New 'Single Scheme' Pension

Discussion in 'Public sector pensions' started by Itchy, Apr 30, 2013.

  1. Itchy

    Itchy Frequent Poster

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    Could anyone make a stab at explaining the new entrant public sector pension scheme? Totally confused! Its based on average earnings. A portion of your salary grows at CPI untill you retire. At the end of your time all the portions are added together plus the State pension gives your total retirement payment? Is that roughly right? Cheers.
     
  2. ClearFinance

    ClearFinance Frequent Poster

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    It sound to me that it is similar to a career averaged earnings plan, the superannuation scheme is based on the 80ths rule. What this means previously is that for every year of service your a member of the pension scheme you would get 1/80th of your final salary to the max of 40 years. This is 40/80 or equivalent to 1/2 if you did max service. the benefit of this is that if you based your payments on varying salaries over the years but received your pension on final salary ie 1/2 of your final salary for life. Now it looks like each 1/80th is added individually at retirement. say year one you "bank" 1/80th @ 30k year 2 1/80th @ 31k and so forth so this will be increased @ cpi rates in retirement. It stops a public servant jumping massively in salary just before retirement so they benefit from a higher pension. it is also cheaper as a pay out in retirement. Does this make sense to you?
     
  3. Cinnamonjam

    Cinnamonjam New Member

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    This is wrong though isn't it? It looks like the entitlement has been halved. It's no longer 1/80 for every year, it's 1/160? So max pension is 25% of career average....doesn't sound great really.
     
  4. ppmeath

    ppmeath Frequent Poster

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    How did you figure that out? I thought ClearFinance's post explained it very well.
     
  5. Username2012

    Username2012 Frequent Poster

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    I think the accrual rate up to 45k is 0.58% so that would be 1/172? It's higher for the bit over 45k.
     
  6. Cinnamonjam

    Cinnamonjam New Member

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    Yeah its 0.58% up to 45k and then the old rate of 1/80 or 1.25% for anything over 45k. So for the majority of civil servants(EO grade and below roughly) the pension entitlements seem to have been more than halved. If I'm reading it correctly. .

    Currently considering a move to the PS myself so trying to understand the new scheme. I'm not sure if the new scheme compares favourably to where I'm at now (multinational company with pension scheme where they match up to 5% contribution).
     
  7. ppmeath

    ppmeath Frequent Poster

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    The PS formula is a pension up to a max of 40/80ths. Each years service is 1/80th.

    The accrual rate up to 45k is calculated to take into account entitlement of the State Contributory Pension (X 3.74) which is integrated into the Public Sector pension scheme at the final calculation.
     
  8. Slim

    Slim Frequent Poster

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    It's .58% up to 45.5k and 1.25% on pensionable remuneration over that. The 40 years is no longer relevant as there is no cap on service but compulsory retirement age is 70 in most cases. In addition to the pension entitlement paid under the Single scheme, the State pension will be payable from age 66 until 2021 when it becomes 67. A lump sum entitlement accrues at 3.75% of PR each year.

    Edit. Post crossed with ppmeath's!
     
  9. ppmeath

    ppmeath Frequent Poster

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    Slim, are you sure? I am not too familiar with the new pension - but in looking at it I came across this:

    http://www.per.gov.ie/en/recent-changes-affecting-existing-public-service-pensions/

    "the introduction with effect from 28 July 2012 of a 40-year limit on the total service which can be counted towards pension where a person has been a member of more than one existing public service pension scheme,"

    Edit to add - when you click on the "more information" in that link it states:

    Chapter 4
    3. Chapter 4 introduces a 40-year limit on total pensionable service across multiple public
    service pension schemes, as well as extending the scope of pension abatement. It also
    contains several provisions designed to support efficient pensions administration (including
    information-gathering). These provisions are already present in many public service pension
    schemes and Chapter 4 brings them together in one area of primary legislation. The sections
    in Chapter 4 are as follows:
     
  10. Cinnamonjam

    Cinnamonjam New Member

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    Ok. Beginning to make more sense now. So if I'm following you correctly. .. Public servants who started before the new scheme are not entitled to the state pension but will instead accrue the 1/80 per annum, while public servants who start on the new scheme only accrue at 0.58% but will now be entitled to the old age pension?
    And these two things balance each other out roughly ( old age pension versus approx twice the accrual rate)
     
  11. ppmeath

    ppmeath Frequent Poster

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    OOOOhhhhhhh - I hate this lol - I don't want to open this can of worms!!

    There are 4 different pension strands.

    Pre 1995

    Post 1995 - pre 2004

    Post 2004 - pre 2013

    2013 >>>>

    All except the pre 1995 pay Class A PRSI contribution and all their Social Welfare entitlements are integrated into the occupational scheme, including the pension scheme.

    The 1 in the 1/80 is years, the accrual rate of 0.58% is your contribution to the occupational part of your final pension - the balance is taken care of by your PRSI contribution.

    The employer is assuming that you will have full entitlement to the State Contributory Pension (No such thing as an OAP pension anymore) and is offsetting it - which is why the rate is 0.58%.

    The "formula" of 3.74 is simply a way to do this.
     
  12. Cinnamonjam

    Cinnamonjam New Member

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    Thanks ppmeath. Very helpful stuff. I think I'm finally beginning to understand this.

    Any thoughts or opinion on how the new scheme compares to a private pension fund option? Just thinking there that one potential pitfall of the PS could be the possibility of the state pension rates being slashed in the future....
     
  13. ppmeath

    ppmeath Frequent Poster

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    I doubt you will get a defined benefit scheme in the private sector, only a defined contribution.

    There is no pitfall even if the state pension is slashed - they will simply adjust the pay level up to the accrual rate to take any future changes in the state contributory pension into account.

    The plus for a PS pension is that it is a Defined Benefit and if the benefit promised is up to a max of 40/80ths (based on the new way to calculated that), then this is what you have to get - this is why they are no longer (or as far as I can see) available in the Private Sector.

    The new scheme calculates your contributions on an ongoing basis, your "minimum pension age" is now linked to the State Contributory Pension age - that is the age at which you can retire and claim your pension - this is an area of confusion because some people thought that this was always the case - it wasn't.

    If you are entering the PS now then you cannot retire at 65 and receive your benefits - you must wait until you are eligible for the SCP - which is why it is called a "Single Pension" scheme.

    http://www.per.gov.ie/en/single-scheme/

    • "minimum pension age for most members is linked to the State Pension age (66 years at present, rising to 67 in 2021 and 68 in 2028)"
    "Most" relates to "normal " Civil Servants, Prison Officers, for example must retire at 60 and contrary to belief, this is their "Minimum pension age" - i.e the age at which benefits become payable.

    Edit - Are you in a Defined Benefit of Defined Contribution scheme?
     
  14. Slim

    Slim Frequent Poster

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    If you click on the link in your post above, select FAQs and see page 9, it says no limit bar age.
     
  15. ppmeath

    ppmeath Frequent Poster

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    "15. Is there a ceiling on benefit accrual for Single Scheme members?
    For most Single Scheme members there is no ceiling on the length of service over which benefit accrual can occur (unlike the 40-year service cap in the pre-existing schemes). However, Single Scheme members can only make contributions and accrue benefits until the applicable maximum retirement age, which is 70 years for most Single Scheme members."


    Apologies Slim and thank you, as I said, I am not too familiar with the new strand and this make perfect sense as I have wondered how this would affect those entering the PS now at a younger age. It really makes more sense because they now pay towards their pensions based on their earnings each year, rather then the old way.