Advice re Leaving Public Sector

G

Gordon Gekko

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A friend of mine works in the public sector and has been offered a job in the private sector. The public sector pension has always been one of the attractions for her.

She is 40, earns circa €70k a year, and is a Class A PRSI payer, so if she finishes at 60 on €80k with 40 years’ service, she’ll get a pension of €40k which includes the State Pension.

The offer is €90k with a €10k employer pension contribution to an occupational scheme.

Am I right in saying that public servants pay 6.5% towards their pensions plus about 10% for the portion above €30k? Pension Related Deduction, soon to be renamed.

If it was me, I’d take it. Nice to end up with a blend of DB and DC in retirement. She should contribute 25% of €90k to the occupational scheme. Job security is a factor in the public vs private debate, although people who are decent at their jobs tend to worry less about that.

Any thoughts/observations appreciated.
 
Gordon Gekko said:
Am I right in saying that public servants pay 6.5% towards their pensions plus about 10% for the portion above €30k? Pension Related Deduction, soon to be renamed.
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Not 6.5% as such. 3% of pensionable remuneration (including 1.5% towards spouse and children's pension) plus 3.5% of net pensionable remuneration. "Net pensionable remuneration, for the purpose of contributions, is pensionable remuneration, less twice the maximum rate of Social Welfare State Pension (Contributory) payable to a single person."

For the Pension Related Deduction (or Additional Superannuation Contribution), I believe it is 10% between €32k and €60k and 10.5% above.

As Johnl68 has said, if she retires at 60 (assuming she is a pre-2004 entrant) she will have to wait until 68 for the State Pension part, but she may qualify for a Supplementary Pension (ie, meets the conditions - essentially not employed in any capacity which involves the payment of a PRSI contribution (including self employment). See here for fuller details : https://www.education.ie/en/Educati...ns/Supplementary-Pension-Explanatory-Note.pdf .
 
As an example, if she was taking the public sector pension with 20 years service at 60 on €80k, she should be eligible for an Occupational Pension of about €13,665. As she would not be entitled to a State Pension until 67/68 she could apply for a Supplementary Pension in the interim if she met the conditions. In this example, it would amount to €6,355 (€20,000 - €13,665). However, this would not be payable if she was then working in a private sector job (or self-employed).
 
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Apologies Gordon for hijacking thread.
I have a question regarding supplementary pension (I've read the link provided by Early Riser). Would the payment of prsi on income from amrf/arf from avc's prevent access to supplementary pension if taking early retirement at 60?
 
johnl68 said:
Would the payment of prsi on income from amrf/arf from avc's prevent access to supplementary pension if taking early retirement at 60?
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I believe it only applies to earned income - employment or self-employment. But I can't answer that definitively.
 
Thanks Early Riser. I hope you're right, I wonder wher i could find out for certain without showing my intention?
"Just when I thought I was out, they pull me back in"
 
That Dept of Ed explanatory note on the Supplementary was updated quite recently. The wording seems fairly clear :

3.6 Supplementary pension may be paid where the retiree: (a)is not employed in any capacity which involves the payment of a PRSI contribution (including self employment).

In general, I would be fairly confident the ARF is ok (and, indeed, deposit interest if it were to be over the limit). I am not sure how you would go about getting a confirmation on this. Someone else around here may know ?
 
If she puts 25% of her €90k a year into a pension together with the employer contribution of €10k a year, and if she can net 4% a year on average over 20 years, she’ll have a fund of €1m.

25% lump sum, €250k, netting €240k.

€750k into ARF. 4% drawdown of €30k.

Asset to be left to next generation.

And €20k payrise now in the private sector.

Seems attractive.
 
You'd probably have to compare it with an equivalent AVC top-up to her current pension scheme. Those sort of sums are beyond me!

Anyway, other factors will probably swing it.
 
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Is there a pay rise/restoration of income coming her way over the next few years ,
 
I’ve just done a back of the envelope calculation which is probably laden with errors.

She’s paying around €8,550 gross in superannuation contribitions and PRD (6.5% of €70k plus 10% of €40k).

Not paying that makes her €4,104 better off (48%).

€20k extra of salary nets her an extra €9,600 a year.

So better of the tune of €1,150 a month.

Then €600k required to replace the €20k of lost DB. Together with the €10k employer contribution, €780 a month personal contribition needed over 20 years assuming 4% growth.

Net cost of €468 a month, offset against the €1,150 means €675 a month more after tax per month and a nice mix of DB and DC.
 
The best thing to do is open up taxcalc.ie. click on paye this will bring you to the public sector option feed in 70k cross check results with her last pay slip or get the information directly off pay slip this will get rid of any smoke and mirrors .so you can compare paye at 70k and public service including pension cont th cover her up to 70k,

one thing worth noting is if the paye part of her pension gets cut it will not affect her total pension,

in other words if she worked in the private sector and had a pension of 40K including state pension and a Government cut the paye pension from 12.5k to 2.5k per year her pension would drop to 30k per year,

if she worked in the public service and had a pension of 40k and a government cut the paye pension from 12.5 to 2.5 she still gets the 40k ,worth thinking about when when it could affect her pension for as long as she lives and 50% of it if she has a surviving spouse,
 
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Just a couple of points re your envelope calculations. I make current gross superann around €7,400 ( 70000@3%, €44700@3.5%, €38000@10%).

If she had full public sector service her €40000 pension would be made up approx of Occ. Pension of €27,400 plus state pension of €12,600. But I assume she will continue to pay PRSI in her private sector job - so, if she moves she should be eligible for the full state pension anyway. I don't know how this affects the bottom line.

RETIRED2017 said:
Is there a pay rise/restoration of income coming her way over the next few years ,
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"What are the proposed pay improvements?

From January 1st 2018, public service staff will receive a 1 per cent pay rise with a further 1 per cent increase to follow on October 1st next year.


Staff earning up to €30,000 will receive a 1 per cent rise in January 2019 with all personnel to get a 1.75 per cent increase in September 2019.


A further rise of 0.5 per cent will be put in place for those on salaries of up to €32,000 in January 2020 with all staff to get an additional 2 per cent in October 2020."
 
I don't want this to go off thread anyone now on 70 k would have being on close to 80k before pay cuts at least that was how I understood it to be, people on higher income got back the least from restoring pay cuts so far,I am not talking about pay increases, but I take your word ,
If they can now earning 90k in the private sector that speaks for for itself ,
 
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RETIRED2017 said:
I don't want this to go off thread anyone now on 70 k would have being on close to 80k before pay cuts at least that was how I understood it to be, but I take your word if you say not so,
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Not my word - I'm quoting a summary of the pay terms of the Public Service Stability Agreement, 2018-2020.
 
Early Riser said:
Not my word - I'm quoting a summary of the pay terms of the Public Service Stability Agreement, 2018-2020.
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so all pay cuts have being restored 2018-2020 I suspect not ,and the point I am making is the will be restored and need to be taken to account if you are thinking of moving ,and you are on a pay scale most affected,this is the only point I am saying and need to be taken into account before moving, in other words what was top of there scale before cuts,
 
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