Teachers' pensions/AVCs/notional service/salary protection

gaiscioch

A thread on pensions/AVCs/salary protection etc might answer many questions other teachers have.

I couldn't get clear advice on this minefield (and the pension calculations) so I paid an independent financial advisor who specialises in public service pensions etc for his advice. People here might be interested in his perspective, and have other perspectives on it.

He looked at my various cover under ASTI-arranged schemes with Cornmarket/Irish Life, as well as at the unconnected idea of buying notional service:

1) Proposal to buy notional service (for years I didn't work): Financially, very bad value for money, and very inflexible as you are penalised if you leave before 65 years of age. Strong no.

2) Making existing older service pensionable: financially, a very good idea to pay to make this service pensionable. I got old statements of service from ETBs etc and the DoES has given me a quote on making them pensionable and transferring them.

3) Convertible Term Life Assurance (Irish Life): he said this was a fine policy and not to bother changing it.

4) ASTI Salary Protection Scheme: strongly advised keeping this. Said this ASTI scheme is very good, although in his view the TUI negotiated a slightly better one.

5) ASTI AVC (with Irish Life): He strongly advised me to get out of this scheme, pointing out their annual fee is bigger than competitors. Moreover, as he put it, "the ads say past performance is not a reliable indicator of future performance, but would you expect a C student to get an A in the Leaving Cert? I'd give Irish Life's Fund Managers a 'C'. Zurich and Standard Life have much better records. Over the course of your AVC these differences add up to a lot." Because the Cornmarket AVC uploaded fees at the start I'm just going to cut my loses and he will set up an individual AVC with a better performing fund (he also said he can set the AVC up in such a way that I will have much more freedom to manage it, something I never had with the ASTI AVC). The downside in changing is that it is not taken directly from my salary as the ASTI AVC was, so I'll have to get the tax back another way (he said it's easy to set up an alternative method). Furthermore, he said because I'm still young I can afford to be a bit more risky with my AVC, and reverting to a more conservative position when I get nearer retirement.

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Does anybody have any perspectives or advice on these issues?

gaiscioch

Additionally, he made it clear the distinction between the old scheme (pre 2004), the 'New Entrant' scheme (2004) and the ''Unified' scheme (2011) in terms of pension rights. I'm under the so-called New Entrant scheme and he was pointing out the enormous difference it makes to my pension and lump sum, which is calculated on my final year's salary, rather than on an overall career average as it is under the 2011 scheme. I was never aware of that, although I knew there was some issue.

Furthermore, because 2004 and 2011 entrants are not on the old scheme, they're A1 PRSI payers and thus they will have two pensions, with the state pension making up the shortfall in the DoES pension. However, the state pension is given at 68 so if, for instance, I were to retire at 60, I would only have that single DoES pension (and that's where AVCs would be useful to supplement income).

TheDriver

And therein starts the lies- the state will give you a supplementary pension to make up the difference between your pension and D prsi pension until 68 when you keep getting same money but its called oap pension then. Advisors seem to always leave this crucial info out but advise avc to bridge the gap that doesn't actually exist.
Pre 2004 can alsoA1 prsi but can avail of 55/35 rule
Good idea for thread because so much wrong info out there

gaiscioch

TheDriver wrote: »

And therein starts the lies- the state will give you a supplementary pension to make up the difference between your pension and D prsi pension until 68

Excellent. Never knew about that. I'll check out the details and conditions on it now.

km79

gaiscioch wrote: »

Additionally, he made it clear the distinction between the old scheme (pre 2004), the 'New Entrant' scheme (2004) and the ''Unified' scheme (2011) in terms of pension rights. I'm under the so-called New Entrant scheme and he was pointing out the enormous difference it makes to my pension and lump sum, which is calculated on my final year's salary, rather than on an overall career average as it is under the 2011 scheme. I was never aware of that, although I knew there was some issue.

Furthermore, because 2004 and 2011 entrants are not on the old scheme, they're A1 PRSI payers and thus they will have two pensions, with the state pension making up the shortfall in the DoES pension. However, the state pension is given at 68 so if, for instance, I were to retire at 60, I would only have that single DoES pension (and that's where AVCs would be useful to supplement income).

What's the exact criteria to be on the pre 2004 scheme again ?
I'm fairly certain I am but have contacted the dept numerous times and got nothing back !

gaiscioch

km79 wrote: »

What's the exact criteria to be on the pre 2004 scheme again ?
I'm fairly certain I am but have contacted the dept numerous times and got nothing back !

I surmise, if not assume, it's if you received payment from the DoES before the 2011 changes? I know I've kept my qualification allowances simply because I received payment from the DoES prior to those changes. I could be assuming too much by equating both, though.

At the recommendation of the guy today I've also contacted the pensions@gov section asking them to confirm in writing that I'm under the 2004 scheme. I think I'll follow it up tomorrow with a call.

km79

gaiscioch wrote: »

I surmise, if not assume, it's if you received payment from the DoES before the 2011 changes? I know I've kept my qualification allowances simply because I received payment from the DoES prior to those changes. I could be assuming too much by equating both, though.

At the recommendation of the guy today I've also contacted the pensions@gov section asking them to confirm in writing that I'm under the 2004 scheme. I think I'll follow it up tomorrow with a call.

i believe I'm on the original scheme as I started teaching before 2004?
It was maternity leaves for the first 2 years 2002-2004

TheDriver

If you are before 2004, you can retire under 55/35 rule. If 2004-2011, you must be 60 and if 2011 onwards.....

TheDriver

gaiscioch wrote: »

Excellent. Never knew about that. I'll check out the details and conditions on it now.

It took me a lot of research to find it all out, there are people in receipt if it already. Yu get that or disability or old age etc etc. Basically when u retire, you get one of them until 68 so there is no loss. I am out the gap at 56.
Ps anyone on 55/35 rule, you can count 2'years of college so its actually 55/33

km79

TheDriver wrote: »

If you are before 2004, you can retire under 55/35 rule. If 2004-2011, you must be 60 and if 2011 onwards.....

Is that early retirement then on reduced pension and lump sum ? Is it 40 for the full whack
Pardon my ignorance on this but it's got so confusing

TheDriver

You can retire early on an actuary reduced pension. But you can also retire early on a per years service pension. So if u started in 1999, you could retire once you have 33 years service and aged 55. However you get 33/40 of the pension and lump sum

gaiscioch

km79 wrote: »

i believe I'm on the original scheme as I started teaching before 2004?
It was maternity leaves for the first 2 years 2002-2004

On the bottom left of my DoES payslip is "A1" under PRSI Class. What does yours say? D? If you started before 1 April 2004 it would seem you're on the old scheme, even if you were subbing in the years before 2004. The reason I assume that is because I know several people who were subbing before 2011 and kept their qualification allowance because of that (again I'm equating keeping qualification allowance with being a 'New Entrant'). They did not need to be teaching their own hours before 2011 to keep their qualification allowances.

Here's a definition of a 'New Entrant' on the ASTI page:

"Broadly speaking, a new entrant is a person who commences employment in the public service on or after 1 April 2004, or returns to employment on or after that date following a break in public service employment of more than 26 weeks. This broad definition is for general information only and should not be relied on - the Act itself should be consulted when determining whether a person is or is not a new entrant." (FAQs: ASTI)

gaiscioch

TheDriver wrote: »

If you are before 2004, you can retire under 55/35 rule. If 2004-2011, you must be 60 and if 2011 onwards.....

Are you sure it's not 65 for post 2004? My notional service quote was for retirement at 65. I just googled what the 55/35 rule is and came across this:

"*New entrant as defined in the Public Service Superannuation (Miscellaneous Provisions) Act 2004 has a minimum pension age of 65. In the case of a person whose employment commenced before 1 April 2004 and who is not a new entrant as defined in the Public Service Superannuation (Miscellaneous Provisions), Act 2004 the minimum retirement age is 60 (with the exception of the above) and the maximum retirement age is 65. (Teachers voluntary early retirement)

km79

gaiscioch wrote: »

On the bottom left of my DoES payslip is "A1" under PRSI Class. What does yours say? D? If you started before 1 April 2004 it would seem you're on the old scheme, even if you were subbing in the years before 2004. The reason I assume that is because I know several people who were subbing before 2011 and kept their qualification allowance because of that (again I'm equating keeping qualification allowance with being a 'New Entrant'). They did not need to be teaching their own hours before 2011 to keep their qualification allowances.

Here's a definition of a 'New Entrant' on the ASTI page:

"Broadly speaking, a new entrant is a person who commences employment in the public service on or after 1 April 2004, or returns to employment on or after that date following a break in public service employment of more than 26 weeks. This broad definition is for general information only and should not be relied on - the Act itself should be consulted when determining whether a person is or is not a new entrant." (FAQs: ASTI)

it also says A1
myself and my wife are jointly assessed of that makes any difference

mirrorwall14

So can anyone explain exactly the similarities and differences between pre and post 2004?

My understanding is:

Both calculated on final salary rather than career average
Pre allows retirement at 55. Post you must be 60

After that I haven't a notion what the differences are?!

TheDriver

Sorry, its 60 for pre 2004 but you can go at 55 with 55/35 but 65 for post 2004 unless you have 40 years done.
Prsi rate has nothing to do with which pension entitlement except for the supplementary pension bit. At endof it, you get the same money if you are d or a prsi

mirrorwall14

Ok with editing:

Both calculated on final salary rather than career average
Pre allows retirement at 60. Post you must be 65 unless you have 40 years done.

Whats the 55/35 rule?

TheDriver

You must be pre 2004 and must have 33 years service and reached 55 years old (2 years college means 33). But you only get 33/40 pension

Shawn Michaels

Am I right in thinking that for someone who entered service in 2001:

- They can retire at 50 on either actuarily reduced pension and lump sum or pro rata based on years of service?

- They get full pension if they have 40 years service at age 60.

- Notional service purchase is bad for people who might retire early.

- The State Pension is integrated with the Occupational Pension, and paid in full from age 60, with the State Pension coming in the form of a top up until it actually becomes payable.

Many thanks.

mirrorwall14

Ok so something like this?

Both calculated on final salary rather than career average
Pre allows retirement at 60 (with full pension regardless of service?)
Pre allows you to retire with 33 years at 55 on 33/40th of pension
Post you must be 65 unless you have 40 years done.

TheDriver

Nearly, pre 2004 means you can retire at 60 with any service but only get that pension e.g. Someone starts in 1999 aged 55, they can retire in 2004 with 5/40 pension

mirrorwall14

Is that everything then?

Both calculated on final salary rather than career average
Pre allows retirement at 60 (with corresponding portion of pension)
Pre allows you to retire with 33 years at 55 on 33/40th of pension
Post you must be 65 unless you have 40 years done.

And 2011 the big change is career earnings? Was there any other change to rules re retiring?

Also if you retire early on 33/40 pension do you stay on that for the rest of your life?

And if you retire at 60 post 2004 I'm correct in saying you do not get the full pension until you are 65 but you do qualify for the supplementary pension in the meantime?

(Sorry I've become the de-facto-know it all on my staff about anything job related particularly union stuff but I'm getting weird and wonderful questions from everyone!

TheDriver

No, if you are post 2004, there is no provision to retire until 65 unless you have 40 years service done or you take an actuarially reduced pension

mirrorwall14

TheDriver wrote: »

No, if you are post 2004, there is no provision to retire until 65 unless you have 40 years service done or you take an actuarially reduced pension

I mean (post 2004) if I have 40 years service done at 61 and I retire. Am I allowed draw down the pension at 61 or do I have to wait until 65 anyways?

TheDriver

I think you can at 61 but only because you have full entitlement complete

spurious

Just for some real world figures, I started in 1984, did a couple of years part time and took a career break of two years, retired early as an A post at fifty (at the end of 2013). Got a lump sum and have a pension of just under 16k. Am allowed work up to my old finishing salary, but generally just do bits and pieces for the SEC which barely bring me into the taxable bracket.

It was of course quite a drop in income but I was lucky in that the house was paid off and I had no other debts. We manage and it was the right decision for me to go as I'd been in quite a hard station all my career. Enough was enough.

Geuze

Shawn Michaels wrote: »

Am I right in thinking that for someone who entered service in 2001:

- They can retire at 50 on either actuarily reduced pension and lump sum or pro rata based on years of service?

- They get full pension if they have 40 years service at age 60.

- Notional service purchase is bad for people who might retire early.

- The State Pension is integrated with the Occupational Pension, and paid in full from age 60, with the State Pension coming in the form of a top up until it actually becomes payable.

THE STATE PENSION IS NOT PAID at age 60. A supp pension may be payable until the State Pension kicks in at 66/67/68.

Many thanks.

See above.

japester

It should be noted that Spurious was a Class D PRSI employee and so the pension was 100% occupational with no integration with the state pension. Therefore retirement at age 50 meant Spurious got about 28/40 of the max pension available at that time multiplied by a factor of .62 to account for the fact that it was being paid much earlier than normal. So Spurious got a relatively decent pension considering retirement was so early. However, for all those class A employees, I understand that supplementary pension is not payable before minimum retirement age of 60/65. So if a class A employee wished to avail of cost-neutral early retirement as Spurious did, they would end up with a very small occupational pension as the supplementary part would be missing until age 60/65 was reached. In effect it means that cost-neutral early retirement is not really a runner for post-95 class A employees.

From the document Pen07_05.doc at http://www.education.ie/en/Education-Staff/Services/Retirement-Pensions/Teaching-Staff/Cost-Neutral-Early-Retirement/

Supplementary pensions

16. Supplementary pensions, where appropriate, may be paid by the Department, on application, to persons availing of cost neutral early retirement but will not be payable in respect of periods prior to the attainment of the relevant preserved pension age (60 or 65 years, as appropriate). The circumstances in which Supplementary Pension may be payable are set out in Appendix 2 attached.


Check out the miniscule annual pension available to the class A employee retiring at age 50 in example 5 at the end of the document. This puts the class A employee at a major disadvantage compared to their class D equivalent as it basically means that cost neutral early retirement is not financially possible given that supplementary pension is not available between the ages of 50 and 60/65. I wonder if the unions realised this issue when cost-neutral early retirement became an option? Probably not as most members would have been class D employees at that stage and would not have been affected. Maybe the unions will pick it up as an issue as more and more class A employees will be retiring in the coming years and some will be looking for an early exit given all the "extras" that have come our way since 2008.

I should point out though that the case in Example 5 does refer to an employee whose final salary is 40k so I am not really comparing like for like as I estimate that Spurious' final salary might have been about 72k say. Nevertheless, Spurious comes out with a pension of just under 16k but, for a class A employee who has worked the same amount of time (I estimate Spurious worked for about 28 years in total) and had the same final salary, then the pension available upon retirement at 50 would be:

(31186*28/200)+[(72000-31186)*28/80)] * 0.624 = €11638

It's a pension that you could almost live on just about if you had no other debts outstanding but it is still about 4k less than what the equivalent class D employee would have received for the same service and same final salary.

theLuggage

gaiscioch wrote: »

I couldn't get clear advice on this minefield (and the pension calculations) so I paid an independent financial advisor who specialises in public service pensions etc for his advice. People here might be interested in his perspective, and have other perspectives on it.

Hi if it's ok, can I PM to ask you who did you get to review your pension stuff and how much was it?? Thanks

TheDriver

japester wrote: »

It should be noted that Spurious was a Class D PRSI employee and so the pension was 100% occupational with no integration with the state pension. Therefore retirement at age 50 meant Spurious got about 28/40 of the max pension available at that time multiplied by a factor of .62 to account for the fact that it was being paid much earlier than normal. So Spurious got a relatively decent pension considering retirement was so early. However, for all those class A employees, I understand that supplementary pension is not payable before minimum retirement age of 60/65. So if a class A employee wished to avail of cost-neutral early retirement as Spurious did, they would end up with a very small occupational pension as the supplementary part would be missing until age 60/65 was reached. In effect it means that cost-neutral early retirement is not really a runner for post-95 class A employees.

From the document Pen07_05.doc at http://www.education.ie/en/Education-Staff/Services/Retirement-Pensions/Teaching-Staff/Cost-Neutral-Early-Retirement/

Supplementary pensions

16. Supplementary pensions, where appropriate, may be paid by the Department, on application, to persons availing of cost neutral early retirement but will not be payable in respect of periods prior to the attainment of the relevant preserved pension age (60 or 65 years, as appropriate). The circumstances in which Supplementary Pension may be payable are set out in Appendix 2 attached.


Check out the miniscule annual pension available to the class A employee retiring at age 50 in example 5 at the end of the document. This puts the class A employee at a major disadvantage compared to their class D equivalent as it basically means that cost neutral early retirement is not financially possible given that supplementary pension is not available between the ages of 50 and 60/65. I wonder if the unions realised this issue when cost-neutral early retirement became an option? Probably not as most members would have been class D employees at that stage and would not have been affected. Maybe the unions will pick it up as an issue as more and more class A employees will be retiring in the coming years and some will be looking for an early exit given all the "extras" that have come our way since 2008.

I should point out though that the case in Example 5 does refer to an employee whose final salary is 40k so I am not really comparing like for like as I estimate that Spurious' final salary might have been about 72k say. Nevertheless, Spurious comes out with a pension of just under 16k but, for a class A employee who has worked the same amount of time (I estimate Spurious worked for about 28 years in total) and had the same final salary, then the pension available upon retirement at 50 would be:

(31186*28/200)+[(72000-31186)*28/80)] * 0.624 = €11638

It's a pension that you could almost live on just about if you had no other debts outstanding but it is still about 4k less than what the equivalent class D employee would have received for the same service and same final salary.

That is a reference to a cost neutral pension option i.e. someone who cannot avail of a regular pension route (55/35 rule or retire after 40 years service)

Except someone who is pre2004 and A1 PRSI can avail of the 55/35 rule and can claim a supplementary pension https://www.education.ie/en/Education-Staff/Services/Retirement-Pensions/Teaching-Staff/Supplementary-Pensions/Supplementary-Pension-Explanatory-Note.pdf. Basically if a D PRSI can do it, coordination means that A PRSI cannot loose out on the same overall benefits. It is different to cost neutral early retirement. So if you have 33 years done and you are 56, you can claim 33/40 of your pension including the supplementary pension until 68 when the OAP kicks in (but all amounts to the same). the only thing is that you can't claim any other DSP claim e.g. disability

You can look up your entitlement here http://penmod.education.ie/despen/ but remember to add on the supplementary pension to the figure quoted

gaiscioch

theLuggage wrote: »

Hi if it's ok, can I PM to ask you who did you get to review your pension stuff and how much was it?? Thanks

Pm sent, theLuggage.