Calculating Public Sevice pension using modeller

Paddylast

Registered User
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I am trying to calculate the pension I may be entitled to when retiring from the public service using the online Modeller. As I work in a job-share position I wonder if I am correct in using the full time salary for this job and then half the number of years (given the part-time nature). Only a couple of years left to retirement.

My HR dept have used the part-time(job-share) salary in their calculations multiplied by the half the number of years i.e. 16 years service but as it is a job-share this works out at 8 years service. Obviously this provide totally different figures so I need to know who is correct.

In a related matter - I would also draw attention to the position I find myself in regarding AVCs as a warning to others!!

I have been paying into AVCs via the IMPACT scheme for several years now. However, as I will not have GUARANTEE income (only pensions considered guaranteed apparently) of at least €12,700 at 65yrs, all my contributions MUST go into an AMRF and then I cannot access this money until I reach 75 years!!!! So it is effectively locked away. If I can reach the 12,700 level of pension income, which may be possible once I receive the contributory old age pension at age 66, I then have the option to transfer to an ARF and can then draw down on it.

QUESTION - would I be better to stop my AVC contributions now (paying in about €400 per month) and opting to save the same amount in State savings while also withdrawing some of my AVCs under the Government scheme which allows early withdrawals. Appears this is one way of accessing it.

I know there are tax advantages in AVCs at present but as I will be paying tax at the higher rate when I retire anyway, perhaps I would be better off taking the money now and pay the tax now.

Sorry for the long winded post but it is difficult to explain. Thanks in advance.
 
Hi Paddy. In calculating pension entitlements for a jobsharer, working 50% time, you use the full annual salary times the actual service. To do otherwise would be to double penalise the jobsharer. Can`t help with the AVC issue but could you increase hours to enhance Final Salary as you approach retirement?
 
In a related matter - I would also draw attention to the position I find myself in regarding AVCs as a warning to others!!

I have been paying into AVCs via the IMPACT scheme for several years now. However, as I will not have GUARANTEE income (only pensions considered guaranteed apparently) of at least €12,700 at 65yrs, all my contributions MUST go into an AMRF and then I cannot access this money until I reach 75 years!!!! So it is effectively locked away.
Are you absolutely sure about the 75 years thing? Seems absolutely crazy.
 
Yes, absolutely certain. Only the investment growth on a AMRF can be drawn down before 75yrs!

With the freeze on employment in the public service, the likelihood of increasing hours is slim but I will look into it.
 
In a related matter - I would also draw attention to the position I find myself in regarding AVCs as a warning to others!!

I have been paying into AVCs via the IMPACT scheme for several years now. However, as I will not have GUARANTEE income (only pensions considered guaranteed apparently) of at least €12,700 at 65yrs, all my contributions MUST go into an AMRF and then I cannot access this money until I reach 75 years!!!! So it is effectively locked away. If I can reach the 12,700 level of pension income, which may be possible once I receive the contributory old age pension at age 66, I then have the option to transfer to an ARF and can then draw down on it.

QUESTION - would I be better to stop my AVC contributions now (paying in about €400 per month) and opting to save the same amount in State savings while also withdrawing some of my AVCs under the Government scheme which allows early withdrawals. Appears this is one way of accessing it.

A few points here: -

  • I'll assume that you have no other pensions from previous employments, as they would be taken into account and complicate matters a bit.
  • If your superannuation scheme pension + the State Contributory pension are greater than €12,697 then you don't need an AMRF.
  • If your superannuation scheme pension + the State Contributory pension are less than €12,697 then you must invest your AVCs into an AMRF.
  • If it's just a timing issue then you can invest your AVCs into an AMRF when you retire from public service and then your AMRF becomes an ARF when you get the State Contributory pension at 66, assuming that the combination of your superannuation scheme pension + the State Contributory pension >€12,697 per year. In other words, if you're retiring from the public service at 65 and your superannuation pension is less than €12,697 per year, but your State Contributory Pension will bring the total up to over the €12,697 mark at age 66, then you only need an AMRF for 1 year, between the ages of 65 and 66. After that, the AMRF becomes an ARF.
  • AMRFs are not locked up until you're 75. You can access them at any time by converting them into an annuity, i.e. a guaranteed pension for life.
  • In fact you can use your AVCs to buy an annuity at retirement and bypass the AMRF altogether if you want.
  • You can access the growth on an AMRF at any time.

Hope this helps.
 
If I can reach the 12,700 level of pension income, which may be possible once I receive the contributory old age pension at age 66, I then have the option to transfer to an ARF and can then draw down on it.

Just to be clear - if that happens, then after a year your AMRF must become an ARF - it's not an option. Make sure that there will be no charge for converting your AMRF to an ARF after a year, when arranging the AMRF.
 
[*]AMRFs are not locked up until you're 75. You can access them at any time by converting them into an annuity, i.e. a guaranteed pension for life.
[*]In fact you can use your AVCs to buy an annuity at retirement and bypass the AMRF altogether if you want.
Thanks for the clarification, particularly on these two points.
 
Thanks for the helpful replies. One point however re buying an annuity ... I only heard bad things about these when there was no option to invest in an Arf i.e they die with you!! At least with the ARF the money goes to my estate should I bite the dust early. I think the ARF is the better option once it reach 66 and can claim the contributory pension. Good to have the advice about querying any costs to convert from AMRF. Thanks again.
 
Comparing an ARF and an Annuity is more complicated that it might first appear.
The features of an Annuity are:
- yes you give the funds away to a Life Assurance Co
- you can buy different types on Annuity incl one that continues to a spouse on your death
- if you die early or you both die early then there may be nothing payable to your estate ( though some annuities can include a minimum repayment)
- but an Annuity is a guaranteed income for life, no matter how long you live
- so an Annuity gives you income certainty

With an ARF :
- you invest the funds and continue to retain ownership
- you have to decide how to invest the funds, what investment risk etc
- you must draw down 5% of the value each year
- depending on the investment performance, the amount drawn down etc, the ARF fund might die before you do
- on your death, any capital remaining can pass to your spouse (in her ARF) and later to children through your estate

So in simple terms, if you know that you will live beyond say age 90, go for the Annuity. If you think that you might not live beyond age 80, go for the ARF. If you are somewhere in the middle, well it may be a zero sum game. The Annuity offers you income certainty, the ARF offers you flexibility. So you pay your money and take your choice.
 
Conan

You do not have to draw down 5% from an ARF each year. You can always just pay the tax due and leave the remainder in your fund. I've never seen it done but it is an option.



Steven
www.bluewaterfp.ie
 
SBarrett,
Yes you could just pay the tax, BUT if you do, the cash that you do not actually draw down will itself be subject to tax again when eventually drawn down. So although its an option, it makes no sense.
 
Cant the avc be applied to the tax free lump sum where the lump sum payable is less than the revenue max?
 
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