Civil Servant Pension & also personal pension

I

Iceman732

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I've never fully understood the ins and outs of civil service pension funds, I'd be glad of information any readers could provide.

A brother of mine is in the process of buying a house. He's looked at the different methods of purchasing it, such as buying it in his own name, his pension fund buying it or buying it through a pension mortgage.

Anyway he's decided to go with the pension fund option, the only issue being that his wife is a Physiotherapist in the Civil Service so she's therefore in a civil service pension fund. He's wondering how much can his wife contribute towards the private pension fund in addition to what she's contributing to her civil service pension and still get tax relief on the contributions. She hasn't purchased any notional service or anything like that.

Is there some sort of formula that I don't know of? If someone could take the time so maybe give me an example or even a link I'd be most grateful.

Thanks,

Iceman
 
There are two formulae she needs to consider. There are limits to the amount she can contribute to a pension scheme in order to qualify for tax relief, which are determined by her age. If she's in her 30s, the limit is 20% of net relevant earnings, if she's in her 40s it's 25% etc. This figure includes any contributions she may already be making to the main scheme.

The second is an overfunding calculation to make sure she's not aiming for a pension that's in excess of Revenue limits. In a simplified form, maximum permissible pension at retirement under an Occupational Pension Scheme is 2/3 final salary with allowances for increases in pensions during payment and spouses pensions. She needs to make sure that the combination of her main scheme benefits and additional contributions don't risk exceeding these limits.

Finally, unless she's got private income, any private contributions she makes must be either Additional Voluntary Contributions to the main scheme (AVCs) or an AVC PRSA.

It's a complex area and she should take professional advice.
 
If I'm not mistaken, there's another limitation, which relates to the tax relief obtainable. Presumably you're on the top rate of tax (41%) and wish to get relief at the top rate for your full additional contribution. This depends on the amount by which the person' or couple's taxable income exceeds their specified SRCOP (Standard Rate Cut-Off Point). If this is less than your contribution, then part of your contribution will receive tax relief at the lower Standard Rate (ie. 20%).
This is my understanding, but maybe someone can clarify further.
 
Okay so the maximum salary anyone can have is two-thirds there final pensionable salary? The spouse is currently in a Civil Service pension fund that will be 2/3 of her salary when she retires...... Does that mean she can't invest in another pension fund?

I'm aware of the tax side.
 
Iceman732 said:
Okay so the maximum salary anyone can have is two-thirds there final pensionable salary? The spouse is currently in a Civil Service pension fund that will be 2/3 of her salary when she retires...... Does that mean she can't invest in another pension fund?
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No, the maximum pension anyone can have is two-thirds their final actual salary. There may be quite a difference between final salary as defined by Revenue maximum funding calculations and final salary as defined by the pension scheme. Such a gap can be filled by AVCs.
 
Iceman732 said:
Okay so the maximum salary anyone can have is two-thirds there final pensionable salary? The spouse is currently in a Civil Service pension fund that will be 2/3 of her salary when she retires...... Does that mean she can't invest in another pension fund?
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The CS pension is generally no more than half of full salary at retirement (and this assumes 40 years service).

There would still seem to be a gap of at least some 16.66%, between what her CS pension would be (50%) and what Revenue would allow (66.66%).
 
Staples said:
The CS pension is generally no more than half of full salary at retirement (and this assumes 40 years service).

There would still seem to be a gap of at least some 16.66%, between what her CS pension would be (50%) and what Revenue would allow (66.66%).
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Not so. The CS pension of 50% is after commutation of some of the pension entitlements for a lump sum.
 
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