There are two types of pension that can be claimed by a spouse; the State Contributory Pension (SCP) and a State Non-Contributor Pension (SNCP). The contributor pension is based on the number and type of PRSI contributions made by an individual. It is a full pension and entitles the holder to significant benefits including a fuel allowance and discounts on phone and electricity.
Husbands and wifes working for (and not with) their self-employed spouse need to carefully consider whether they are in fact due to make PRSI contributions and also whether they will be granted a full SCP in future. It may surprise you to know that no PRSI is actually payable in respect of salary payments made by a self-employed person to his or her spouse (note this does not apply to non-spouses). It should also be noted that this obscure issue only arises for spouses working for a self-employed husband or wife. It does not apply where the husband or wife trades through a partnership or through a company. Also, the exemption does not apply where a husband or wife works in partnership with his or her spouse.
In the very short term, self-employed individuals may wish to consider whether they have overpaid PRSI in the current year. As any overpayment can be reclaimed before the year-end this could be a valuable source of cash for struggling businesses.
Whilst this may benefit some self-employed individuals in the short-term, the longer term implications are horrendous for retirees and their families. It is very likely that the Government will continue to take PRSI contributions and later refuse provide a SCP to the salaried spouse. The experience of women farmers in recent years is an example of the hardship that individuals may have to endure. An article in the Irish Examiner earlier this year highlights this issue http://www.irishexaminer.com/ireland/kfkfgbmhmhid/rss2/
Interesting and very disconcerting, wouldn't you agree?
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