Early Retirement Questions!!!

S

sidzer

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Hi all - appreciate some help here.

I am a teacher 47 with 17 years full time teaching experience and pension contributions. Before that I had clocked up 6 private sector pension yrs (guinness). I would really like to retire out of teaching at 55. The following are my rough calculations based on my current annual salary of approx 55k.

At 55 I will have 25 years service or 25/80

= 55k / 80 x 25 = €17,187.50



As I will be going 5 years earlier than my due retirement date this is reduced to 77.8%

77.8% of €17,187.50 = €13,371.80


€13,371.80 or €257.15 / week

My key question is as I am an A PRSI contributor the Old Age Pension is built into my pension. Does this mean that I could find myself at 55 after 25 years of service only getting circa €50 per week?

I had a recent meeting with a private pension advisor and he said that he thought that the supplementary pension would not be available in future years as they will have very high liabilities and was surprised that teacher unions didn't avoid this serious financial hit for their members.

Is there something that I'm missing here? Even if I work till 60 I won't be much better off minus the oap.... That's after 30 years paying into a pension! I think this is a bloody scandal
 
sidzer said:
My key question is as I am an A PRSI contributor the Old Age Pension is built into my pension. Does this mean that I could find myself at 55 after 25 years of service only getting circa €50 per week?
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No, under the conditions of the scheme, this is not correct. I have made a rough calculation using the Dept of Education modeller (see ref below) and it gives the following based on the figures in your post:

Occupational Pension at 55 (with cost neutral deduction applied) = €7,375 pa.

Lump Sum (reduction applied) = €46,942

Supplementary Pension at 60 = €7771 pa

Note that the Supplementary is not automatically given - you have to apply at 60 and satisfy the conditions (principally that you are not employed in any insurable capacity and are not in receipt of, nor entitled to receive, a relevant Social Welfare payment).

This is an approximate estimate only.

As regards the private pension adviser, who knows what may happen in the future. There is no word of such a change currently and it would represent a major change to the terms and conditions of your scheme (and similar public service ones). This would be a big and controversial deal -but I don't know what will happen - nor, I suggest, does the sales rep. However, to suggest such a change may enhance his sales pitch for AVCs.

There are links for further information on Dept of Ed pensions and for the Dept of Education Modeller here :

https://www.education.ie/en/Education-Staff/Services/Retirement-Pensions/
 
Sidzer - I should add that at 68 you would apply for the State Pension and your Supplementary would cease. If you can keep up your contribution record after retirement you would probably qualify for a full - or near full pension (depending on criteria then). This could be through work or credits. Obviously if you are working beyond 60 the Supplementary would certainly not be payable.

You may be interested in the links from this page:

https://www.education.ie/en/Educati...nsions/Teaching-Staff/Supplementary-Pensions/
 
Thanks Early Riser. I must add that my pension advisor was an independent €200 for about 1 hour man! Probably my fault but he left me more confused....

the figures you present above mean I could expect @€141 / week - this would obviously not keep the ship afloat. I have a few colleagues mid 50's now planning on retiring and they will get a decent deal under the old scheme. I somehow had thought that i would get a livable amount at 55 but this is not the case. This has led me to re-evaluate more than my pension provision - I had been trading years of putting up with a less than satisfying job for the hope of a more satisfying life after teaching. I think I need a life / careers coach now!!!

Thanks
 
Sidler - I just had a look at roughly what you might expect if you stayed to 60 at the same salary, ie, 30 years service. It is a bit better:

Occupational Pension €11367

Supplementary (if eligible) €9325.

By the way, I was not trying to put you off AVCs. If you want to retire at 55 it could be the way to go. You could enhance your lump sum and put any balance into an ARF to be drawn down as annual income. Depending on other circumstances you would be at the lower income tax rate (or perhaps below the tax rate between 55 and 60?). Do you have any service when you weren't paying into the pension that could be made pensionable now? If so, it should be worth it. I am assuming you also have some pension due from your time with Guinness ?

EDIT :sidzer, I am just remembering that you need a minimum guaranteed pension income of €12700 before you can invest in an ARF (as opposed to AMRF). I don't know if you are allowed to include the Supplementary in this calculation. So it may not be a runner in these circumstances unless you were simultaneously availing of your Guinness pension - and this brought you over the mark. For the same reason it would not be an option between 55 and 60 on your projected pension.Silly me !
 
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Thanks Early Riser - Those figures are much better / more enticing. Why would I not be entitled to full supplementary pension if i was entitled to SP???

I don't have any non pension service bar a few weeks subbing. I do have something due from Guinness and I emailed them today. They had sent me a statement about 5 yrs ago and it was €2,500 then. I assume that's an annual amount! I also have a rental property which is paid off but it's in a town - currently getting €575 / month gross - but could get up to €850 / €900 which are the current rental rates in estate.

My wife is also a PS but we have always kept our monies separate!!!! So I'm not factoring her pension into my own thinking apart from knowing that won't have to share my pension with her and the 2 kids can tap both of us not just me......

Ta
 
sidzer said:
I must add that my pension advisor was an independent €200 for about 1 hour man!
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Cornmarket will look at your financial situation without charging you. If you take up any of their services/products, they will then charge you a fee.

I met with an adviser about two months ago and am 100% of when I can (early) retire and I know exactly how I'll be standing financially.
 
sidzer said:
Those figures are much better / more enticing. Why would I not be entitled to full supplementary pension if i was entitled to SP???
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I am not quite sure what you mean by this - what is SP?

If you were age 60 tomorrow and you were retiring as per all the circumstances above, the Dept would require you to claim any Social Welfare benefit to which you may be entitled before they would pay you a Supplementary pension. In today's circumstances this would be Jobseeker's Benefit, which is payable for 9 months. You would then apply for the Supplementary and, provided you were not engaged in insurable employment, or self-employment, you should be granted the Supplementary - in your case approximately €9325pa, as per post 7 above.

You could,of course, have retired at 59 years 3 months, applied for Jobseekers for the 9 months and then applied for the Supplementary at 60.

By the way, if you apply for and are granted Jobseekers, you can continue to sign for Credits afterwards even though there is no benefit payable. This will preserve your PRSI record for State Pension purposes. Signing for credits is once a year.

This of course relates to the situation as it applies at present. Arrangements in future may vary. I have no idea if any PRSI payment that may be payable on your rental income could impact in any way on this.

You have probably come across this Explanatory Note:

https://www.education.ie/en/Educati...ns/Supplementary-Pension-Explanatory-Note.pdf .
 
Early Riser said:
Sidzer - I just had a look at roughly what you might expect if you stayed to 60 at the same salary, ie, 30 years service. It is a bit better:

Occupational Pension €11367

Supplementary (if eligible) €9325.
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Sidzer - I forgot to include the lump sum estimate for retiring at 60 with 30 years service. It is approximately €62,000.
 
This whole area is a complete nightmare to navigate. Is there someone (other than Cornmarket) who knows the area inside out and will give fee based independent advice?
 
Gordon Gekko said:
This whole area is a complete nightmare to navigate. Is there someone (other than Cornmarket) who knows the area inside out and will give fee based independent advice?
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I went to PSRA maynooth. They specialise in public service pensions. The guy I met knew his stuff but I expected a kind of plan by the end of our session. If you are going to meet someone do your homework first and have your questions laid out. I was left with a few sheets of handwritten notes - I think for €200 you should get something typed up as hand notes were a bit hard to follow.
 
Early riser - SP = supplementary pension!

Thanks again for taking the time and giving excellent advice / info. really appreciate it!
 
Thanks. My query should be simple enough to deal with; For someone on €75k a year who entered the public service at age 20 in the year 2000, what age would they need to work until to lock in a pension of €25k pa?

Full pension would be €37,500 at age 60, so I'm guessing that the answer to my query is broadly 53 (80% x 33/80 x €75k).

But does a 53 year old early retiree get the supplemantary piece to get him/her up to the right level?
 
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PaddyBloggit said:
Cornmarket will look at your financial situation without charging you. If you take up any of their services/products, they will then charge you a fee.

I met with an adviser about two months ago and am 100% of when I can (early) retire and I know exactly how I'll be standing financially.
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Thanks Paddy - I met with 2 cornmarket lads over the years - They are free but are trying to sell their products and fees are supposed to be quite high. The attraction of Cornmarket is the deducations at source from gross.
 
sidzer said:
They specialise in public service pensions. The guy I met knew his stuff but I expected a kind of plan by the end of our session.
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sidzer Did you ask him the question you asked above in your OP and did he give you an estimate for cost neutral early retirement at 55 for a pre-2005 class A PRSI teacher ?

Also, did he explain the principle of The Supplementary Pension and how it is calculated in individual cases such as your own ? If he knew his stuff I am frankly surprised that you you came away with the understanding of your entitlements as indicated in your OP.

sidzer said:
he said that he thought that the supplementary pension would not be available in future years as they will have very high liabilities
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Did he give any factual basis for this speculation ? It is surprising given the the Supplementary Pension's purpose is not to leave Class A pensioners disadvantaged vis a vis Class D pensioners. If the Supplementary was to be abolished it would potentially open a chasm between the two.
 
Gordon Gekko said:
Thanks. My query should be simple enough to deal with; For someone on €75k a year who entered the public service in the year 2000, what age would they need to work until to lock in a pension of €25k pa?
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Gordon, that is not so easy to calculate without knowing the person's DOB. The actuarial reduction is graduated depending on age at retirement. Also when you say "locked in" I am assuming you are referring to the Supplementary Pension and Occupational pension elements combined ?

Anyway, purely for illustration purposes I have looked at a couple of scenarios. The assumptions are Class A contributions and pre-2005 scheme with a normal retirement age of 60. I have used the modeller for secondary teachers (the underlying assumptions for different schemes may vary slightly).

Scenario 1 Retirement at age 60 (born 1970) with 30 years service in 2030.

Lump Sum = €84,700

Occ Pension = €18,900

Supplementary Pen = €9,320

Scenario 2 Retirement at age 58 (born 1972) with 30 years service in 2030.

Lump Sum €81,370

Occ Pension = €17,000

Supplementary Pen (from 60) = 9,320


NOTE re Supplementary: Conditions attaching to payment must be met.
 
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Thanks; I realised that and edited my post while you were composing yours.

Do early retirees get the supplementary piece? And do they get their lump sum "early"?

Thanks.
 
Gordon Gekko said:
Full pension would be €37,500 at age 60, so I'm guessing that the answer to my query is broadly 53 (80% x 33/80 x €75k).

But does a 53 year old early retiree get the supplementary piece to get him/her up to the right level?
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Gordon, I hadn't seen this edit before posting my reply above. No, I am afraid the calculation does not work as above. And Supplementary pension is not payable before age 60 in the case of cost neutral retirement.

Could I refer you back to Japester's methodology in an old thread here:

https://www.askaboutmoney.com/threads/query-re-early-retirement-actuarial-reduction.202262/

If you could give the year of birth for the proposed retiree I will have a look at a calculation again later.
 
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