Where to get independent advice about public sector pensions

Kangboen

Registered User
Messages
4
I joined the public sector in 2017 and so automatically joined their Single Public Service Pension Scheme. However, I was told that the benefits I receive under this are inferior to what they would have been if I had joined the public sector many years earlier. So I have been advised to purchase AVCs.

I knew nothing about AVCs and didn't know where to start. So I went to a financial advisor recommended by a friend, but he said that public service pensions were too complicated for him to understand. Then I went to my union, but they pointed me in the direction of Cornmarket, who would definitely not provide independent advice.

Can anyone recommend where I could go to get unbiased advice so as to maximise my income during my retirement?
 

NoRegretsCoyote

Registered User
Messages
2,667
I knew nothing about AVCs and didn't know where to start. So I went to a financial advisor recommended by a friend, but he said that public service pensions were too complicated for him to understand. Then I went to my union, but they pointed me in the direction of Cornmarket, who would definitely not provide independent advice.

Correct, Cornmarket are somewhat independent but will only try to sell you a product.

The best place to look for advise is this forum.

If you post specific questions and provide your own details you will get better advice.
 

RedDevil

Registered User
Messages
85
AVC's is a term that was once confined to Private Pensions
If you are in a Public Sector Pension you should explore the option of purchasing Notional Service
 

Kangboen

Registered User
Messages
4
Ok. I'll ask.

I'm 47, and I joined the public service as a grade 3 in 2017 (starting around €23K) . Last year I moved up to grade 5 (starting around €42K) and will probably stay at that grade until retirement. My first question is what would my yearly income be when I retire if I just got the Single Public Service Pension?

My second question is what would my yearly income be if I had joined the public service 30 years ago? This would have allowed me to complete the 40 year's service according to the conditions that were in place at the time.

And my third question is what can I do to make the current pension that I am eligible for as good as it would have been if I had joined 30 years ago? As far as I can tell, purchasing Notional Service is not an option for people who have joined the public service as recently as me.

Any advice would be greatly appreciated.
 

Conan

Registered User
Messages
1,250
Ok. I'll ask.

I'm 47, and I joined the public service as a grade 3 in 2017 (starting around €23K) . Last year I moved up to grade 5 (starting around €42K) and will probably stay at that grade until retirement. My first question is what would my yearly income be when I retire if I just got the Single Public Service Pension?

My second question is what would my yearly income be if I had joined the public service 30 years ago? This would have allowed me to complete the 40 year's service according to the conditions that were in place at the time.

And my third question is what can I do to make the current pension that I am eligible for as good as it would have been if I had joined 30 years ago? As far as I can tell, purchasing Notional Service is not an option for people who have joined the public service as recently as me.

Any advice would be greatly appreciated.
Can’t answer your first question. The calculation can be complicated and depends on the assumptions you make.
On your second question, if you had joined the PS in 1990, you would be in the pre-1995 Defined Benefit Scheme. That scheme would provide a Pension of 50% of Salary + a Lump sum of 150% of Salary IF you had 40 years service. But this is purely academic at this stage.
The new Single Scheme (which I assume you are a member of) is an entirely different scheme. It’s not a traditional Defined Benefit, but rather revalued average salary calculation. If you want to add to this scheme, you could establish an AVC arrangement.
 

Protocol

Registered User
Messages
3,381
My second question is what would my yearly income be if I had joined the public service 30 years ago? This would have allowed me to complete the 40 year's service according to the conditions that were in place at the time.

Pre 95 PS pensions are easy to explain.

Pension = (yrs service)(1/80)(final salary)
Lump-sum = (years) (3/80)(final salary)

So if you retire on 60k with the full 40 years paid in, you get 90k lump-sum and 30k pension.

You don't pay PRSI, and don't get a State pension.


Post 95 pensions deliver the similar benefits, although are more complex, as the State Pension is integrated.
 

Protocol

Registered User
Messages
3,381
I'm 47, and I joined the public service as a grade 3 in 2017 (starting around €23K) . Last year I moved up to grade 5 (starting around €42K) and will probably stay at that grade until retirement. My first question is what would my yearly income be when I retire if I just got the Single Public Service Pension?

My second question is what would my yearly income be if I had joined the public service 30 years ago? This would have allowed me to complete the 40 year's service according to the conditions that were in place at the time.

And my third question is what can I do to make the current pension that I am eligible for as good as it would have been if I had joined 30 years ago? As far as I can tell, purchasing Notional Service is not an option for people who have joined the public service as recently as me.

First of all, I suggest trying to estimate the future pension benefits, and then seeing is that enough.

(1) State Pension
(2) + any work pension from jobs before age 44
(3) + PS pension from age 44 onwards


If you eventually decide that (1)+(2)+(3) is not enough income to live on in retirement, then your options are:

(1) AVCs
(2) Buying notional service - you say this can't be done? I don't know. Is that what is mentioned here:

 

Early Riser

Registered User
Messages
1,089
My second question is what would my yearly income be if I had joined the public service 30 years ago? This would have allowed me to complete the 40 year's service according to the conditions that were in place at the time.

As you are paying Class A PRSI, the only valid comparator would be with a previous Class A PRSI pension scheme. Most people who entered the PS 30 years ago did so at Class D but there were some Class A PRSI pension schemes then, and since 1995 they all are.

So for someone with Class A PRSI retiring after normal retirement age with 40 years service, the approximate occupational pension calculation would be Final Salary * 40/80 - State Pension. The main difference in the Single Scheme is that the pension is not based on final salary but on career average earnings.

Approximate example. Assume all figures are inflation adjusted.

Joe is retiring after normal retirement age with 40 years in a traditional scheme (Class A PRSI). He started in a grade with a €35K salary and advanced by smooth stages to finish on a grade with a salary of €80K (he spent at least 3 years at this level). For pension purposes his salary prior to his final 3 years is irrelevant. His annual pension is estimated at €80K * 40/80 - €13k = €27,000.

Josephine is retiring at normal retirement age with 40 years in the Single Scheme. She started in a grade with a €35K salary and advanced by smooth stages to finish on a grade with a salary of €80K. Her pension cannot be calcuated by simple formula but if we assume that when her full career earnings through the grades are averaged the result comes to €60K, then her approximate occupational pension is €60K * 40/80 - €13K = €17,000.

You can see the difference. For someone with lots of big promotions in the second half of their career the difference is bigger than if the promotions come early in the career (or there are few promotions).

There is no provision for "notional years" in the Single Scheme. It has been replaced by a scheme to purchase "referrable amounts", either towards the annual pension or lump sum (or both). It certainy seems more clumsy than "notional years" but, perhaps, that is because I don't understand it. However, it is possible to go this way to enhance pension benefits. Alternatively there are AVCs. Whether better value or not, they certainly seem more straightforward and offer more flexibility at retirement.
 

Sunnygirl69

Registered User
Messages
12
Kangboen your situation is remarkably similar to mine. I joined 2015 grade 3 starting 23K upgraded to grade 4 then grade 5 in 2019 starting on 42K.
Are u a Forsa member? Forsa members (single public service scheme) were advised to contact a particular pension advisor aligned with New Ireland. I spoke to them this week... Their advise is buying back years is not an option as cost is 'astronomical'
I'm hoping to go with AVC's & I would like to pay in directly from salary through HSE, however I'm horrified at costs as outlined to me.... 0.75% fund man fee... Year 1 only 76% allocation.... Year 2 onwards 95% allocation.
How can Forsa steer new entrants in this direction?? They are well aware there is zero pension advise available to them in house.
Did you get any further Kangboen?
 

Protocol

Registered User
Messages
3,381
Sunnygirl,

I'm sure you realise that the broker is selling AVCs, which are a competitor to NSP.

It's like asking a Toyota dealer about VW cars. Of course they will discourage you, as they want you to buy their AVC.


Also note that PS can buy any AVC, and there are AVCs with 100% allocation and 1% AMC available.
 

2bmortgagefree

Registered User
Messages
23
Well Forsa should get their act together, why is one member being charged such poor allocation rates versus 100% allocation above. Forsa should be getting a better deal for public servants. Its a huge lucrative market for an AVC provider.

Any public servant should look at whats available elsewhere. The only downside is you tax side by yourself. Beyond me why Forsa can't get better deals.
 

Early Riser

Registered User
Messages
1,089
Forsa members (single public service scheme) were advised to contact a particular pension advisor aligned with New Ireland. I spoke to them this week... Their advise is buying back years is not an option as cost is 'astronomical'

Notional service (colloquially, but incorrectly, "buying back years") is not a available in the Single Scheme at all. It has been replaced with
purchase of "Referrable Amounts" on an annual basis. I don't know about expensive but it seems cumbersome (see below).
As others have said, there is no reason to go with Cornmarket for AVCs, except that setting up the the alternative PRSA-AVC with Revenue initially takes a little more effort. These can be arranged through a variety of brokers.

4. Purchase Facility

Eligible Scheme members can enter into purchase agreement(s) with their Relevant Authority for the purchase of referable amounts. The following are the features of the purchase facility:
Eligible members can choose to purchase additional pension only, additional lump sum only or a combination of additional pension and additional lump sum;
Purchase agreementswill operate on a twelve month basis; 
A Scheme member can enter into one contract in any period of 12 months, the setting of the 12 month period to be determined by each Relevant Authority;
Subject to the limits provided for in this Circular, a Scheme member can enter into any number of 12 month purchase contracts over his/her period of membership of the Single Scheme, although no two contracts can overlap;
The limits on purchase, as set out in Para 8.2are determined on the basis of the lower amount resulting from the calculation of two formulae;
The limits referred to above must be re-calculated in respect of each individual contract;
Referable amounts may be purchased by way of one lump sum paymentonly; 
A Relevant Authority can set its own notice period for the receipt of applications for purchase


 

GSheehy

Registered User
Messages
450
Here Cornmarket are selling an AVC for the civil service, with 595 fee, and 100% allocation.

This isn't a PRSA AVC, it's probably an AVC Scheme and there are no disclosure requiements on an AVC Scheme.

The PRSA AVC (on an execution only basis) has a 100% Allocation and 1% AMC - there are no bid/offers, early exit charges or minimum investment terms to qualify for reduced AMCs etc.

I've come across a version of this AVC Scheme before where there was a Bid/Offer Spread of 5% on it. Now, maybe this is a reinvented version of that product, but there's no harm in checking if there are early exit charges, a minimum investment term or a Bid/Offer Spread on this product.

Gerard

www.prsa.ie
 

Protocol

Registered User
Messages
3,381
Ah I see.....

So an AVC can have any range/mix of fees.

But an AVC sold as a PRSA-AVC is more constrained/regulated, and can only have the fee structures prescribed for PRSA?
 

GSheehy

Registered User
Messages
450
@Protocol

There's just more clarity on the PRSA-AVC.

And yes, there are some AVC Schemes that are more competively priced than PRSA-AVCs.

I'm just cautious about this one, but would welcome any correction.


Gerard

www.prsa.ie
 

Kangboen

Registered User
Messages
4
Thank you all for your advice. It is much appreciated. One of the main problems for me is that it seems like there is a whole lot of financial jargon that I have to learn in order to make critical decisions about what my retirement is going to be like. The system seems so much more straightforward if you were lucky enough to have joined the public service in the last century. I wonder why they changed it.

Sunnygirl69, yes it seems that your situation is somewhat similar to mine, and I am a Forsa member. But when I asked them about my issue, they just directed me to Cornmarket. I had hoped my union would have provided independent advice, but for whatever reason they have decided to hook up with a large financial firm.

I have been thinking of going to PSRA to advise me. They claim to be totally impartial financial advisors for public sector employees. I'm wondering if anyone knows if they are as good as their claim.
 

NoRegretsCoyote

Registered User
Messages
2,667
The system seems so much more straightforward if you were lucky enough to have joined the public service in the last century. I wonder why they changed it.
Partially because people used to join young and stay for 40 years.

The public service gets a lot more recruitment and exit at all ages now.

Also the pre-2013 system wasn't very equitable. Final-value pensions were great if you had a late-career bunch of promotions compared to someone who slogged away the whole time in the same grade.
 
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