PRSI rates on Public Sector pensions

DaveD

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A colleague is considering early retirement at 58, normal retirement age 65. At 58 they will have 40 years service and be entitled to 40/60ths at normal retirement age but a reduced amount if they opt to have it paid at 58.

However, there are 2 salary scales in operation, Schedule A for those employed before a certain date, they pay Class D1 PRSI, and Schedule B for those employed after a certain date, they pay Class A PRSI. My colleague is on Schedule A, Class D1 PRSI.

The simple question is, what PRSI class will their pension payments be subject to?
 
The simple question is, what PRSI class will their pension payments be subject to?

Occupational pension income is subject to PRSI Class M - currently zero.

A colleague is considering early retirement at 58, normal retirement age 65. At 58 they will have 40 years service and be entitled to 40/60ths at normal retirement age but a reduced amount if they opt to have it paid at 58.

Is your friend sure about all this? Most Class D people have a normal retirement age of between 60 (minimum) and 65 (maximum). However, for "non-established" public servants minimum retirement is at 65. There is a considerable difference in the actuarial reduction for retirement at 58 depending on which minimum retirement age attaches to the position.

Also, Class D pensions are usually calculated with a divisor of 80, ie, maximum pension would be 40/80 for someone with full service.
 
In OP's friend's case, the minimum retirement age would be 60. At 58, the pension would be reduced by up to 10% p.a. You rightly point put that the divisor is 80, not 60 but a lump sum of 120/80 would be payable but reduced by 7%.
 
Thanks for clarifying the PRSI situation.

They are 100% certain that the divisor is 60, so after 40 years service, their pension is 40/60 of their salary, assuming normal retirement age. Their normal retirement age is 65, with an actuarial reduction of 6% per for each year they retire early, they've been told its not linear so if they retire 5 years early the reduction is less than 30%.

Separately, but on a related note, they have now queried if their colleagues on Schedule B salary scale (Class A PRSI) versus their Schedule A scale (Class D) will receive a higher pension as both with then be on Class M. Schedule B is a proportionally higher version of Schedule A to compensate for the higher PRSI rate, both Schedule A and B staff should have the same nett salary after deductions for the differing PRSI rates before retirement. However, without clarification, it would appear that on retirement, staff on Schedule B would have 40/60 of a higher salary. Does this seem correct?
 
When I started working (a few decades ago), I think I heard older colleagues referring to a pension of 40/60. Maybe there used to be a scheme providing 40/60, but it could be long gone?

These days, if there is any conversation at work regarding pensions, it is difficult for anyone to provide each other with useful information. The arrangements have changed a few times since I started working, so the people in the group have different schemes. My younger colleagues are usually fairly clueless, because retirement is too far away to worry about. Our HR Dept are very knowledgeable though.

DaveD, your colleague may be able to get useful information through your HR dept. In fact I think the HR dept are supposed to provide you all with charts showing likely entitlements, depending on your salary and how many years service you would have.
 
DaveD - Based on the information you have provided, your friend is not in one of the standard public service pension schemes (General Overview of older schemes here :http://www.cspensions.gov.ie/SuperannuationHandbookandGuidanceDec20061.pdf). Can you tell us what scheme he is in or what part of the public service he works in?

For Class A rate public servants the standard percentage formula (40/80, etc) is not used to calculate pension entitlements - see Section 7 in the above link. However, the formula there would not be applicable in the type of situation you describe for your friend. Also, you will see the (standard)actuarial reduction formulas in sections 13/13A.

As POC has suggested, HR is the best bet, as this is way off the regular path for a public service pension.
 
DaveD, your colleague may be able to get useful information through your HR dept. In fact I think the HR dept are supposed to provide you all with charts showing likely entitlements, depending on your salary and how many years service you would have.

Their HR dept can indeed provide some info, but I’m told they are very slowly respond. And like your own experience they seem to operate multiple pension schemes depending on the date you started your employment.

DaveD - Based on the information you have provided, your friend is not in one of the standard public service pension schemes (General Overview of older schemes here :http://www.cspensions.gov.ie/SuperannuationHandbookandGuidanceDec20061.pdf). Can you tell us what scheme he is in or what part of the public service he works in?

For Class A rate public servants the standard percentage formula (40/80, etc) is not used to calculate pension entitlements - see Section 7 in the above link. However, the formula there would not be applicable in the type of situation you describe for your friend. Also, you will see the (standard)actuarial reduction formulas in sections 13/13A.

As POC has suggested, HR is the best bet, as this is way off the regular path for a public service pension.

Thanks again, very useful information indeed. I agree the pension scheme in question seems to lie outside the norm. I’d prefer not to mention where they work as I promised I wouldn’t, it’s a small enough section and they’re very conscious of not making their queries public, hence why I get to ask!

I’m starting to understand how much of a minefield public service pensions really are. I’ll see if I can persuade them to ask more specific questions of their HR dept.
 
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