Buying back years in HSE

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rogeroleary

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Mrs O'Leary works part time for charitable organisation and is paid by the HSE - salary is c. €25k. She's 59 next birthday and has about 20 years service (all part time) - I'm wondering a) if she can "buy back years" to increase her pension / retire early b) any idea of how much pension she would be entitled to if she retired @ say 65 and c) how much would it cost (ball park) for her to max out the buying back of years?

Any advice would be much appreciated.

Roger
 
Her HR department should be able to give her information.
If she is part time, calculations will be based on the full time salary. So if she has 20 years service, working as 50% of a whole time equivalent, then she will be deemed to have 10 years full time service.
If she continues to work for 6 more years, she'll have 13 years full service. So she'll be a long way short of 40 years full time service. She can get tax relief on notional service purchased (also known commonly as buying back years), within the revenue limits.
Is she paying PRSI at A or D class? Was she paying stamps A class stamps in previous jobs?
What is her retirement age? For example I must retire at 65, but am eligible to retire at 60 (which would mean I've fewer years contributions), or I can retire any time from age 50 - with an actuarially reduced pension. The rules vary a lot depending on when she started in the public service.
 
Hi Roger. It is important to establish who exactly is her employer, as that will dictate if she will fall under HSE Superannuation Scheme and she can then contact HR and establish her entitlements.
 
I would think that more information is required before attempting any of these questions, eg,

Mrs. O'Leary has worked part-time - what is the equivalent years of service full-time ? If she has been working half-time for all of this time it would be 10 years.

Has she been a member of the pension scheme for all of her working time with this organisation or has she already "bought back" any of the time she hasn't been? Has she worked any time unpensioned ? Has she at any time in the past been given the option of buying back unpensioned years ? If her existing service is all already pensionable then the option she may be considering is purchasing "notional service" rather than "buying back".

Has she worked in any other public service organisation ? Has she pensioned or unpensioned time there?

If she works for a charitable organization how come she is paid by the HSE? Do you mean that the HSE fund the Charity who in turn pay/ employ her ? If so, is it the Charity's scheme that she is a member of(which may, or may not be, an equivalent Public Service Scheme) ?

Precisely what scheme is she a member of and when did she become a member/join - has she a booklet, etc. with a scheme name ? (Rules for public service schemes have changed over the years)? I know she can work until 65 but what is her "retirement age" , ie, is she able to retire at 60 without "actuarial reduction" of benefits ?

Has the Organisation a HR Dept or Officer and has she sought any information/guidance there?

I don't know the pros and cons myself, but I am aware of some in this type of situation who have opted for the AVC route rather than purchase "notional service". Just for info purposes here is a link to a link to info for the purchase of notional service for the Education sector - teachers specifically:

https://www.education.ie/en/Education-Staff/Services/Retirement-Pensions/Notional Service Purchase Scheme for Teachers – General Information.pdf

EDIT:Sorry POC and Slim - I hadn't seen your replies/advice before posting this.
 
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POC said:
Thanks POC - responses in bold below:

  • Is she paying PRSI at A or D class? - A class
  • Was she paying stamps A class stamps in previous jobs? YES
  • What is her retirement age? 65
  • She thinks she can go at 60 but obvously she would have less service than @ 65 so less pension
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Slim said:
Hi Roger. It is important to establish who exactly is her employer, as that will dictate if she will fall under HSE Superannuation Scheme and she can then contact HR and establish her entitlements.
Click to expand...

Thanks Slim - she's definitely under HSE - apparently it's the NHASS (Nominated Health Agencies Superannuation Scheme)
 
Thanks Early Riser - responses in bold below:
  • Has she been a member of the pension scheme for all of her working time with this organisation? - YES
  • Has she already "bought back" any of the time she hasn't been? No
  • Has she worked any time unpensioned ? She would have worked with private companies previosly but pension contributions would have been small and she thinks she would have received refunds on departure (that was not unusual years ago from what I recall)
  • Has she at any time in the past been given the option of buying back unpensioned years ? I think that would have been there all along but she would not have been in a position to avail of it (financially)
  • If her existing service is all already pensionable then the option she may be considering is purchasing "notional service" rather than "buying back". (hmmm....got the impression from POCs post that this was one and the same?)
  • Has she worked in any other public service organisation ? No
  • Has she pensioned or unpensioned time there? No
  • If she works for a charitable organization how come she is paid by the HSE? Do you mean that the HSE fund the Charity who in turn pay/ employ her ? Correct
  • If so, is it the Charity's scheme that she is a member of(which may, or may not be, an equivalent Public Service Scheme)? It's called the Nominated Health Agencies Superannuation Scheme
  • Precisely what scheme is she a member of and when did she become a member/join (1997)
  • Has she a booklet, No
  • I know she can work until 65 but what is her "retirement age" , ie, is she able to retire at 60 without "actuarial reduction" of benefits ? Yes - she seems pretty sure that is the case.
  • Has the Organisation a HR Dept or Officer and has she sought any information/guidance there? Yes but she'll probably be retired before she can get an answer from them :p
  • Yes she would consider AVC but given how long she has left (and the capping of contributions of AVCs @ 35%) I suspect the impact would be minimal fr a part time worker.
 
Roger,

How part-time is Mrs O'Leary's work ? Has it been half-time for the past 20 years (ie, the equivalent of 10 whole-time years) or has there been some other pattern ?

When you say €25000 is the salary does this mean what she is actually paid annually for her part -time hours or does she get paid a portion of this corresponding to her work pattern (eg, half) ?

Anyway, The NHASS is an approved Dept of Health Scheme, which has essentially the same conditions and benefits as a post- 1995 Public Service scheme. It is a coordinated scheme (Class A PRSI).

Here are some approximate figures, with assumptions.

Assumption 1

Mrs O has worked 20 years (half- time) in a position with a salary of €50000 attached. As she has worked half-time she earned €25000 per year (or 10 years at €50000, for pension estimate purposes).

If Mrs O continues her current work pattern until 65 she will be eligible for an Occupational Pension of approximately €4100 and a tax-free lump sum of approximately €24500. As Mrs O appears to have a good PRSI record she may obtain a full or nearly full State Pension at 67. She may be eligible for a further supplementary pension from her her employer (circa €4100) if she not eligible for any Social Welfare payment in the interim.

If Mrs O retires at 60 her lump sum is approx €20000 and Occupational Pension €3350. She may be eligible for Jobseeker's for 9 months. She might continue to sign for PRSI credits afterwards to keep up her record. After the Jobseeker's ends she can apply to her Employer for a Supplementary Pension and if she meets the conditions for this it should be about €3400 pa until State Pension age.

Assumption 2 (Just the figures - the same caveats as above apply)

Mrs O has worked for 20 years in a position with a salary of €25000 attached. As she worked half-time she earned €12500 per year.

Retires at 65 : Lump sum €12300 approx. Occ Pension €1550 approx

Supplementary, if/when eligible €2500

Retires at 60: Lump sum €10000 approx. Occ Pension €1330 approx

Jobseeker's as above. Supplementary, if eligible, €2050 approx.
 
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Roger, A few further thoughts.

It seems that the option of buying back previously unpensioned years is not there for Mrs O. When this is possible it is generally cheaper than buying notional years, which is calculated on current salary and on on actuarial projection of future benefits. "Buying back" is based on salary at the time of unpensioned service - so If Mrs O happened to have had such service 20 years ago it was likely at a lower salary point than now.

Others will know more about this, but I think the capping of contributions for tax purposes is at the same rate for AVCs and for notional years purchases. Given Mrs O's salary, her tax relief would be at the 20% rate, (right ?) so not as attractive as for a higher rate payer. This may be entirely unsuitable (and unappealing) but, if the salary attached to her position full time is €50000, her best way to max the pension would be to go full- time (building up her service years), work until 65, and purchase AVCs or purchase notional years while getting 40% tax relief (But I'm not trying to raise any discussions between you :p).

I wouldn't know enough to advice between AVCs and notional years, but the benefits obtained through notional years are mostly in terms of enhancing the annual pension - Mrs O will need to stay around long term to make any gain:). Also, she is probably a member of the Spouse's and Childrens component in the NHASS. If she purchases notional years she will also be obliged to fund this component notionally as well. It may, or may not be, a priority for Mrs O to make additional provision for you after her demise ! On the other hand, Mrs O should have the opportunity to enhance her tax free lump sum somewhat via the AVC route and if she puts any remaining loot in an ARF/AMRF she can control draw down of it more readily.

Best of luck, Roger. I am going to be off-line for for the next few days. I'll catch up with how you and Mrs O are getting on after that.
 
As EarlyRiser said - purchasing Previous Service is different to purchasing Notional Service. The term 'buying back years' is commonly used when referring to Notional Service Purchase, even though I think it better describes purchase of previous service.
I'm on the same scheme as Mrs O at the moment, and I have done both.
I assumed from your first post that Mrs O has been paying Superannuation throughout her Public Sector career - so isn't eligible to purchase previous service, and you have confirmed that in later posts. (I was able to purchase 2 periods of previous service. One when I was on a temporary contract, and one when I was part time - but wasn't eligible to pay superannuation until rules changed years later). IF Mrs O is eligible to purchase previous service, she would have to do that before purchasing Notional Service.
Regarding Notional Service - I was given 2 sets of figures, depending on whether I planned to retire at 60 or 65. They looked at the shortfall of years if I retired at 60 or 65. They gave me a cost per month to purchase each year of the shortfall (shortfall is higher if I retire at 60, and cost per year purchased is higher if I retire at 60 as I have fewer years to pay). They also gave me a figure if I chose to purchase the maximum amount. Monthly purchases must start at Mrs O's birthday.
Initially I didn't purchase the maximum amount, based on age 65, as it would've exceeded the threshold for maximum tax relief. However my circumstances changed since then and I am now paying the maximum amount based on retiring at 65.
I'm no expert on this subject and don't work in HR! But I do understand my own situation well.
I suggest Mrs O contacts her HR Dept. They should be able to give her some basic information quickly, but it could take a while to get the paperwork in order especially if figures need to be agreed with the pensions section in Manorhamilton.
 
Hi Early Riser - first of all thank you very very much - this is really helpful. I was away myself for a few days so only getting to respond now. Please see responses in this pen.

Early Riser said:
Roger,

How part-time is Mrs O'Leary's work ? Has it been half-time for the past 20 years (ie, the equivalent of 10 whole-time years) or has there been some other pattern ? Nope, that has been a consistent pattern

When you say €25000 is the salary does this mean what she is actually paid annually for her part -time hours or does she get paid a portion of this corresponding to her work pattern (eg, half) ? it's €50k pro rated to €25k for part time

Assumption 1

Mrs O has worked 20 years (half- time) in a position with a salary of €50000 attached. As she has worked half-time she earned €25000 per year (or 10 years at €50000, for pension estimate purposes).

If Mrs O continues her current work pattern until 65 she will be eligible for an Occupational Pension of approximately €4100 and a tax-free lump sum of approximately €24500. As Mrs O appears to have a good PRSI record she may obtain a full or nearly full State Pension at 67. She may be eligible for a further supplementary pension from her her employer (circa €4100) if she not eligible for any Social Welfare payment in the interim.

If Mrs O retires at 60 her lump sum is approx €20000 and Occupational Pension €3350. She may be eligible for Jobseeker's for 9 months. She might continue to sign for PRSI credits afterwards to keep up her record. After the Jobseeker's ends she can apply to her Employer for a Supplementary Pension and if she meets the conditions for this it should be about €3400 pa until State Pension age.
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Early Riser said:
Roger, A few further thoughts.

If Mrs O happened to have had such service 20 years ago it was likely at a lower salary point than now. - Yes I would think so

Others will know more about this, but I think the capping of contributions for tax purposes is at the same rate for AVCs and for notional years purchases. Given Mrs O's salary, her tax relief would be at the 20% rate, (right ? - I'll check that with her) ......her best way to max the pension would be to go full- time (building up her service years), work until 65, and purchase AVCs or purchase notional years while getting 40% tax relief (But I'm not trying to raise any discussions between you :p). eh....it would take a braver man than me to tackle that specific proposal but I do get your drift ER :eek:


I wouldn't know enough to advice between AVCs and notional years, but the benefits obtained through notional years are mostly in terms of enhancing the annual pension - Mrs O will need to stay around long term to make any gain:). Also, she is probably a member of the Spouse's and Childrens component in the NHASS. If she purchases notional years she will also be obliged to fund this component notionally as well. It may, or may not be, a priority for Mrs O to make additional provision for you after her demise ! I wouldn't think so :( On the other hand, Mrs O should have the opportunity to enhance her tax free lump sum somewhat via the AVC route and if she puts any remaining loot in an ARF/AMRF she can control draw down of it more readily. that's definitely something we'd like to explore.

Best of luck, Roger. I am going to be off-line for for the next few days. I'll catch up with how you and Mrs O are getting on after that.
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Thanks very much ER - really appreciate that
 
Hi Early Riser - first of all thank you very very much - this is really helpful. I was away myself for a few days so only getting to respond now. Please see responses in this pen.

Early Riser said:
Roger,

How part-time is Mrs O'Leary's work ? Has it been half-time for the past 20 years (ie, the equivalent of 10 whole-time years) or has there been some other pattern ? Nope, that has been a consistent pattern

When you say €25000 is the salary does this mean what she is actually paid annually for her part -time hours or does she get paid a portion of this corresponding to her work pattern (eg, half) ? it's €50k pro rated to €25k for part time

Assumption 1

Mrs O has worked 20 years (half- time) in a position with a salary of €50000 attached. As she has worked half-time she earned €25000 per year (or 10 years at €50000, for pension estimate purposes).

If Mrs O continues her current work pattern until 65 she will be eligible for an Occupational Pension of approximately €4100 and a tax-free lump sum of approximately €24500. As Mrs O appears to have a good PRSI record she may obtain a full or nearly full State Pension at 67. She may be eligible for a further supplementary pension from her her employer (circa €4100) if she not eligible for any Social Welfare payment in the interim.

If Mrs O retires at 60 her lump sum is approx €20000 and Occupational Pension €3350. She may be eligible for Jobseeker's for 9 months. She might continue to sign for PRSI credits afterwards to keep up her record. After the Jobseeker's ends she can apply to her Employer for a Supplementary Pension and if she meets the conditions for this it should be about €3400 pa until State Pension age.
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Best of luck with it, Roger. As I have noted, I couldn't advise between Notional years and AVCs - but just to say - although AVCs give greater flexibility at draw- down, they do involve nasty commissions/charges which do not apply to notional years.

The Supplementary Pension element applies in the NHASS scheme in the same way as similar Public Service schemes. Below is a link to to a Dept of Education explanatory document from 2016 (the figures have changed slightly since due to an increase in State Pension). See Section 3 for eligibility.

https://www.education.ie/en/Educati...ns/Supplementary-Pension-Explanatory-Note.pdf
 
Thanks POC - please see responses in this pen

POC said:
I'm on the same scheme as Mrs O at the moment, and I have done both.
I assumed from your first post that Mrs O has been paying Superannuation throughout her Public Sector career - so isn't eligible to purchase previous service, and you have confirmed that in later posts. (I was able to purchase 2 periods of previous service. One when I was on a temporary contract, and one when I was part time - but wasn't eligible to pay superannuation until rules changed years later). This is very interesting because she did work there for a while full time before our kids came along and left for about 10 years.
IF Mrs O is eligible to purchase previous service, she would have to do that before purchasing Notional Service.
Regarding Notional Service - I was given 2 sets of figures, depending on whether I planned to retire at 60 or 65. They looked at the shortfall of years if I retired at 60 or 65. They gave me a cost per month to purchase each year of the shortfall (shortfall is higher if I retire at 60, and cost per year purchased is higher if I retire at 60 as I have fewer years to pay). They also gave me a figure if I chose to purchase the maximum amount. Monthly purchases must start at Mrs O's birthday. Good to know as that's in Q3
Initially I didn't purchase the maximum amount, based on age 65, as it would've exceeded the threshold for maximum tax relief. Thank you, I will check that. However my circumstances changed since then and I am now paying the maximum amount based on retiring at 65.
I'm no expert on this subject and don't work in HR! But I do understand my own situation well.
I suggest Mrs O contacts her HR Dept. We'll definitely do that. They should be able to give her some basic information quickly, but it could take a while to get the paperwork in order especially if figures need to be agreed with the pensions section in Manorhamilton.
Click to expand...
 
So Mrs O worked full time in the public service previously. Did she pay superannuation at that time? If so, were her benefits preserved or did she take a refund when she left?
 
Hi POC, she's fairly sure she would have taken a refund ....just not 100% sure
 
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