What is contributory or non contributory?

The State pension is a contributory pension that is paid to people from the age of 66 who have enough Irish social insurance contributions to qualify. The contributory State pension is not means-tested and you may have other income such as a personal or occupational pension and still receive a contributory pension. Like all other income, this pension is taxed, however you are unlikely to pay tax if it is your only source of income.

What is a non-contributory State pension

A non-contributory pension is also a State pension but it differs to a contributory pension in that it is residency based and is a means-tested payment for people aged 66 or over who do not qualify for a contributory State pension based on their social insurance payment history.

Whether you are eligible to receive either a contributory or a non-contributory State pension, the key issue is whether or not either State pension will be adequate enough to provide the income in retirement that you will need. As there are a number of pension options available to you, having all the information is key. Sound advice is invaluable, so it's a good idea to seek advice from a financial advisor. An independent financial advisor can guide you through the process and help you select the right plan for your circumstances. You can find a local financial advisor near you with the Zurich Advisor Finder. Alternatively, our Financial Planning Team can provide you with more information about Zurich's pension plans and options.

The State Pension (Non-Contributory) is a means-tested payment.

In a means test the Department of Social Protection examines all your sources of income. To get a State Pension (Non-Contributory), your income must be below a certain amount.

The main items included in the means test are:

• Cash income that you or your spouse, civil partner or cohabitant may have. Some cash income may not be included in the means test – see ‘Cash income’ below.
• Capital, for example, the value of savings, investments, shares or any property you have, but not your own home. The first €20,000 of your capital is not taken into account – see ‘Capital and property’ below.

Cash income

Any cash income you have is assessed in the means test.

Cash income includes any social security pension from another country. However, some types of cash income are not taken into account in the means test.

For example, you can earn up to €200 per week from employment including Community Employment (CE) (but not self-employment) and it will not affect your Pension. Your spouse, civil partner or cohabitant can also earn up to €200 per week. Any income from work above this amount is assessed in the means test.

Blind Welfare Allowance is not included in the means test.

Farm land owned or leased

Your net income from farming or leasing land is assessed as income in the means test. Your net income is worked out by taking your gross income (your income before tax) and deducting your expenses. If you own land that is not productively used or leased, it is assessed on its capital value – see ‘Capital and property’ below.

Payments you get under the Farm Retirement Scheme and income from property that has already been assessed on its capital value are not taken into account in the means test.

More information is available in our document about cash income not taken into account in the means test.

Information about how income from farming is assessed is available on gov.ie.

Capital and property

Savings, investments, cash on hand and any property you own (but not your own home) is assessed as capital.

If your property is assessed on its capital value then income from that property (such as rent) is not assessed in the means test.

If you or your spouse, civil partner or cohabitant saves a portion of your State Pension (Non-Contributory) each week, these savings as well as savings from most other sources will be taken into account in the means test.

All your capital from different sources is added together and a special formula is then used to find your weekly means from capital.

Disability Allowance and the State Pension (Non-Contributory)

The means tests for Disability Allowance (DA) and the State Pension (Non-Contributory) use different rules to assess capital. But if you are moving from DA to the State Pension (Non-Contributory) at 66, you will not get a lower-rate Pension due to a less favourable assessment of capital.

Income from your home (such as rent)

The value of the house you live in is not taken into account in the means test. Income you are getting from your home (for example renting a room) can be taken into account. However, the following exceptions apply:

• You are living alone: If renting out the room means that you would not be living alone, then your income from rent is not taken into account.
• You are not living alone: You can get up to €269.23 a week (€14,000 per year) from renting a room in your home without it affecting your State (Non-Contributory) Pension. The person renting a room in your home must use the room for a minimum of 28 consecutive days and not be an employee or immediate family member.

You should check if renting a room in your home will affect your Fuel Allowance.

The Accommodation Recognition Payment for hosting refugees from Ukraine is not assessed in the means test for the State (Non-Contributory) Pension.

Selling your home

If you sell your home, the money you make from the sale (the proceeds) would normally be taken into account in the means test. However, you may be able to sell your home because it is no longer suitable for you (or you cannot maintain it) and have up to €190,500 of the proceeds of the sale excluded from the means test. The exemption of €190,500 applies, if you sell your house to:

• Buy or rent more suitable alternative accommodation
• Move into a private nursing home which is registered under the Health (Nursing Homes) Act 1990
• Move in with a person who is getting a carer's payment to care for you
• Move to sheltered or special housing in the voluntary, co-operative, statutory or private sectors

If you use the proceeds of the sale to buy more suitable accommodation, the balance of the proceeds after buying the new accommodation is exempt up to a limit of €190,500.

However the proceeds of the sale may be taken into account by the Health Service Executive (HSE) when your entitlement to the Nursing Homes Support Scheme is being assessed.

Investing the income from the sale of your home

Any benefit you get from investing the proceeds from the sale of your home is taken into account in the means test.

If you invest the money you make from selling your home (the proceeds), any interest you make on the investment is taken into account in the means test and assessed as capital.

However, if you rely on interest payments to pay major expenses, such as nursing home costs, the DSP can exclude the interest, on the exempted capital, up to a maximum of €190,500.

Leaving your home but not selling

If you leave your home (either on a temporary basis or indefinitely) due to old age or being unwell, the value of your home will not be assessed in the means test. However, if you get an income from it (for example, if you rent it out), the capital value of the house will then be taken into account in the mean test.

Total means

Your cash means and capital means are added together to see what level of pension you will get, if any.

If you are one half of a couple (married couple, civil partners or a cohabiting couple) then your means are taken to be half of the total means of yourself and your spouse, civil partner or cohabitant.

You can have savings or assets of up to €20,000 and earnings of up to €200 per week from employment and still qualify for a full State Pension (Non-Contributory).

The first €30 per week of means does not affect the rate of your pension. After that first €30, your pension is reduced by €2.50 for every €2.50 of means.

The Farm Assist and for the State Pension (Non-Contributory) means tests are different. But if you are moving from Farm Assist to the State Pension (Non-Contributory), and the different means tests would result in you getting a lower pension payment, you keep the higher payment.

Married, civil partners and cohabiting couples

If you are getting an increase in your State Pension (Non-Contributory) for an adult dependent, this increase will be paid directly to your spouse, civil partner or cohabitant. This only applies to Pensions applications made after 27 September 2007.

When your spouse, civil partner or cohabitant reaches 66 you will no longer get an increase in your payment for them. However, they can apply for a State Pension (Non-Contributory) in their own right.

The welfare system in the United States at the turn of the 20th Century was a patchwork of private initiatives and family networks along with state and local programs. However, the Great Depression laid bare the inadequacies of the arrangement and the need for a coherent system.

The passage of Social Security Act of 1935, established old age benefits through the Social Security Administration, unemployment insurance and financial support for single mothers. These were entitlement programs to ensure the welfare of Americans, greatly reducing the financial hardship for the elderly, children of single parents and those out of work.

Additional programs to expand the social safety net were created in the years following to cover education, childcare and healthcare, among other things. These programs are divided into two categories contributory and non-contributory entitlements. Spending on them accounts for roughly 51 percent of all federal spending, the ‘big three’ of Social Security, Medicare and Medicaid represent about 48 percent alone according to Forbes.

Contributory entitlement programs

Entitlements such as Medicare, Social Security and unemployment compensation are “forced” contributory programs. All Americans are required to participate in the programs through contributions taken from their wages, and in order to qualify beneficiaries must have contributed to the programs.

Prior to Social Security benefits, the elderly faced the prospect of living out their remaining years in destitution once their savings had expired if they could not rely on family or friends. According to analysis by the Center on Budget and Policy Priorities, all things being equal almost 38 percent of elderly Americans would be in poverty today without the federal old age financial support. Prior to the covid-19 pandemic only 9.7 percent had income below the federal poverty line.

Non-contributory entitlement programs

Regardless of their work history, qualifying Americans can receive benefits from non-contributory entitlements. These programs are targeted at low-income individuals and households, mainly dependent on the participants level of income, but other factors are taken into account.

They offer basic support for housing, nutrition and medical support, among other things, forming a social safety net to support Americans that have fallen on hard times, keeping them out of poverty. Although they are federal programs, many are managed by the states, resulting in different thresholds to qualify across the US.

These programs include the Earned Income Tax Credit, designed to provide financial support to working Americans, Housing Assistance, to ensure families have shelter; Medicaid and CHIP, providing healthcare; Pell Grants, to support students financially; the Supplemental Nutritional Assistance Program (SNAP), financial support to buy healthy food; and Supplemental Security Income, financial support for low-income eldery, blind or disabled Americans.