Nurse - with 2 Normal Retirement Ages - Confused

Dogwalker

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Folks,

I recently posted about using some of my AVC fund to purchase reckonable service and received some great advice on this site, thanks to all.

Another fly has appeared in the ointment. As I really want to retire at 60, I decided to check into my normal retirement age. So I was employed for 9 years on a scheme which meant my normal retirement age was 60.

I then left to work in Australia. When I returned some years later, I was employed under a new scheme with a normal retirement age of 65.

I have been advised that if I was to retire at 60 I can only draw down the pension related to the 9 years with the remainder payable when I reach 65.

So to me it looks like I will have to wait to retire at 65 and all my avc and buying back years was all for nowt.

Can anyone advise me please and help me find a way to retire at 60?
 
You have a preserved pension from your 9 years in the pre-2004 scheme. You can take this at 60. Indeed, you should apply for it at 60 whether you retire from your current position then or not.

You are now in a post-2004 scheme (I assume it is not the Single Scheme, ie, post 2013?). If you want to retire fully at 60 from your current position you would have to either take Cost Neutral Early Retirement (CNER), or retire with a Preserved Pension. If you do the latter at 60 the pension benefits you have accrued in the current scheme will be paid normally at 65 (both lump sum and annual pension). If you take CNER at 60 the annual pension benefit will be paid immediately but reduced to 75% of its preserved value and the lump sum to 91%. There will be no reduction in the benefits payable from the old pre-2004 scheme.

The training years you propose to buy back will count towards your pension and are still worthwhile. However, I think that unfortunately they be be added to your current post-2004 scheme rather than to the original scheme (although I am not absolutely sure about that).
 
Just to note that your preserved pension from the 9 years in the pre-2004 scheme will be based on the current salary for the grade you were at when you left - not the salary for your grade in your current pension scheme (or final salary). You may be able to transfer your service in the old scheme into your current scheme and have your pension based on final salary for all of your service (check with HR if interested). The disadvantage, though, is that the normal pension age for all of your service would then be 65.
 
You have a preserved pension from your 9 years in the pre-2004 scheme. You can take this at 60. Indeed, you should apply for it at 60 whether you retire from your current position then or not.

You are now in a post-2004 scheme (I assume it is not the Single Scheme, ie, post 2013?). If you want to retire fully at 60 from your current position you would have to either take Cost Neutral Early Retirement (CNER), or retire with a Preserved Pension. If you do the latter at 60 the pension benefits you have accrued in the current scheme will be paid normally at 65 (both lump sum and annual pension). If you take CNER at 60 the annual pension benefit will be paid immediately but reduced to 75% of its preserved value and the lump sum to 91%. There will be no reduction in the benefits payable from the old pre-2004 scheme.

The training years you propose to buy back will count towards your pension and are still worthwhile. However, I think that unfortunately they be be added to your current post-2004 scheme rather than to the original scheme (although I am not absolutely sure about that).

Hi EarlyRiser,

Thank you for taking the time to reply.

You are correct I'm in the post 2004 scheme.

I will admit that I was taken aback today when I realised that I would have to get by on a quarter of my pension for 5 years if I retired at 60.

Can I use my AVC fund to bridge the gap until I access the ramainder of my pension at 65? If I can should I really start maxing out the AVC contributions as soon as possible?
 
No. If you retire at 60 with a preserved pension from your current scheme you cannot access your AVC funds until 65. You could only access them if you took CNER.
 
No. If you retire at 60 with a preserved pension from your current scheme you cannot access your AVC funds until 65. You could only access them if you took CNER.

Thanks EarlyRiser

Last question if I take CNER can I use AVC to maybe get another lump sum equal to the 9% and/or to push the annual pension benefit closer to 100%?
 
Last question if I take CNER can I use AVC to maybe get another lump sum equal to the 9% and/or to push the annual pension benefit closer to 100%?

You should be able to increase your lump sum using the AVC, but Revenue set a maximum on this and it only relates to your current pension scheme and service (unless you had a seperate AVC when you were in the pre-2004 scheme). What is the total length of service you will have in the current pension scheme when you reach 60 ?

As an aside, when you left to work in Australia you weren't on a career-break from your nursing job by any chance? If so, you should have been entitled to resume in your old pension scheme on your return.
 
You should be able to increase your lump sum using the AVC, but Revenue set a maximum on this and it only relates to your current pension scheme and service (unless you had a seperate AVC when you were in the pre-2004 scheme). What is the total length of service you will have in the current pension scheme when you reach 60 ?

As an aside, when you left to work in Australia you weren't on a career-break from your nursing job by any chance? If so, you should have been entitled to resume in your old pension scheme on your return.

Thanks again EarlyRiser,

I really appreciate all the advice. I will check with my AVC provider how much of my AVC I can use to maximise the lump sum.

I will have 35 years of service at 60, 26 years approximately in the current scheme.

Unfortunately no it wasn't a career break when I went to Australia.

At this stage, I'm going to look into CNER and using the AVC to maximise my benefits. I can't really see myself being able for 5 more heavy years after 60.

Thank you EarlyRiser for all your help, you're very helpful.
 
Once you have more than 20 years service Revenue will allow you to use an AVC to fund a top-up of pension to 120/80 * pensionable salary. However, if you take CNER this is reduced by multiplying this figure by S/PS, where S = years served, and PS =potential service to normal retirement age.

Say you have a pensionable salary of €70,000. With 26 years service you would get a main scheme lump sum of approximately €68,000 at normal retirement age. Revenue would allow you to top this up to €105,000 at normal retirement age.

However, if taking early retirement at 60, the CNER lump sum for 26 years in the main scheme would reduce to approx €62,000.
Revenue would reduce their allowed €105,000 by 26/31 to yield €88,000.

So on a salary of €70K, someone with 26 years service taking CNER at 60 would get €62,000 tax free from the main scheme and could take a further top-up of €26,000 from an AVC. Anything left over in the AVC could be transferred to an ARF and drawn down over subsequent years - subject to income tax and USC (and 4% PRSI up to your 66th birthday).

The lump sum from your preserved pension is seperate - and calculated on a different pensionable salary. The AVC would not apply here for a top-up unless you had an AVC while in that scheme. (Or unless you were able to transfer your service in that scheme to your present scheme, but this would have its own disadvantages, as mentioned previously).

Your situation is complex and consulting an independent adviser would be a good idea. THe AVC provider advise is variable - and not that independent.
 
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This is interesting. So if Dogwalker retired at normal retirement age, she can use her AVC to top up her lump sum to 120/80 of her current salary AND receive an additional lump sum from her preserved pension.
Whereas if she combines the 2 pensions, I assume she'd be limited to just the 120/80 of current salary?

My position is a bit different but there are similarities. I have a preserved pension from previous employment too.
 
If the two pensions were combined (ie, the first pension transferred into the second pension) then the limit of 120/80 would certainly apply.

Perhaps there is some rule that I am unaware of that caps the combined lump sum from the two seperate pensions in some way, even though it would appear that Revenue rules permit the second pension alone to be topped up to 120/80. For example, if the preserved pension didn't exist at all the second pension could certainly be topped up to 120/80 at normal retirement age. The Revenue rule applies to the pension scheme rather than the totality of public service, as far as I am aware.

Perhaps some tax/pension experts could commemt?
 
If you are “topping up” the lump sum (say where the main scheme rules are providing less than the Revenue max of 120/80ths) then retained benefits must be taken into account. So the max you can get is 120/80ths. If the scheme you are retiring from is paying less than this (perhaps due to short service), then the lump sum from the retained benefit can be added. If the total is still less than 120/80ths of final Salary, then the AVC fund can be used to increase the overall lump sum up to the Revenue max.
 
If you are “topping up” the lump sum (say where the main scheme rules are providing less than the Revenue max of 120/80ths) then retained benefits must be taken into account. So the max you can get is 120/80ths. If the scheme you are retiring from is paying less than this (perhaps due to short service), then the lump sum from the retained benefit can be added. If the total is still less than 120/80ths of final Salary, then the AVC fund can be used to increase the overall lump sum up to the Revenue max.

So just to tease that out with an example.

Say John was a member of a pre-2004 scheme with a normal retirement age of 60. He left his position in 2006 with 10 years service and a preserved pension.

John rejoins the public service in 2009 and becomes a member of the post 2004 scheme with a normal retirement age of 65.

John reaches 60 in 2024 and gets a preserved pension based on a salary of €40,000. Lump sum = €15,000.

John retires from his post-2004 scheme in 2029 on a salary of €60,000. His main scheme lump sum is €45,000. However, he has also being paying into an AVC scheme and has built up a fund of €45,000.

If John had not already had a preserved PS pension Revenue would allow him to take the €45,000 from the AVC to bring his max up to €90,000 (120/80 by pensionable salary). But because he has a preserved public service pension from another scheme they will only allow €30,000 to be taken tax free from the lump sum ?

Is that how it works? And what if instead of a preserved PS pension John instead had a previous private sector pension ? Would this be taken in account also by Revenue and his maximum allowed PS lump sum reduced accordingly ?
 
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Early Riser
You have it about right. When getting the lump sum at 65, they would be asked if they had already received a retirement lump sum from any other scheme (so the lump sum at 60). The overall Revenue max is 120/80ths (150% of Final Salary) from all schemes.
 
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Thanks Conan. Just to confirm - In this example would a private sector pension lump sum also be counted towards the 120/80 limit ? I would guess not ?
 
Thanks Conan. Just to confirm - In this example would a private sector pension lump sum also be counted towards the 120/80 limit ? I would guess not ?
Yes, all retirement lump sums count IF you are trying to augment a scheme lump sum of less than 120/80ths. So for example, if you only have 20 years service in the retiring scheme (the minimum required to try and augment to 120/80ths) and the scheme is thus providing a lump sum of say 60/80ths, you can use other pension funds (such as an AVC fund) to top this up to 120/80ths. But if you are also getting or have gotten a lump sum from a retained benefit scheme, this is also taken into account in arriving at the 120/80ths figure.
If however you have two separate incomes running side by side, then each pension scheme can provide its own lump sum, subject to usual Revenue limits.
 
Last question if I take CNER can I use AVC to maybe get another lump sum equal to the 9% and/or to push the annual pension benefit closer to 100

So now, back to your question Dogwalker. If you want to retire at 60 you take your preserved pension from your old scheme and a CNER pension from your current scheme. In this event your total allowed tax-free lump sum is (final) pensionable remuneration *120/80 *26/31. After adding together the lump sums from your two occupational schemes you can use your AVC fund to top up to this amount. You put any remainder in an ARF to draw down as income. If you are not working you would also be eligible for a Supplementary Pension in relation to your preserved pre-2004 pension. This is likely to be quite small. The preserved pension is based on the current salary for the position you resigned from when you left the scheme.
 
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