# Moving to Teaching from Private Sector



## Purple (19 Apr 2017)

If someone works and pays PRSI for 20 years and then moves to teaching and works for 20 years are they entitled to a contributory state pension and a teaching pension?


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## torblednam (19 Apr 2017)

If they're paying A class PRSI contributions they'll qualify for their contributory state pension regardless of what sector they're employed in.

The amount they receive from their occupational pension will take account of their length of service i.e. 20/80ths, and (as an A class contributor) their receipt of a state pension.


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## Purple (19 Apr 2017)

torblednam said:


> If they're paying A class PRSI contributions they'll qualify for their contributory state pension regardless of what sector they're employed in.
> 
> The amount they receive from their occupational pension will take account of their length of service i.e. 20/80ths, and (as an A class contributor) their receipt of a state pension.


Thanks torblednam. To clarify, if they never worked previously to becoming a teacher and then put in 20 years they will end up with 20/80ths. What extra pension will they get for the 20 years they were in the private sector and paying PRSI?


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## huskerdu (19 Apr 2017)

The 20 years PRSI contributions is added to your overall PRSI record which entitles you to a state contributory pension if you have enough years service.

Here is more information about how you qualify.

http://www.citizensinformation.ie/e...etired_people/state_pension_contributory.html


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## torblednam (19 Apr 2017)

I have  to confess that I have done something that I am annoyed by when I see other people doing it: I am posting on a topic that I don't really have the expertise for.  

My understanding of how the occupational schemes work is that you get whatever state pension your contributions entitle you to, and if the 20/80ths exceeds this then you get the additional amount.

(But I could be well off the mark.)


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## Purple (19 Apr 2017)

torblednam said:


> I have  to confess that I have done something that I am annoyed by when I see other people doing it: I am posting on a topic that I don't really have the expertise for.
> 
> My understanding of how the occupational schemes work is that you get whatever state pension your contributions entitle you to, and if the 20/80ths exceeds this then you get the additional amount.
> 
> (But I could be well off the mark.)


Thanks, that's what I'm trying to clarify. It seem unfair if that's the case as if so the 20 years worth of PRSI was wasted.


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## Purple (19 Apr 2017)

huskerdu said:


> The 20 years PRSI contributions is added to your overall PRSI record which entitles you to a state contributory pension if you have enough years service.
> 
> Here is more information about how you qualify.
> 
> http://www.citizensinformation.ie/e...etired_people/state_pension_contributory.html


Thanks huskerdu, I read torblednam's reply first.
From our link;
_If you meet all these requirements, you may qualify for a pension proportionate to the number of contributions that you have at the full rate. To take a very simple example, if you worked for 40 years up to age 66 and 10 of those were in the private sector, you would get one-quarter of the normal pension._
Therefore someone who works for 20 years in the private sector and 20 years as a teacher gets half the State pension as half the teachers pension.
OK, that seems fair.

Am I correct?


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## huskerdu (19 Apr 2017)

No, you are misunderstanding. 


torblednam said:


> I have  to confess that I have done something that I am annoyed by when I see other people doing it: I am posting on a topic that I don't really have the expertise for.
> 
> My understanding of how the occupational schemes work is that you get whatever state pension your contributions entitle you to, and if the 20/80ths exceeds this then you get the additional amount.
> 
> (But I could be well off the mark.)



No, this is incorrect.  When you retire you may be entitles to private and state pensions.  This is a simplified explanation 

All workers pay PRSI. Your PRSI contributions entitle you to a state contributory pension, based on how many years that you contribute .

Completely separate to this, your pension contributions, and your employers contributions are invested in a fund to provide a pension for you, based on those contributions. 

 I am not going to explain all the rules about all the different scenarios which can occur . There are different types of pension and rules abut tax releave and the maximum pension you can get, but mainly if you work and contribute to a pension and pay PRSI, you will get a company pension and a state pension.


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## Purple (19 Apr 2017)

huskerdu said:


> No, you are misunderstanding.
> 
> 
> No, this is incorrect.  When you retire you may be entitles to private and state pensions.  This is a simplified explanation
> ...


OK, I'm back to square one. If someone works in the private sector for 20 years and accumulates a contributory state pension entitlement over that period and then becomes a teacher for the next 20 years what are the entitled to? They will get 20/80ths of their teachers salary but what will they get for the 20 years worth of PRSI contributions they made while in the private sector?
This has nothing to do with a company pension! I am asking only about what happens to the State pension entitlement which accrued while working in the private sector.


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## torblednam (19 Apr 2017)

I understand all that but this thread is specifically about public sector DB schemes.

The only such one I'm remotely familiar with is the one I'm in for the civil service as an A class contributor.

I know for a fact I won't be getting a state contributory pension on top of my occupational pension of X/80ths of final salary, and that my contributory pension will be subsumed into my DB pension. (And that's fine with me, lest anyone looking to PS-bash might try to infer otherwise!)

I plan on serving (or otherwise attaining) my full 40 years service so I've never considered whether or what my first dozen years of PRSI might entitle me to... you have me wondering now too Purple...


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## POC (19 Apr 2017)

torbeldnam - if you work 40 years in the public service, paying A class contributions - you will finish up with a total pension equivalent to half (40/80) your salary. But there are 2 components to this pension, the contributory pension and the public sector pension for which you pay superannuation. The superannuation part will be 40/80 of your salary, minus the maximum contributory pension.
If the OP has paid 40 years A class stamps, (20 while in the private sector and 20 in the public sector), then he'll have the full contributory pension. But the other superannuation part will be smaller. It'll be 20/80 minus the maximum contributory pension. However I think there is an alternative method of calculation, if this isn't favourable.
I'm not an expert on this subject, I just know about the information that applies to me! The rules are a bit different for newer entrants to the PS.


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## Protocol (19 Apr 2017)

Purple,

the first 20 years paying PRSI is accruing CSP benefits, as will the next 20 years spent paying PRSI.

No PRSI is "wasted", although it's true that somebody with 39 years paid may get the same CSP as somebody with 40 years paid PRSI.

At the moment, you need an average contribution of 48 wks for each year you paid PRSI, so the years spent paying PRSI after the first 20 are all helping to meet the 48 target.


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## Purple (20 Apr 2017)

POC said:


> torbeldnam - if you work 40 years in the public service, paying A class contributions - you will finish up with a total pension equivalent to half (40/80) your salary. But there are 2 components to this pension, the contributory pension and the public sector pension for which you pay superannuation. The superannuation part will be 40/80 of your salary, minus the maximum contributory pension.
> If the OP has paid 40 years A class stamps, (20 while in the private sector and 20 in the public sector), then he'll have the full contributory pension. But the other superannuation part will be smaller. It'll be 20/80 minus the maximum contributory pension. However I think there is an alternative method of calculation, if this isn't favourable.
> I'm not an expert on this subject, I just know about the information that applies to me! The rules are a bit different for newer entrants to the PS.


So if their pension would have been €80 a week above the State pension they will get the full State pension plus that €80. That's because they have paid 40 years worth of PRSI so get that plus 20/80ths of their teachers pension less the value of the State pension.  
Is that correct?


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## Early Riser (20 Apr 2017)

Purple said:


> To clarify, if they never worked previously to becoming a teacher and then put in 20 years they will end up with 20/80ths. What extra pension will they get for the 20 years they were in the private sector and paying PRSI?



If this person retires at 65 after 20 years teaching and never was a PRSI contributor previously he/she will probably get the same total pension as the colleague with the same service and 20 previous years in the private sector. This is because of the strange eligibility criteria for the State Contributory Pension, rather than anything to do with the public versus private sector per se. Look at it this way - If the first person works from 45 to 65 in the private sector and never was a PRSI contributor previously, he/she would probably get the same State Pension as a colleague working for 40 years.(I say "probably" because of my limited understanding of the State Pension calculations).

However, I suspect it would be unusual for a person to become a pensionable teacher at 45 and have never been subject to PRSI previously. If, for example, he/she paid PRSI for a  few months in their 20's it would change the calculations


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## Purple (20 Apr 2017)

I'd love someone to be able to answer this. My initial suspicion was that they would, in effect, get nothing for their 20 years worth of PRSI contributions in the private sector. I'm still not really any the wiser.


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## Early Riser (20 Apr 2017)

Purple said:


> I'd love someone to be able to answer this. My initial suspicion was that they would, in effect, get nothing for their 20 years worth of PRSI contributions in the private sector. I'm still not really any the wiser.



 In my opinion,it all comes down to this - Was this hypothetical person ever subject to PRSI before taking up the teaching job ? If no, then there would no difference in the State Pension and, therefore no difference in the overall pension (assuming they both retire at 65 with no gap in PRSI record after taking retirement). It all comes down to the "Averaging Rule" for the State Pension - see here :http://www.citizensinformation.ie/e...etired_people/state_pension_contributory.html .

If the person had been subject to PRSI, even for the briefest of periods earlier in life, then the lifetime average PRSI contribution record would change resulting in a State Pension change.

The amount of occupational pension paid directly from the Dept of Ed would be exactly the same, if they both had the same pensionable salary and 20 years service.

Also to note that that changes to the eligibility criteria for the State Pension have been mooted from time to time. The current averaging rule may not always apply.


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## Purple (20 Apr 2017)

Early Riser said:


> In my opinion,it all comes down to this - Was this hypothetical person ever subject to PRSI before taking up the teaching job ? If no, then there would no difference in the State Pension and, therefore no difference in the overall pension (assuming they both retire at 65 with no gap in PRSI record after taking retirement). It all comes down to the "Averaging Rule" for the State Pension - see here :http://www.citizensinformation.ie/e...etired_people/state_pension_contributory.html .
> 
> If the person had been subject to PRSI, even for the briefest of periods earlier in life, then the lifetime average PRSI contribution record would change resulting in a State Pension change.
> 
> ...


Can you give me the Ladybird version of that please?
I've read the link relating to the Averaging Rule but I don't understand it.
Lets say they worked for 20 years in the private sector and paid PRSI for 20 years and then went into teaching, retiring after 20 years in a salary of €50'000. What pension would they get?


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## Early Riser (20 Apr 2017)

Purple said:


> Lets say they worked for 20 years in the private sector and paid PRSI for 20 years and then went into teaching, retiring after 20 years in a salary of €50'000. What pension would they get?



Frustratingly there is not a straightforward answer as it depends on a number of things- when the person took up the teaching post (and which scheme he is in), when he first paid PRSI, etc. However, here is an example :

John D.O.B           1/5/1952
First Employment in private sector (first PRSI) 1/5/77
Teaching Job   1/5/1997
Retirement      1/5 2017
Pensionable Salary   €50000

Occupational Pension (Dept of Ed) €6412

State Pension  (at 66)                             €12391 (full rate)*

*As the State Pension is not payable until 66 John would have to sign for Jobseeker's in the meantime - or apply for a supplementary pension but let's avoid this complicating factor.

If John is only taking up teaching now he would be joining a different scheme with different calculations.


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## Purple (20 Apr 2017)

Thanks Early Riser.
If John had never paid PRSI previously, but just worked for 20 years as a teacher, what would his pension be?


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## Purple (20 Apr 2017)

Early Riser said:


> If John is only taking up teaching now he would be joining a different scheme with different calculations.


Do you know what that calculation would be?


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## Early Riser (20 Apr 2017)

Purple said:


> If John had never paid PRSI previously, but just worked for 20 years as a teacher, what would his pension be?



My understanding is - and others may correct this - that if John first became insurable only when he took up his teaching post, then his State Pension would be exactly the same (as his yearly average would be in excess of 48 contributions). 

However, If John had insurable employment in his early 20s and then "disappeared" for insurance purposes for 20 years before taking up teaching, his yearly average would probably be within the 20-29 band, yielding a State Pension of €10545. The Occupational Pension component is the same in all cases.



Purple said:


> Do you know what that calculation would be?



Sorry, I am not familiar with the new "Single Scheme". Here's a reference :
http://www.per.gov.ie/en/single-scheme/
l


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## orka (20 Apr 2017)

Not sure how the single scheme/changed rules for very new entrants might affect this but for those paying Class A PRSI (everyone recruited after 1995?), the teachers pension and the state pension are separate but designed to work together to provide an accrual of 1/80th per year to a maximum of 40/80ths (50% of final salary).
From the asti website ( [broken link removed] ):



> Pension:
> In the case of a teacher paying A Rate PRSI, the pension is 1/200th of the pensionable remuneration that does not exceed the maximum personal rate of State Pension (Contributory) multiplied by 3.333333 plus 1/80th of the pensionable remuneration which exceeds that figure for each year of pensionable service.  This is known as co-ordinated pension.


So (ignoring salary increases), with 40 years of service, a 60K salary and assuming the maximum state pension (SP) is 12K:

Salary = 60K
Max state pension 12K * 3.333 = 40K
Excess salary above 40K = 20K

Accrual per year of service = 1/200th of 40K plus 1/80th of 20K = 200 + 250 = 450

So for each year of service, 450 annual pension is accrued.  After 20 years, 9K annual pension has been accrued (450 * 20 years) and after 40 years, 18K annual pension has been accrued (450 * 40 years).  State pension is on top of this so if the person is entitled to the max state pension because of their PRSI contributions, they get 12K on top of their teachers pension.  So after 40 years and a full state pension, total pension = 18K teachers pension plus 12K state pension = 30K which is 50% of final salary of 60K.

So to work out how much pension is accrued, you need to look at the two bits separately - the teachers pension should have a clear calculation (the relevant union website should show it) and then the state pension is dependent on the 'whole working life' prsi contribution record.

Also bear in mind that the concept of average PRSI contributions is disappearing fairly soon - being replaced with a total contributions approach (which seems fairer) - I think you get a max pension once you have 30 years of contribution regardless of average contributions per year.


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## Early Riser (20 Apr 2017)

Okra - your point that the averaging system for PRSI contributions is likely to be reformed in future years is pertinent. But, as it stands at the moment, it does seem that in the very unusual and specific example raised by the OP (a person taking up teaching for the first time at circa 45 and this is the first insurable employment), at retirement after 20 years he/she would qualify for a full State Pension at 66.

On the other hand if another person had taken up teaching at 25 (and Class A PRSI) and worked for 20 years before resigning and, say, travelling he/she would only qualify at a lesser rate of State Pension. In other words, even though both had 20 years service, 20 years PRSI in total and (assuming) the same pensionable salary, the first person would receive a larger total pension income at 66 because of a better average.

The Occupational element of the pension would be the same in both instances (as per the accrual rate).


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## orka (20 Apr 2017)

Early Riser said:


> it does seem that in the very unusual and specific example raised by the OP (a person taking up teaching for the first time at circa 45 and this is the first insurable employment),


I don't think that's the OP's circumstances - he said moving to teaching after 20 years of other PRSI - not first PRSI ever.  I would imagine first PRSI ever at 45 would be very unusual unless a person was newly arrived in Ireland/the EU.  Unfair situations with average years PRSI are not all that unusual though (it's quite a bugbear of mine...)  

For example, someone starting a part-time job at 16/17 then going to college and doing a masters/phd and not starting PRSI work again until 25/26 - their years will be averaged over aged 16 to 65/66/67/68 - whereas someone who didn't have a part-time job will be averaged from age 26 to 65/66/67/68.

It's also unfair to those who maybe don't go to college and start full-time work at age 18 - they will be averaged over more years than a graduate starting work at 25/26 - so they could end up with less pension for more years work if they retire early.

And finally, I also think it's unfair that those who contribute large amounts of PRSI on large salaries might not qualify for full pensions because of lower average number of years - I think there should be some recognition of amount of contributions as well as numbers.  But that's a different discussion...


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## Early Riser (20 Apr 2017)

orka said:


> I don't think that's the OP's circumstances - he said moving to teaching after 20 years of other PRSI - not first PRSI ever. I would imagine first PRSI ever at 45 would be very unusual unless a person was newly arrived in Ireland/the EU.



I agree it would be very unusual and I suspect it was being raised hypothetically by Purple. Nevertheless he did ask specifically how someone would fare in this scenario as opposed to someone who had 20 years prior PRSI.

I agree with you observations about the averaging rule.


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## Purple (25 Apr 2017)

Early Riser said:


> I agree it would be very unusual and I suspect it was being raised hypothetically by Purple. Nevertheless he did ask specifically how someone would fare in this scenario as opposed to someone who had 20 years prior PRSI.
> 
> I agree with you observations about the averaging rule.


It was a hypothetical question but I asked how someone would fair who had 20 years prior PRSI contributions. I wanted to know if they would get more of it, in effect, the prior 20 years worth of payments would be lost. 
It looks like they would be better off so question answered, thanks.


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