# Teacher returning after 3 year career break: Buy back lost years?



## Blade (23 Jan 2004)

I've recently returned to teaching after a three-year career break and I'm wondering if it would make sense to "buy back" the missing years in my pension. 

I'm still waiting for the full details but the Department of Education has indicated that it would involve a lump sum payments of about half my salary, ie about €20k. 

I have the money in the bank and if I make the payment I'll be eligible to retire early at age 55, which is a very important consideration for me. 

I'm also keen to maximise my pension benefits because my public service scheme looks a lot more generous than my husband's private sector pension. 

We've paid off the mortgage on our home, maximised SSIAs and have nearly €20k sitting in the bank looking for a home. 

To my mind €20k is a small price to pay to retire at age 55 instead of age 60. But it's still a lot of money and I want to be sure I'm doing the right thing. Any thoughts? 

P.S. If I make the pension top up, am I correct in assuming that it will qualify for full tax relief? Both my husband and me pay at 42%.


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## yeleek (3 Feb 2004)

*Buying Service*

You have two choices

1. Buy Notional Service from the Department of Education and Science. Do it fast the Pensions Board have recommended its abolition. No lump sum payment required. It can be paid over the reamining years to be worked.

2. Purchase AVC's

Check the price of one against the other. Notional Service is usually cheaper and the return is guaranteed.


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## ajapale (3 Feb 2004)

*Re: Buying Service*

Hi yeleek,



> Do it fast the Pensions Board have recommended its abolition.



Do you have a reference for this?

Is it just for the Department of Education or all Public Service Pensions or for all Defined Benefits Schemes (Including Private) or perhaps just unfunded pensions public service schemes?

Thanks,

Ajapale


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## Blade (4 Feb 2004)

*Notional Service*

Thanks for your replies,

Department of Education has outlined two ways of buying back notional service: 

1. Pay the €20k lump sum now, which would allow me to retire at 55.

2. Increase my regular pension contribution by a small percentage (still waiting on the specifics), but this means I wouldn't qualify for a pension until age 60.

Because I'd love to retire at 55 and have the €20k, I'm more attracted by the first alternative.


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## Guest (28 Jun 2004)

*Notional Service*

Is this Indo article (free registration required) of any interest in this context?

www.unison.ie/business/pe...si=1206449


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## Blade (24 Aug 2004)

*AVCs*

I've now got my options nailed down as follows:

1. Notional Service. Pay a lump sum of €23,750 now to "buy back" three years of missed service. 
Pro: the money's guaranteed.
Con: I won't be able to retire before age 60. 

2. Cornmarket AVC. Pay €104 a fortnight net of PAYE/PRSI relief.
Pro: retire at age 57 and possibility of transferring AVC into ARF at retirement. 
Con: nothing's guaranteed and Cornmarket's charges (set up €815, entry charge of 1% + 5%, annual management charge of 1%).

I'm inclined to go with Cornmarket because early retirement is important to me. I'm also pretty secure financially so I can take the risks associated with an AVC. 

Anyone think I'm doing the wrong thing?


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## Blade (24 Aug 2004)

*Buy Back or AVC?*

I've come up with another way of looking at the numbers. 

If I do nothing, I'll be able to retire at 57 with a tax-free lump sum of €58,650 and pension of €19,550 a year (in today's money).

If I pay €23,750 to buy back notional service, I'll still be able to go at 57 but the lump sum will increase to €63,825 and the pension to €21,275. Even allowing for tax relief on the €23,750, I'd have to retired five years before getting my money back. 

If I pay €104 a fortnight (after PAYE/PRSI relief) to Cornmarket, there's a chance of increasing the lump sum to €69,000 and pension to €23,000, while still retiring at 57. 

I'm still leaning towards Cornmarket. What does everyone else think?


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## Guest (25 Aug 2004)

*Buy Back or AVC?*

> I'm still leaning towards Cornmarket. What does everyone else think?

Not being smart but apart from soliciting comment here you should seriously consider getting independent, professional advice on this seeing that it's quite an important decision.


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## din0saur (7 Sep 2004)

*"Teachers could lose in pension top-up row"*

*TUI affiliate claims teachers could lose in pension top-up row*

 Irish Independent, Sep 07 2004

A PENSIONS top-up scheme that the Teachers Union of Ireland (TUI) recommended to its members could cost thousands in lost potential benefits, it was claimed yesterday by an affiliate of the union.

The 1,000-member Retired Members Association (RMA) has written to union branches claiming that thousands of members have paid hefty fees to invest in a TUI-backed Additional Voluntary Contributions (AVC) scheme.

Yet the RMA claims that most would have been better offer buying additional years from the State through a commission-free government alternative, known as Notional Service Purchase (NSP) - and many could still do so if told about this before they retire.

Those who invest in the AVC scheme pay hefty fees and must usually take a chance on share performance, which has been dismal in recent years, whereas the State-backed occupational scheme provides a secure return similar to much-prized defined benefit pensions.

There are no fees or commission and the return is practically guaranteed at up to 8pc - a level most pension fund managers would envy in today's climate of falling returns - according to the RMA. It maintained that many previous attempts to warn of the problem since 2002 have been thwarted. The RMA claimed that it extends to other teachers' unions and probably across the entire public service, wherever employees have less than 40 years' service. Those about to retire, as teachers do in droves at this time of year, could face potential major losses unless they act before retirement, according to the RMA.

The letter stated: "The predicament of such members is made worse by the fact that many of them (3,100) had committed very heavily to the AVC scheme operated for the union and later discovered that the occupational scheme would have suited much better and cost much less. Typically, teachers can get the same pension at half the cost by buying the government pension instead of the alternative," maintained George O'Sullivan, a retired accountant and RMA committee member.

"At the extreme," he added, "people could pay up to seven times more to buy AVCs versus government NSPs for no additional benefit."

One member, two years from retirement, discovered that he was on course to pay €150,000 for an AVC when he could get an equal benefit NSP for €75,000, according to the RMA.

Mr O'Sullivan maintained that "hundreds" of TUI members he encountered through the RMA Citizens Advice Bureau lectures informed him they were never told of NSPs.

The RMA said a complaint has been made by a TUI retiree on this issue to the Pensions Ombudsman, Paul Kenny.

Mr Kenny wouldn't comment on that specific case, but said he was aware of a "general information deficit" regarding the option of buying additional years of service in the State sector, which was a cause for concern.

The onus to provide this information is on employers - which are schools and colleges in the case of most TUI members. "I have urged the employers concerned to draw attention to various positions, including added years." He intended to highlight this problem.

Mr Kenny said that, "historically, AVCs have been oversold", however, the case against them is not totally clear cut and much of the criticism is done with the benefit of hindsight.

"Twenty years ago, interest rates were high and projections were made in good faith." AVCs are also more flexible and can make sense for people who want to retire early, he added.

The Irish Independent furnished the TUI with a copy of the letter sent out by the RMA. It responded with a statement as follows: "We are disappointed that a copy of this letter was not sent to Head Office. We will be forwarding a copy to the trustees of the AVC scheme here. We will not be making any further comment on the matter at this moment in time."

Bill Tyson and
Orla O'Sullivan


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## din0saur (29 Sep 2004)

*Re: TUI issues 'gagging' letter over pensions*


Irish Independent Wed, Sep 29 2004

THE Teachers Union of Ireland (TUI) has issued a "gagging" letter to its Retired Members Association (RMA). The letter comes after the RMA highlighted possible flaws in some members' pensions through the Irish Independent, and in a letter to branches.

"I am seriously concerned that letters sent by RMA have reached the national papers . . . This had the effect of confirming the authenticity of the reports," TUI president Paddy Healy stated in a letter sent via email to RMA secretary Donnacha O'Riordan.

"I hereby instruct RMA and all its members to desist from any further public comment and any further publication of internal TUI matters. I wish to see the officers of the RMA in my office at your earliest convenience." Mr O'Riordan replied in a letter that: "The only case to answer is why the union administration failed to take our complaint seriously and why our association's documented concerns were ignored and indeed attempts made to marginalise, and silence our members."

Mr O'Riordan refused to comment on the letters (they were supplied by another source) but he said he hopes to schedule a meeting with the TUI for October when a key RMA member returns from holidays. The 1,000-member RMA had earlier written to union branches issuing a warning that members have paid hefty fees to invest in a TUI-backed Additional Voluntary Contributions (AVC) scheme.

The RMA claims that many would have been better off buying additional years from the State through a commission-free Government alternative, known as Notional Service Purchase (NSP).

Bill Tyson
Personal Finance Editor


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