buying back additional years

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elacsaplau

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If someone is buying back additional years (in the form of a lump sum payment), can the tax relief be carried back to 2017 so long as the contribution is otherwise within allowable limits and the payment/election is made before the end of October/ROS deadline?
 
I'm not sure if you are buying back actual years or purchasing notional years, but either way normal pension tax reliefs apply ( Caveat: I am not a tax expert). So you should be ok with this :

"If a contribution is paid after the end of the year, but before the following 31 October, relief may be allowed in the
earlier year provided an election to do so is made by the individual on or before the 31 October. As the payment
of a qualifying contribution is a pre-condition to the availability of relief, an election made in advance of such a payment is not effective."

Details here : https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-03.pdf
 
Thanks Early Riser,

Can I ask two follow-ups please?

1. What's the difference between buying back actual years and purchasing notional years (I thought they were the same?)
2. Does one need to be currently in service to make a contribution to an employer sponsored (public sector) scheme?
 
They are not the same, although there is often confusion as people often refer to NSP (notional service purchase) as buying back years.
I think it’s compulsory to buy back years before NSP. I bought back years before commencing NSP.
Buying back years means making contributions for time that you have already worked, but weren’t making contributions. For example if you were on a temporary contract, before a permanent one.
NSP looks forward instead of back - if you continue working until retirement age, will you be eligible for full pension through 40 years service. If not, you can purchase NSP to bring you up to a maximum of 40 years.
I’m not an expert on this! But I understand my own circumstances well.
I can’t answer your original question though, because I’ve always paid through my payslip, rather than a lump sum.
 
elacsaplau said:
1. What's the difference between buying back actual years and purchasing notional years (I thought they were the same?)
Click to expand...

They are not the same.

Buying back years is for situations where you might have previous service which for some reason was not pensioned at the time. One example might be part-time temporary periods of service before your regular job. Or some training positions may not have been pensionable at the time of service but can be bought back later. OR someone may have got a refund of contributions when they left the service in earlier years and they now (after returning) wish to make them pensionable again.

Purchasing notional service (or years) is for when you will have less than full service at retirement and apply to purchase "notional" service for pension purposes.

Colloquially notional service is sometimes referred to as "buying back years" but it is not the same as buying actual service. When it is an option, buying actual service should always be pursued first as it is the cheaper option. IF you were always with the same employer they should be aware of your earlier unpensioned years. But some people move between various public sector bodies and their unpensioned years can get lost. You should always track these down. They are very valuable for pension purposes.
 
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My post crossed with Early Riser! We’re saying the same thing, but his answer is much more comprehensive!
 
Thanks POC and Early Riser

For the avoidance of doubt, must one still be in service to make a contribution? I'm getting conflicting info here too!
 
elacsaplau said:
For the avoidance of doubt, must one still be in service to make a contribution?
Click to expand...

As far as I am aware, yes, you must be in service. There are some subtle variations between different schemes and, perhaps, some allow exceptions in very unusual circumstances - but this would be exceptional.
 
Could I ask if it is possible to buy back service for time spent jobsharing or for the extra unpaid maternity leave or parental leave periods?
 
cormster1 said:
Could I ask if it is possible to buy back service for time spent jobsharing or for the extra unpaid maternity leave or parental leave periods?
Click to expand...

If you will have less than full service (usually 40 years) at your minimum (normal) retirement age (60 or 65 years) then you can purchase notional service to make up the difference. Is that what you mean?
 
I would have a minimum retirement age of 60 but would be short 7 years as i joined at 27. I also took two months unpaid maternity leave plus some parental leave as well as spending 4 years working part time as job sharer.

What I am wondering is whether there is any differences in how any of these are treated for the purchase of pension service. In my limited understanding the 7 years are achievable via NSP but is it the same for the unpaid time or the jobsharing time.

Thanks
 
cormster1 said:
What I am wondering is whether there is any differences in how any of these are treated for the purchase of pension service. In my limited understanding the 7 years are achievable via NSP but is it the same for the unpaid time or the jobsharing time.
Click to expand...

Yes, all this time can be purchased via NSP, all treated the same way. You can purchase by reference to age 60 or age 65. If the latter, you are only short 2 years plus the time you have to make up for parental leave and job-sharing.

If purchasing to 60 you would have the 7 years short plus the other time to make up - maybe up to 10 years in all ? Say you are around 50 now. That would be a lot of notional service to pay off over the next 10 years. It is not cheap - you might find the cost prohibitive. If going this way you need to be sure you are actually going to retire at 60 - otherwise you will lose out as you will have overpaid.

Another option you could consider is paying NSP by reference to age 60 but not the full 10-ish years that you are short.
You would then have the option of continue another few years after 60 or retiring, albeit a few years short for max pension.
 
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