Major issue with Civil Service Pension

[Shesastute]

Hi,

I joined the civil service in Dec 1995, and joined the post-95 pension scheme. I paid into this correctly for the first 5 years. I moved on promotion to the Department of Finance in 2000. There was a transfer of functions to DPER in 2011. I moved to another (current) department in 2023.

It has since come to light that the Department of Finance put me on the pre-95 pension scheme, although I was paying into PRSI and the survivors pension scheme. I am now c. €40,000 short in my pension contributions with 8 yrs to retirement at 65. Tbh, I'm pretty stressed about this.

I have spent the last year and a half dealing with my department's HR (who didn't initially know they are now my pension provider), the NSSO (who took on civil service pensions around 2012 and are only the pension administrator), and the DPER pension policy section (sent in a case under the IDR to be told 3 months later that I had no case). This is opposed to the recent case of the retired civil servants and Ministers who pension issues whom got calculations, repayments, etc., sorted out very quickly. It would be interesting to know if there were any deals/write-off associated with these cases.

The message from everyone is that I have to pay the Exchequer back in full, full stop. I have recently got informal advice from the Pensions Authority and an ex-DPER colleague, but I'm finding it difficult to get advice as to the best way to start arranging some form of pay-back. I believe that there is a liability with each of the pension providers/administrators for the mal-administration of my pension, and that they should be responsible (at least in part) for the payback of contributions to my pension. There were so many opportunities where my pension provider should have copped their error and mitigated my liability, such as:

• When I moved to DoF in 2000, where HR instructions were correct, but pensions section made a serious error.
• When I arranged through the Department of Finance to purchase notional service in c. 2003;
• When I moved to DPER in 2011;
• When the NSSO took over the civil service pension administration 2018;
• When I brought the possible error to the attention of the NSSO who queried it with DPER who did not investigate;
• When I move to my new department in 2023.

Any advice or insights would be appreciated, or any any suggestions of professional advisors that may have dealt with similar civil service pension errors.

Many thanks in advance

 

[Marsupial]

Have you involved your CS Union with this yet?

They may be aware of a precedent - and/or may refer you to their solicitor to write to the employer on your behalf.

 

[Marsupial]

This is opposed to the recent case of the retired civil servants and Ministers who pension issues whom got calculations, repayments, etc., sorted out very quickly. It would be interesting to know if there were any deals/write-off associated with these cases.

It seems reasonable to me that people who had already retired were given a higher priority than someone who has 8 years to go before retiring.

 

[Shesastute]

Thank for the suggestion. I engaged with my union rep initially and he was very dismissive, again telling me I'd have to pay the money back to exchequer. I may try to bypass the rep now.

 

[Clamball]

Do you believe you have to pay it back?

Perhaps your union rep will leverage how you pay the money back. As you say you were compliant and unaware of the error for years. Thus you find yourself in this position where you have been given €40K extra over the years that you were now aware of. There is plenty of occasions where staff having been over paid need to give the money back.

So suggest you pay €417 back for the next 96 months.

 

[Itchy]

It has since come to light that the Department of Finance put me on the pre-95 pension scheme, although I was paying into PRSI and the survivors pension scheme.

Does your PRSI record (from welfare.ie) show Class A contributions, moving to Class D contributions circa. the time of your move and subsequently or is it up to date and the issue is solely an underpayment of contributions?

 

[Annieindublin]

Is the underpayment simply the shortfall in payments or is there an interest element? The latter would be very unfair in the circumstances I feel

 

[AAAContributor]

I am now c. €40,000 short in my pension contributions with 8 yrs to retirement at 65.

If you are required to pay this amount in contributions, you should be able to claim income tax relief on this, as you would have received tax relief had you been paying this pension contribution periodically through payroll.

That should help soften the financial hit.

 

[Persia]

If you are required to pay this amount in contributions, you should be able to claim income tax relief on this, as you would have received tax relief had you been paying this pension contribution periodically through payroll.

Is there a time limit in how far you can go back?

 

[Annieindublin]

I think tax relief is limited to 6 years back. Or current plus 6,.. but I think that’s where you made the contributions and forgot to claim relief. If these are made going forward then surely the tax relief is when they are paid? So the next 8 years?

If you decided to retire early what would happen? Is that likely anyway?

 

[AAAContributor]

Is there a time limit in how far you can go back?

There'd be no backdating of relief here, unless there is a precedent for mess-ups like this.

If the OP was going to dispose of the liability over the next 8 years in increments, then relief would be claimed then.

 

[Annieindublin]

Was the 40k calculated inclusive of tax relief?

 

[Shesastute]

Does your PRSI record (from welfare.ie) show Class A contributions, moving to Class D contributions circa. the time of your move and subsequently or is it up to date and the issue is solely an underpayment of contributions?

I have a full record of Class A contributions paid from 1915 to date. The error was the

Is the underpayment simply the shortfall in payments or is there an interest element? The latter would be very unfair in the circumstances I feel

The €40K is all contribution. I am trying to get written assurance through my HR/NSSO that this is the final amount owed and there is no interest owing.

 

[Marsupial]

I have a full record of Class A contributions paid from 1915 to date.

You're pulling my leg!

 

[Fionclaire]

Have you received the repayment option form/undertaking forms from the NSSO, as while it is most upsetting this has occurred, there is no accountability or responsibility from the Payroll unit/PPA on their error, and sadly you will have to take the burden of it all yourself, speaking from experience, it has been physically draining.

Overpayments and recoupments - NSSO

 

[Marsupial]

....... telling me I'd have to pay the money back to exchequer.

But you're not "paying it back", you're paying it for the first time, in exchange for a future (pension) benefit. And if you don't pay it then you're not entitled to the benefits that will ensue. I know that's probably not what you want to hear, but that's the reality.

It's unfortunate that your Union wasn't more helpful, but frankly I'm not surprised - as a former Civil Servant myself, I don't have much regard for the type of individual who becomes a paid Union official.

For me, the easiest way for you to make up the shortfall in pension contributions would be by arranging to have it deducted from your lump sum on retirement. That way, it's relatively painless (no one misses money that they've never had!) and your income/cash flow over the next 8 years won't be affected. Be sure to get a letter from your employer comfirming that the deduction was made without tax relief so you can claim the tax credit due.

Finally, try to look at it positively: it's very annoying, but, as pointed out above, you've effectively been given an interest-free loan of €40k not repayable for 8 more years, so it's not all bad!

 

[Shesastute]

Was the 40k calculated inclusive of tax relief?

This is a gross amount. There would be tax relief on the pension element. However, I am at the top of my scale and have been for many years, so I'm not getting any increments. The pay agreement increases don't really cover inflation. So paying back the full amount over the 8 years would be a big and onerous financial commitment. I could, of course, let them take it from my lump sum, which may cover this amount. This is where I really need advice on my best course of action.

You're pulling my leg!

Indeed That should read 1995 (had to wait an hour before I can post an update)

Have you received the repayment option form/undertaking forms from the NSSO, as while it is most upsetting this has occurred, there is no accountability or responsibility from the Payroll unit/PPA on their error, and sadly you will have to take the burden of it all yourself, speaking from experience, it has been physically draining.

@Fionclaire, I haven't heard of that form. I'll be sure to check that with my HR unit. It really is a burden and they haven't made it easy.

If you decided to retire early what would happen? Is that likely anyway?

I think it is more likely that I'll end up working past the age of 65 (which I think is now allowed) and my 40 years service.

 

[BIG-notorious]

I have some experience of this from previous roles as well as my personal experience.

Ultimately you'll have to pay the outstanding pension contributions and there's no way around this. You'll likely be offered a number of options:

1. Pay the outstanding contributions by lump sum now.
2. Pay the outstanding contributions by salary deduction over the next 8 years until you retire
3. Pay the outstanding contributions by deduction from your lump sum when you retire.
4. Some combination of 1, 2 & 3.

This is a gross amount. There would be tax relief on the pension element. However, I am at the top of my scale and have been for many years, so I'm not getting any increments. The pay agreement increases don't really cover inflation. So paying back the full amount over the 8 years would be a big and onerous financial commitment. I could, of course, let them take it from my lump sum, which may cover this amount. This is where I really need advice on my best course of action.

Given you're being paid fortnightly, that's €40k over 208 paydays and €192 gross or €115 fortnightly after tax relief. Given that the impact of inflation (if paying by deduction from your lump sum) is likely to be a lot less than the impact of tax relief (if paying from your salary) you're probably much better off financially doing it by salary deduction.

There were so many opportunities where my pension provider should have copped their error and mitigated my liability

This will sound harsh but you had the opportunity at any point over the last 25 years to cop the error yourself and mitigate your own liability. All you had to really do was ask the question why your pension contributions had been cut in half despite getting promoted and getting a pay bump. On top of that you haven't actually lost anything. You have in fact received an interest free loan from the taxpayer for 25 years of pension contributions, the gross of which is probably worth at least 25% over & above what you will now need to pay considering the impact of inflation. On top of that, unless you were a top rate taxpayer all the time, you're probably also benefitting from more tax relief that you would have gotten at the time the the contributions.

You are in fact well ahead of the game.

 

[S class]

Take your complaint to the FSPO.

Let the Ombudsman deal with the maladministration, and determine a fair solution.

 

[mathepac]

Take your complaint to the FSPO.

OP must first exhaust all internal avenues of complaint before the FSPO will even look at the case. Although might we have an issue of self-investigation here, different desks in Finance as an organisation?

Amazed and disappointed at the union reps response. Try to stop paying union dues and see what happens.