Public Sector Pension
For anyone working in the Public Sector it can be difficult to get your head around the complicated rules of each scheme and understand which rules pertain to you.
There are 4 main schemes in the Public Sector and the benefits of each are very different. Below is a short synopsis of each;
First Scheme (Public Servants Joined Prior to the 6th of April 1995)
The first scheme is the most straightforward and is considered the best. However, there are some small nuances, so it is not always. If you have full service at your normal retirement age (the age you can retire without penalty) you will qualify for a lump sum of 1.5 times your pensionable salary and a pension of half of your pensionable salary. You will get all your pension benefits when you retire from your employer and will not be entitled to the State Pension.
Some occupational pension schemes allows you to retire early due to the doubling of years after 20 years of service (such as Garda, Psychiatric Nurses, HSE and teacher schemes etc.) . Being in this pension scheme can be particularly advantageous as you will be able to take up new employment post retirement from the Public Sector without this having any impact on your retirement benefits.
If you suffer from ill health, you will get your sick pay benefits from your employer as D class PRSI payers do not qualify for the illness benefit or the invalidity pension from the State.
In the event of your death pre or post retirement being in this scheme also has advantages over the other schemes. As a financial planner this scheme is the most straightforward, but you must watch out as within this scheme there are different rules for different occupations such as Teachers, Psychiatric Nurses, Garda, Nurses etc.
Second Scheme (Public Servants Recruited and Joined between the 6th of April 1995 and the 1st of April 2004)
The second scheme retains some of the rules of the first scheme such as normal retirement ages. The pension you will have with full service (inclusive of the State Pension) would mirror that of the first scheme. There are however some big differences.
First, you will be paying a different class of PRSI (A). The pension you get from your employer will be reduced as you will also qualify for some or all the State Pension depending on your contributions. For those who benefit from being able to retire relatively early (Garda, Nurses, Teachers, Psychiatric Nurses) then there are disadvantages to being in this scheme as if you take up employment (your pension for the years prior to you receiving the State Pension) would be reduced considerably.
The clients who I find can benefit from being in this scheme as opposed to the first are those who do not have full service at retirement. Your ill health and death in service benefits will also differ from the first scheme.
Third Scheme (Joined between the 1st of April 2004 and the 1st of January 2013)
The third scheme benefits retain some of the benefits of the second scheme but there are some stark differences. The main difference is the normal retirement age which moves out to 65 for most but not all employees. There are also some changes to the nuances within different schemes.
I have often met teachers who have colleagues who joined within a few months of them but one can retire at age 55 without penalty as they are in the second scheme but the other due to the changes cannot retire until age 65.
If you wish to retire early from the 3rd scheme, then please speak to us as the rule changes that apply to this scheme would make it very difficult. On a positive note, once you do reach pension age for most people your benefits will be like those on the 2nd Scheme.
Fourth (Single) Scheme (Joined Post 1st of January 2013)
The fourth and most recent scheme has many differences to the first 3 schemes with regard to pension, long term sick pay and death in service. It is unfortunately the poor relation of the other 3 in many aspects. The most significant change is that your pension will be based on your career average pension rather than your final pensionable salary. If you spend most of your career at the top of your salary scale, then this is not an issue.
The reality is most are spending many years climbing the ladder of salary scales. With the first 3 schemes if say a school principal spent the last 3 years of his or her service as a school principal and the other 37 as a classroom teacher then his or her full pension would be based on their final salary as a principal. With the fourth scheme only a small part of his or her pension would be based on their principal’s salary.
There are many things that you can do to improve on your pension such as buying back training years, buying notional service, applying for professional added years, and paying Additional Voluntary Contributions (AVC’s).
Further information on Public Sector Pensions
If you ever wish to sit down and get a good understanding of what your retirement will look like and to discuss your options to improve it, then please do not hesitate to contact us.