3rd level institution scheme, class A PRSI: notional service so expensive?

J

Jnomics

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I belong to a 3rd-level institution pension scheme, post 1995 employee, so class A PRSI contributor. I appear to be contributing about 5.6% of my gross monthly salary to my pension. Aged 43 now, I need to buy about 4 years notional service - the cost of this is going to be a further 4.63% every month - is this a good deal? It seems to me that over the next 17 years or so it's going to cost me €64000+ just for the extra four years and that is only going to buy another 1/20th portion of my final salary. In other words, I'd have to live about another 15 years before I even got my money back (in today's money - but even with indexation between now and then I'm paying in more - as well as getting back more ultimately).
 
Re: notional service so expensive?

so it's going to cost me €64000+ just for the extra four years
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Is this gross or net. Don't forget that the additional 4.63% is deducted before calc tax.
 
Re: notional service so expensive?

Hi Jnomics

This is a very difficult issue to evaluate. I have suggested to a few individuals and organizations that they should produce independent advice on it.

However, the rule of thumb is that the government's notional service scheme costs about 50% of what it should cost.

90% of public servants opt for AVCs although it is very difficult to construct a set of circumstances where the AVCs would be better than buying back Notional Service.

Brendan
 
Re: notional service so expensive?

The cost of €64000+ is gross, so I guess the net cost is a little more than half that because I am a higher rate taxpayer - so then it doesn't look quite so bad - except that the return figure I calculated was gross not net as well, so I was comparing like with like.
The trouble I have with it is that it seems to me as if - I put a penny in now, to get a penny back in 20 years time.
 
Re: notional service so expensive?

A number of the factors underpinning the State schemes have been brought into line with financial reality in recent years - early retirement terms, purchase of notional year etc. I'm not sure if Brendan's rule of thumb is the pre or post position.
 
Re: notional service so expensive?

While its true that you put in gross now to get gross in the future you have to remember that you can take a lump sum tax free and you will probably be paying tax at the lower tax rate unless you are on a very good salary now.
 
Alos these additional pension conrtibutions will give 12/80ths of your final pay. Also you are paying in the money at current values but you will be taking it out in 20 -25 years with your pay at that time.

I would be in a similar position and i am purchasing the pension on a monthly basis. The cost of a lump sum purchase of this pension was over 100K.
 
Re: notional service so expensive?

Brendan said:
However, the rule of thumb is that the government's notional service scheme costs about 50% of what it should cost.
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There are thumbs of all shapes and sizes. THe prices for notional purchase vary significantly depending on whether you choose lump sum or period purchase, and whether you started the purchase before the price increace of June 2006 or not.
 
Hi, I am in a similar position to the original poster. I need to purchase 9.5 years if I wished to have the option to retire at 60. I am considering paying what the university has calculated for me. However I have a little over 5 years in a pension from Northern Ireland - on hold from the early 1990's when I moved to Dublin. No one can advise if I should transfer this pension into the university one or not. the admin in the university said it wouldn't be worth 5 years in their calculations. Has anyone any advice - should I move it or let it stay as it is. If I want to move would the current university dept be able to tell me what it is worth?
Abit confused but looking for advice
K
 
kaff said:
Hi, I am in a similar position to the original poster. I need to purchase 9.5 years if I wished to have the option to retire at 60. I am considering paying what the university has calculated for me. However I have a little over 5 years in a pension from Northern Ireland - on hold from the early 1990's when I moved to Dublin. No one can advise if I should transfer this pension into the university one or not. the admin in the university said it wouldn't be worth 5 years in their calculations. Has anyone any advice - should I move it or let it stay as it is. If I want to move would the current university dept be able to tell me what it is worth?
Abit confused but looking for advice
K
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Can your HR / Pensions dept do the calacultion of the number of years that it is worth.
 
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