Single public service pension scheme and the state contributary pension.

[ROS]

Is there a relationship between the single public service pension scheme and the state contributory pension.

For example, an the annual pension under the Single scheme is 40K. If the contributory was 10K, do you receive 40 in total, with only 30K being paid from the single scheme.

What happens if the single scheme annual pension was on 5K. Do you only receive the 10K contributory pension.

 

[newtoinvesting]

Is there a relationship between the single public service pension scheme and the state contributory pension.

For example, an the annual pension under the Single scheme is 40K. If the contributory was 10K, do you receive 40 in total, with only 30K being paid from the single scheme.

What happens if the single scheme annual pension was on 5K. Do you only receive the 10K contributory pension.

Have a look at the Single Public Service Pension Scheme booklet from singlepensionscheme.gov.ie and in particular Page 32:
"The Scheme takes account of the Contributory State Pension as part of the total pension package, this is referred to as an integrated scheme. Both employers and employees make pay-related social insurance (PRSI) contributions and these, in turn, may entitle Scheme members to social welfare benefits."

So, in your example above my understanding is, assuming you were entitled to a full CSP valued at 10k, your total pension of 40k would effectively be 10k from the CSP plus 30k from your contributions to the Single Scheme (i.e. not 10k in addition to the 40k)

 

[ROS]

Thanks for that.

I am thinking of a case where an individual joins the Single pension scheme late in life. Their annual single pension value is less then their contributory pension.

What happens then?

 

[Mathematician]

On Page 6 of the booklet, it says that the contributory state pension 'is payable in addition to the retirement benefits that you are entitled to receive under the Single Scheme.'. I don't think it would make any sense for the contributory state pension to be deducted from the benefits since a pretty large percentage of people would be paying into the pension (it is compulsory) for no benefit.

My understanding of Page 32, where it says integrated, is that the benefits accrued already take account of the contributory state pension, not that the contributory state pension will be deducted from the benefits accrued.

I hope so anyway for otherwise I am effectively paying an extra tax.

 

[newtoinvesting]

Thanks for that.

I am thinking of a case where an individual joins the Single pension scheme late in life. Their annual single pension value is less then their contributory pension.

What happens then?

Based on my understanding, you would use the approach on Page 16/17 to calculate both lump sum and pension benefits based on the "referable amounts" you have contributed while paying into the Single Scheme.

Based on my own sums following the approach in the Booklet, say you were earning 25k/year and contribute to the Single Scheme for 10 years. Also assume from this employment, and any previous/later employments, you are entitled to a full CSP.
I calculate you would be entitled to a Total Pension of ~€16k, made up of ~€14.5 from your full CSP plus ~€1.5k based on ten years of contributions to the Single Scheme (i.e. the €1.5k comes from Page 16 - 0.58% of €25000 = €145 x 10 years = €1450).

For 2 years at 125k/year, your Pension would be slightly higher at ~€17k, with ~€2.5k from those two years contributing to the Single Scheme.

 

[DingDing]

My understandin is that the Public Service coordinated pension doesn't favour employees who retire either on a low gross salary or have a limited number of years contribution, as their pension never gets above the contributory pension.

It this person was not in a public sector pension, they would be building the PRSI contributions for a contributory pension, and their pension payments in the private sector would get them some benefit when they retire.

As an example a 5 year contract with no previous public service pension (unless you get added years) would not amount to much extra pension and if at a higher grade you could be paying fairly hefty pension contributions.

I am thinking someone getting a senior management role on a 5 year contract in their mid 50's with no precious service.

 

[ROS]

My understandin is that the Public Service coordinated pension doesn't favour employees who retire either on a low gross salary or have a limited number of years contribution, as their pension never gets above the contributory pension.

This is exactly where I am coming from. But I was looking at it from the perspective of someone taking a low paying part-time public service job in their late 50's. They have 520 plus A contributions.


Could it be they will not get any payment from the single pension, if their entitlement under that is less that what their contributory pension will be.

 

[newtoinvesting]

Could it be they will not get any payment from the single pension, if their entitlement under that is less that what their contributory pension will be.

I think they will get something, per my example above, but it will be relatively modest over the CSP.

 

[cremeegg]

Have a look at the Single Public Service Pension Scheme booklet from singlepensionscheme.gov.ie and in particular Page 32:
"The Scheme takes account of the Contributory State Pension as part of the total pension package, this is referred to as an integrated scheme. Both employers and employees make pay-related social insurance (PRSI) contributions and these, in turn, may entitle Scheme members to social welfare benefits."

So, in your example above my understanding is, assuming you were entitled to a full CSP valued at 10k, your total pension from the Single Scheme of 40k would effectively be 10k from the CSP plus 30k (i.e. not 10k in addition to the 40k)

I think I understand this, it appears to make sense. My concern would be that having joined the PS late my entitlement from the Single Scheme will be less than the CSP.

On Page 6 of the booklet, it says that the contributory state pension 'is payable in addition to the retirement benefits that you are entitled to receive under the Single Scheme.'. I don't think it would make any sense for the contributory state pension to be deducted from the benefits since a pretty large percentage of people would be paying into the pension (it is compulsory) for no benefit.

OK so the benefits I will be entitled to will be in addition to the CSP. (I expect to receive approx 80% of the CSP based on my contribution history by 65.)

But the two things above seem contradictory.

My understanding of Page 32, where it says integrated, is that the benefits accrued already take account of the contributory state pension, not that the contributory state pension will be deducted from the benefits accrued.

This looks like an effort to reconcile the two positions. I don't understand it.

 

[zsuzsa]

In the single scheme estimator tool it adds on, rather than includes, my state contributory pension to the total projected benefit

 

[AAAContributor]

In the single scheme estimator tool it adds on, rather than includes, my state contributory pension to the total projected benefit

That's correct.

My understanding of Page 32, where it says integrated, is that the benefits accrued already take account of the contributory state pension, not that the contributory state pension will be deducted from the benefits accrued.

Spot on.

If you are a member of the Single Scheme, you get a statement every year from your Single Scheme pension administrator (Annual Benefit Statement as at 31 December 20XX) showing your:

- accrued lump sum benefit,

and

- accrued annual pension benefit.

At the point of retirement, it is these figures that your public sector employer will pay you.

There is no deduction or offset or adjustment to these accrued benefits for the State Pension Contributory (SPC).

You then, separately, make a claim to the Dept of Social Protection at age 66 for your SPC.

The Dept will look at your PRSI contributions from when you entered the social insurance system and factor for any Homemaker / HomeCaring periods etc and determine your SPC amount based on that record.

What the Single Scheme was designed to achieve at a big picture level was that if you were a full-time member of the Scheme for 40 years, you will broadly expect to have at the Scheme's retirement age of 66:

- a lump sum of 1.5x your career average earnings (inflation-adjusted), and

- an annual INCOME of approximately 50% of your career average earnings (inflation adjusted), taking into account the annual pension paid to a member from the scheme and the SPC. This is what it means when it says on page 32 of the booklet:

"The Scheme takes account of the Contributory State Pension as part of the total pension package, this is referred to as an integrated scheme."

So, this is what someone can expect on Day 1 of a 40 year membership of the Single Scheme.

If you are in Year 2 of your Career, and you want a forward-looking estimate of your annual pension from the Scheme you utilise the 'Estimator' tool on the Single Scheme website.

However, if you are about to retire from the scheme you look to the 'Annual Retirement Pension' figure on the latest Annual Benefit Statement for what the Single Scheme will pay you annually.

If someone joins the Single Scheme late in life at age 61 and is a member for 5 years, they will accrue benefits under the Scheme of whatever 5 years amounts to and if they have 35 years of PRSI contributions from previous employments, they will get a full SPC from their 35 years of contributions from previous employments and the 5 years from the most recent employment.

At the end of Year 5, when that member is about to retire from the scheme and is looking at the 'Annual Retirement Pension' figure on the Annual Benefit Statement, no adjustment is made to that benefit figure for the SPC.

Always look to your Annual Benefit Statement which will show the accrued annual pension amount. The 'Annual Retirement Pension' is the benefit that the Single Scheme will pay on an annual basis into your hands - end of. Assuming the Minister for Finance approves of it, the pension-in-payment should increase thereafter in retirement at the rate of inflation.