State Integrated Pension

LuasSimon

My wife took VS from her Employer 5-6 years ago but would have built up a pension over 17 years employment. Its state integrated apparently and says she has accrued 9,000 of a pension . Her retirement age is 63.

Does this mean she gets 9000 from that employer scheme at 63 until she reachs state pension age( 68 in her case) at which stage she then gets nothing as the state pension of 12,000 is greater or what??

Ace2007

LuasSimon wrote: »

My wife took VS from her Employer 5-6 years ago but would have built up a pension over 17 years employment. Its state integrated apparently and says she has accrued 9,000 of a pension . Her retirement age is 63.

Does this mean she gets 9000 from that employer scheme at 63 until she reachs state pension age( 68 in her case) at which stage she then gets nothing as the state pension of 12,000 is greater or what??

She should contact the administrator of the scheme and request for an updated options form, which will outline what her benefits are.

Given the above details, I assume she's a deferred member in a private DB scheme, so she's likely to have the ~9k paid per year from the scheme at her retirement age, and then she will be paid the state pension at 66/67, so she will have both, i.e. ~9k from scheme and ~12.5k from state - so ~21.5k

She should be entitled to take a lump sum from the scheme, with a reduced pension, but again that should be all outlined in the updated option statement that the admin team can give you.

coylemj

LuasSimon wrote: »

Does this mean she gets 9000 from that employer scheme at 63 until she reachs state pension age( 68 in her case) at which stage she then gets nothing as the state pension of 12,000 is greater or what??

By my understanding of integration, yes. Her benefit under the scheme is that she should get a total income in retirement of 9,000 and the scheme will pay her that from age 63 but as her scheme is integated with the state pension, her occupational pension will drop to zero as soon as she reaches 68 and starts getting the state pension because it's more than 9,000.

She should clarify this with the trustees or administrators of the pension scheme since some employers may adopt a more generous interpretation of 'integration' than others but that's how I read her situation.

For those who aren't aware of how 'integration' works.....

A significant number of pension schemes make an allowance for the State pension when providing a pension from the scheme. This is known as "integration" in the private sector and "coordination" in the public sector. An integrated scheme looks at the State pension as part of the total pension package promised to employees on retirement. One reason for this is that both employers and employees make PRSI contributions and these, in turn, entitle scheme members to Social Welfare benefits, including State pension.

https://www.pensionsauthority.ie/en/LifeCycle/Private_pensions/Integration_coordination/

Ace2007

^^^ I’m really note sure about that interpretation.

Any intergrayed scheme I’ve seen the state pension offset is applied in the definition of final pensionable salary (fps),

so for example

Final salary was 50,000
State pension is 12652

FPS is final salary less 1.5 state pension
50,000-1.5*12652 = 31,022

Assume scheme service is 20 years and accrual rate is 1/60, pension would be 31,022*20/60 = 10,340 p.a. paid at retirement date plus state pension, 12,652 is paid at the state pension age say 66.

Therefore overall pension is the some of them both I.e approx 24k

Just to add that the link in the post above this clearly shows what I’m saying, so I don’t understand what the above poster is actually saying.

coylemj

Ace2007 wrote: »

^^^ I’m really note sure about that interpretation.

Any intergrayed scheme I’ve seen the state pension offset is applied in the definition of final pensionable salary (fps),

Both options are possible, the one outlined by me is called 'integration by pension offset' and the one you described is called 'integration by salary offset'. In fairness, your scheme is more common.

Integration by salary offset

The most common method of operating an integrated pension scheme is by “salary offset”. This means that the employer will regard the State benefit as taking care of pension rights in relation to a particular part of salary. Since this part of the member’s salary is being “pensioned” by the State pension it is deducted from the member’s actual salary, to arrive at a figure for pensionable salary.

Integration by pension offset

Another method of arriving at an integrated pension is by the use of a “pension offset”. Again, a member’s total pension will be made up jointly of State and occupational pensions. Using the pension offset method, an overall pension is first calculated and the State pension entitlement is simply deducted from that amount. The difference is the pension payable from the occupational pension scheme.

See pages 27 and 30 in the Pensions Authority 'How does my pension scheme work' booklet (click to download).