contributions had been paid for that time. Normally, registration for the Homemakers Scheme is automatic, when making an application for child benefit.
It is also common for a spouse to give up work to assist in the running of the farm. There are some particularly tricky PRSI issues where an individual works with his/her spouse. Where one individual works for a spouse either as a full-time employee, or fulfilling some duties, they cannot make PRSI contributions in respect of this income. This does not apply to situations involving companies or partnerships.
Where a husband and wife work together as a partnership, each can make PRSI contributions in respect of their share of the partnership income.
In practice, many spouses may have been working in informal partnerships with only one spouse declaring income and paying PRSI. Following representations by the ICMSA in 2008, the Government agreed that farmers would be allowed to apply to the Department of Welfare to have informal partnerships and the years for which a wife was farming in an informal partnership with her husband recognised. These years would be counted towards establishing whether the spouse was entitled to the State pension in their own right.
Your local welfare office can issue you with a leaflet, SW124, which describes some factors the department will consider in determining whether a partnership actually exists – including a joint business bank account, joint cheque book on which each person has drawn business cheques and verification that each has made significant contributions to the business.
There was some confusion in Social Welfare last year, whereby some wives who had been granted the State pension as a result of their farming partnership had been informed that decision was incorrect, and the pensions were being withdrawn. This was because the Department of Social Welfare was insisting that at least one year’s PRSI contribution must have been paid by the spouse, in addition to the period where the partnership was carried on.
Where both spouses qualify for pension in their own right, they will receive a maximum combined payment of €460.60 per week. Where only one spouse qualifies for the State contributory pension, then they may be entitled to an additional payment, where they live with a “qualified adult”. I will look at this in future articles.
As mentioned last week, your social welfare office can provide you with detailed information on your PRSI history and entitlement to benefits as a result of those PRSI contributions. Your questions on this and other farming tax issues are welcome.
