Defined Benefit (DB) schemes aim to provide a set level of pension and/or lump sum at retirement. The level of benefits depends on your service in the scheme and salary at retirement. Generally DB schemes in the private sector aim to provide employees with a pension of 1/60th of salary for every year of service to a maximum of 40/60ths. You may have the option to take a retirement lump sum and a reduced pension. Public sector schemes tend to provide retirement lump sums of 3/80ths of salary and a pension of 1/80th of salary for every year of service to a maximum of 40 years service.
If you will not have 40 years of Service you could save a lot of money in tax. Find out how much here.
Private sector DB schemes are rare so for the rest of this section we will concentrate on the Public Sector DB schemes also known as Superannuation.
Superannuation
By definition Superannuation is the regular payment made into a fund by an employee towards a future pension and it is also the pension paid to a retired employee who has contributed to a superannuation fund. All members of the Public Sector in Ireland pay superannuation in return for a pension and tax free lump sum (gratuity). Most workers also contribute to a “spouses and childrens” scheme, which is a death benefit for every member’s family.
Superannuation rules are very complicated due to the fact that there are so many rules! A public sector worker’s retirement benefits will differ as a result of the following:
- PRSI Class
- Officer or Non Officer grade
- Date you started service determines your Normal Retirement Age (NRA)
- NRA of 60, 65, state pension age
- Final Pensionable Remuneration
- Years of Service
- Career break
- Buying back of years
- Unpaid leave, Carer’s Leave, Adoptive Leave, Maternity Leave
- Job sharing or part time hours
- Substitute work
- 35-year rule for Teachers
- Working in a Voluntary hospital as a student
- Part of a University Closed scheme
- Occupation that has Professional added years such as a Pharmacist, Doctor, Psychiatric nurse, Guard, Engineer, Planner, Architect, Solicitor.
Increasing your retirement benefits
There are several ways to increase your Retirement benefits which all attract tax relief. The question is which one suits me best and leaves me better off financially?
- Notional Service Purchase/Purchase of Notional Service (NSP’s/PNS): buying years you will never actually work but pay superannuation for.
- AVC or PRSA AVC: private pension to supplement your tax free lump sum and pension
- Buying back years: paying back superannuation for years that you actually worked but didn’t contribute to the pension scheme at the time.
- Marriage Gratuity Years
- Student years
- Temporary years
- PCW buyback for Teachers
How Rockcourt can help?
Every worker has a different life and different set of circumstances. As you can see from the above there are many rules that apply and options that are available to public sector workers. The key is to highlight the rules and take the correct option that is available to you. Rockcourt Consultants have over 50 years of public sector experience between them. We also work with Seamus O’Dwyer whose superannuation experience is second to none.
When we are outlining your pension options we will go through in detail your service history, tax saving potential, projected retirement benefits, outgoings, savings and loans. Recommendations will be then made by one of our experienced Financial Consultants.