PRSI Class A and Class D service

Discussion in 'Public sector pensions' started by czechmate, 7 Aug 2018.

  1. czechmate

    czechmate Frequent Poster

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    Hi

    Looking at options in relation to public sector early retirement for a relative, and find it quite confusing, so would really appreciate some advice here.

    Having received the record from the Department of education, it looks like they have both Class A service (5 years from different periods as a teacher early 1990s) and then all Class D service since then, again all employed as a teacher (about 20 years). Currently on Class D. Normal retirement age 60.

    They are looking at early retirement options now at age 56. The numbers from the department show amounts for both co-ordinated (for the Class A years) and uncoordinated pensions (for the Class D years). My questions are:

    - Given the mix of Class A and Class D service, am I right in thinking the following will apply:

    (i) Retire early at age 56: Actuarial reduced pension based on Class D service
    (ii) Normal retirement age 60: Supplemental pension starts based on Class A service
    (iii) State pension age 68: State pension to be paid based on Class A service (and any other Class A service). Supplemental pension will stop at that stage.

    - For the State pension, how do the calculations work? Class A service to date is about 9 years, which combines 5 years as a teacher and a further 4 years private sector work. Relative would expect to continue work in private sector. Let's say they will have 15 years Class A service in total when they get to state pension age 68. Do they get a full state pension based on the 15 years service, or is it some pro-rata? Is the teaching Class A service treated any differently to the private sector Class A service?

    - It's not clear why the early teaching service is marked as Class A. Is it possible this is mis-classified? Let's say it was and this is re-classified. Am I right in thinking then that more Class D service would mean a higher early retirement pension now but a lower state pension from age 68? In that case, it might be worth leaving as Class A in the long run?

    Thanks for any advice. This is a minefield to work out!
     
  2. Early Riser

    Early Riser Frequent Poster

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    Last edited: 7 Aug 2018
    Hi czechmate - You ask quite a few questions there. I will attempt to answer some.

    In relation to the State Pension, Class A contributions are Class A contributions - it makes no difference whether they are "earned" in the public or private sector.

    It looks like your friend has at least 11 years to go before reaching state pension age.The current contribution requirements for this pension are due to change around 2020 and the details of the new requirements have not been finalised yet. So it is not possible to say what level of pension she (?) will qualify for - or how precisely it will be calculated. Based on your info, it is likely to be less than a full pension. However, the more Class A contributions - or Class A Credits - she has the better, so she should aim to keep up her record after retirement.

    For people with both Class A and Class D contributions there is currently a provision for the state pension to be calculated on a pro-rata basis (some explanation here :http://www.citizensinformation.ie/e...etired_people/state_pension_contributory.html ). Others would be able to explain this better than me. In any event the changes to come in the system will probably affect this also. All your friend can do is try to keep up her Class A record.

    I don't know whether your friends may originally have been misclassified as Class A - I understand that it has happened. She should query this with the Department. Is she sure she was in the Pension Scheme during those years ? If not, she could "buy back" those years now - it is good value. In general your point above is correct - if it was all at Class D she should get a bigger pension now at 56 but could potentially be disadvantaged by missing out on the State Pension.

    However, from your post above it seems that both her Class A and Class D service is already pensioned (and all in the one Pension Scheme?). I do know for sure that some retiring public servants have both Class A and Class D years. So that in itself is not that unusual. Working on this basis:

    (1) If you friend retires at 56 she should qualify for an actuarially reduced pension based on both her coordinated Class A service and her uncoordinated Class D service.

    (2) At 60 she can apply for a Supplementary Pension based on her coordinated Class A service. This should be granted provided she meets the conditions - one of which being that the applicant is not engaged in any paid employment or self-employment. If your friend intends to continue working after 60 then she would not qualify.

    (3) State pension at 68 based on her total PRSI contributions and credits (currently pro rata combination of Classes A and D) - calculated according to criteria we are not currently sure about. Any Supplementary Pension in payment will stop at that stage (assuming that the level of Supplementary being paid is less than the level of Pension granted - very likely, but if not, she should get the excess).

    As regards (2) above. Should your friend take early retirement at 56 and obtain employment with Class A PRSI, she should enhance her state pension prospects. Should this employment cease for some reason at 60 she could then apply for Unemployment Benefit. If she qualifies she would get Class A Credits while on the Benefit. If still unemployed at the end of Benefits, she could continue to sign for Class A Credits. Class A Credits also count towards the State Pension (up to certain limits). She could also apply for the Supplementary Pension based on her Class A Years (once she is not working or receiving a Social Welfare payment). As she has only about 6 pensionable years at Class A any Supplementary is likely to be a small amount.
     
    Last edited: 7 Aug 2018
  3. czechmate

    czechmate Frequent Poster

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    That's great, appreciate that. I should clarify that the numbers received from the Department of Education for early retirement at age 56 exclude the service for coordinated pension (Class A). What's slightly confusing though is that these Class A years of service are noted as 'PCW' so it sounds like it is pensioned, but only as Class A and therefore only becomes payable from Normal Retirement Age 60.
     
  4. Early Riser

    Early Riser Frequent Poster

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    czechmate - I suspect that the Class A service is pensionable but is not currently pensioned. This would explain why it was at Class A in the first place. I believe that "PCW" is indicating to your relative that she has the option of buying back this service at retirement. If so, she should strongly consider this. The payment would come from her (already earned) lump sum - but the buy-back itself would result in a larger lump sum being payable and a larger pension. And the amount paid in the buy-back can be claimed against tax. The bought back service can also be taken on an actuarially reduced basis - the coordinated portion of it. It is considered good value - your friend should enquire about a quote to her pension dept. As far as I am aware, this option is only availble at retirement - payable from the lump sum.

    Further info here:
    https://www.asti.ie/pay-and-conditions/retirement-pensions/enhancing-your-pension/

    http://www.retirementadvice.ie/missing-years/pcw-buy-back.295.html
     
  5. gipimann

    gipimann Frequent Poster

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    If the person started teaching as a temporary teacher, they may have paid class A contributions. This was the case for other public servants.

    If the person paid class D contributions, then the integrated or supplementary pensions don't apply - the integration of public service pension and state pension only applies to staff recruited after April 1995, who pay class A contributions through their working life.

    If your friend qualifies for a contributory state pension based on her A contributions, this will be in addition to the teaching pension.
     
  6. Early Riser

    Early Riser Frequent Poster

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    I don't think this is quite right, Gipiman. A close relative of mine found herself in this very situation. Her total teacher's pension was calculated on both a coordinated and uncoordinated basis (proportionately) based on her Class A and Class D service. She "bought back" the years she served at Class A, as per the route outlined in the links in my previous post. And she qualified for a Supplementary Pension at 60 based on the Class A portion.

    More generally, both the Voluntary Hospitals Superannuation Scheme (VHSS) and the Nominated Health Agencies Superannuation Scheme (NHASS) date from well before 1995 and are public service schemes with Class A PRSI and coordinated pensions. They are closed to new entrants but have both serving and retired members.
     
  7. gipimann

    gipimann Frequent Poster

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    Thanks, Early Riser - happy to be corrected. It was always my understanding that the integrated element of public service and state pensions only applied to post 1995 Class A contributors.
     
  8. Early Riser

    Early Riser Frequent Poster

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    And you are largely correct, Gipiman - it only applies to Class A contributors. But some people may have a combination of Class A and Class D public service. And there are also some people in pre 1995 Class A coordinated (integrated) schemes.

    It seems that in the OP example the person joined the pension scheme before 1995 and therefore was (and is) Class D. But she has earlier non-pensioned (but pensionable) service at Class A which she can buy back. This happened similarly in my relative's case and she ended up with one pension but with integrated and non-integrated elements. I am NHASS myself.
     
  9. 56HB

    56HB Frequent Poster

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    Interesting reading the above .
    I work in the Health service, am in superannuation I have 21 years as class D and 16 years as class A . I am retiring in December aged 63 can I ask if anyone might know is it better to get the Class D pension based on the 21 years and the Class A pension based on the last 16 years separately. I rang Social Welfare and they said I would be entitled to the full old aged pension if I keep up my credits. I could claim Job seekers for 9 mts post retirement .
    At 66 can i get the State pension on top of my Class D pension and my Class A pension ??

    Or - would I be better amalgamating all my service to class A getting the reduced pension Job seekers and if necessary applying for the supplementary pension form the HSE ? My lump sum would be reduced to back pay Child and Spouce scheme for the 21 years class D.

    It all seems very complicated anyone any ideas much appreciated.
     
  10. Conan

    Conan Frequent Poster

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    I am confused by you post.
    If you retire out of a Class D role, those PRSI payments don’t qualify you for a State Retirement Pension. Yes you will get a Public Service Occupational Pension (based on your service in the Scheme) but D Class contributions (modified PRSI) don’t entitle you to a Social Welfare Pension.
    Your Class A record can qualify you for something, but I think a reduced State Pension (not a full State Pension). You may be entitled to a Mixed Rate (or Pro Rata) Pension. Under current rules, I think your 16 years at A Class might qualify you for a State Pension of circa 40%. I cannot fathom why someone in Social Welfare would say you are entitled to a “full pension”. You might visit your local SW office (Intreo) to clarify.
    Also remember that the State Pension is due to start at age 67 after 2021.
    Finally, I don’t think you are entitled to Jobseekers if you retire from a D Class role.

    I think you need to look more carefully at your entitlements. Perhaps you should consult with your local Citizens Information Office to clarify.
     
  11. Early Riser

    Early Riser Frequent Poster

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    Hello 56HB,

    I am taking it that you are retiring out of a Class A position ? If so, yes, you should certainly look towards maintaining credited A contributions towards your State Pension , as you have outlined. As Conan has said, I don't see how you would qualify for a full state pension and I don't know what portion you will get - could be wrong, but I think it may be higher than the 40% that Conan has reckoned.

    You ask whether you should amalgamate the pensions in some way or claim them both separately? Have you actually been offered a choice in this matter ? The way it worked for my relative was that she was given one public service pension on retirement but it was calculated by adding the Class A and Class D pensions together after they had been calculated separately. In your case, for example, 21 years were calculated as Class D service in the normal way, 16 at Class A in the normal way, and these two figures were then combined to give her total Occupational Pension. She was then able to claim a Supplementary Pension up to State Pension age based on her years service at Class A only - in your case that would be 16 years. She was given no choice re combining or not combining. But perhaps your circumstances are different in some way.

    Before eligibility for your Supplementary you will have to claim any Social Welfare payment to which you are eligible - if retiring as an A this will be Jobseekers Benefit - but if a D you will have no eligibility for Social Welfare and you can claim Supplementary in relation to your A service straight away. What rate you retire on is whatever rate you are paying right now - you do not have a choice in the matter.
     
  12. Conan

    Conan Frequent Poster

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    56HB
    I assumed you are retiring from a Class D role (maybe wrong?).
    You need to separate your Occupational Pension ( presumably from HSE) from your entitlement to the State Pension.
    Your State Pension is based on your Class A contributions. There is no amalgamating of A and D.If you have a record of both, then the Pro Rata rules apply ( your number of years at A divided by your total total of A and D). So my circa 40% was based on 16/37 x Full State by Pension. If you can sign on for credits then that improves the %, but only if they are A credits. If you are retiring from an A Class role that will be the case, but not if you are retiring from a D Class role.
    Your Occupational Pension is generally based on your years of service in the organization. It may (or may not) take into account your expected entitlement to a State Pension (an integrated scheme).
    Reading your original post I am unclear as to whether your D contributions are all public service and whether your A contrutions are all private sector. Or are they all public service with the D being pre-1994 service and the A being post 1994 (maybe with a break in service). Can you clarify?
     
  13. 56HB

    56HB Frequent Poster

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    Thank you for your replies,
    I am retiring on class A
    I had 21 years paying class D
    The last 16 years I paid class A
    All service ( 37 years ) in the Health service.
    The pensions office have asked me if I want them to calculate my pension on 37 years class A ( told me I can claim Job seekers and then supplementary pension until the State occupational pension kicks in ,
    or do I want to get 21 years paid fully directly by superannuation and receive separately 16 years paid according to the Class A rules ( I actually have 20 years credits at Class A, I spent 4 years in another employment when I rang the Dept of SW they said I would be entitled to the full rate of occ pension I assume they were correct - does anyone know how many years you need to be working to get it )

    So am still confused as to what to tell pension office ....

    what do you think ?
     
  14. Early Riser

    Early Riser Frequent Poster

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    Last edited: 9 Nov 2018 at 6:37 AM
    Provided you are going down the route of claiming Jobseekers and then the Supplementary, then the total amount of pension in payment should be the approximately the same under both options, just made up differently.

    Lets just say that your pensionable salary is somewhere in the region of €70000. If you choose the option of having it calculated as if it had all been at Class A then your Occupational Pension should be in the region of €20800 and a Supplementary in the region of €11700. If you choose to have it calculated as you served it (mixed D and A) then the total amount would be made up differently with an Occupational Pension of around €27400 and a Supplementary of around €5100. Either way there is a total amount of around €32500. The same principle should apply whatever your salary is.

    Obviously to get this amount in full you have to go down the route of Jobseekers and Supplementary in both scenarios. If for any reason you think this is not for you (eg, you are thinking of engaging in alternative employment after retirement or you intend to live abroad ) then you are definitely better taking the A+D option, as it has the larger Occupational Pension and smaller Supplementary.

    To be honest, I can't off-hand think of any advantage of choosing the Class A exclusive option. Or is it that this route offers an improved Survivors Pension through buying back 21 years in the Child and Spouse Scheme from your lump sum? I wasn't clear on this from your post. Only you can decide on this (and your spouse/partner?). If you are doing this remember that you can claim tax relief at your marginal rate on the cost of the buy back.

    For what its worth, given the two options I would choose the A+D route together with Jobseekers and a smaller Supplementary afterwards (excluding any consideration for the Spouse/Survivor Scheme that may be in play). I would also hope to sign for Credits after Jobseekers. This is to improve your Class A record for State Pension purposes.

    What I do not understand is the suggestion from the Dept of Social Welfare that you would be entitled to a full Contributory Pension. With a mixed A and D record it should be a pro-rata pension. The way pensions are calculated is meant to change to a total contributions approach in a few years. How this may impact on the pro-rata calculation I have no idea. Under the existing averaging system you can estimate you own likely entitlement from the formula in section 21 at this link:

    https://www.welfare.ie/en/Pages/Qualifying-for-State-Pension-Contributory.aspx#q20
     
    Last edited: 9 Nov 2018 at 6:37 AM