Best way to invest €125K tfls and benefits from PRSA/AVC and trying to understand abatment if I return to publec sector role after JSB

[Interested1]

After much soul searching, I will be taking early retirement (CNER) from a public sector post with 33 years service due to stress related issues at 57.

My last day of service will be April 27th, 2025 and I am trying to get my head around options on best the way to invest €125K lump sum from employer and approx €57K I have in a PRSA AVC with Zurich, currently in cash (1% management charge).
I set up the PRSA AVC in 2023 to avail of tax rebates in 2023 and 2024, and to increase the scope for my tfls over and above the 125K.

For context, my final salary is €111,907, and I will have an annual pension of €29,532.00 from public sector employer, which will increase by another €10,911 pa through supplementary pension when I reach 60, in January 2028, if I am no longer in insurable employment.

I am single and have no dependants and the my mortgage on home ( worth approx 550K) will be cleared from savings next month. I have invested in house energy upgrades in recent years and have achieved BER A3 on 1950's house, incl well functioning Photovoltaic panels & smart meter. Kitchen and 3 bedrooms & 2 bathrooms would benefit from upgrades, but dont think I will do this immediatly (maybe at age 60). I have €20 K in cash savings, and 2023 car paid in full.

I currently have no other investments, and 1643 class A PRSI contributions up to end 2024, and will have a further 52 in 2025, from employment (13 weeks and credits while on JSB) so total by Jan 2026 would be 1695, with entry date of July 1985 (age 17 summer job). I know I need to sign on for credits (or work) in next number of years to get full COAP at age 66.

I intend to sign on for JSB on April 28th, hoping to get the new rates until end of Jan 2026, and I will use this time to find a partime role (probably in a university) from Feb 2026 when the JSB finishes.
So to the questions:
Advice please on how to invest the €125K tfls in low to moderate risk funds for 5 to 10 years.
Some portion of the PRSA AVC could also be taken as a part of the tfls (not able to work this out at the moment, but would welcome advice on how much that might be), but I am wondering if its worth taking that tax free portion or should I convert this in to a vested PRSA or and ARF, looking to take 4% (or more if needed) as additional at age 61.

Thirdly, If I return to work partime in the public sector from Feb 2026 up to Jan 2028 (when I will be 60) how much abatment would apply to my annual pension of €29,532.00, if I were to get a salary of €75,000 from a university. From what I have read in threads here I think it would not be abated (because it will be less than final salary of €111,907) but I find it confusing to figure out.

Finally thank you to AAM contributors-I could not have even written the above summary, if it were not for all I have already learned from reading AAM threads over the years, and I am very grateful for the free financial education!

 

[Estragon]

I'll address the abatement point.

The old rule of thumb in the HSE regarding abatement was you could work up to half the whole time without abatement, if you returned to your old position. This was based on someone with 40 years, so you could potentially have worked more than 0.5 WTE without impact on your pension if you hadn't 40 years.

However, that understanding was incorrect. DPER Circular 24 / 2022 now governs application of abatement in the HSE, and, as I understand it, the wider Public Sector. The methodology for calculating abatement mandated by this circular is significantly more punitive than the old rule of thumb outlined above.

In brief the calculation establishes your pensionable remuneration (PR) at retirement (final WTE salary + allowances). This is then uprated to account for any increases which have taken place between retirement and the date of return to service. Your WTE rehire salary and any allowances are then identified. This total is then subtracted from the uprated PR figure to give you your 'allowable pension'. This is the annualised amount of your pension which will not be touched for abatement.

The allowable pension figure is subtracted from your annualised pension figure for the period being assessed. This amount is subject to abatement. The amount to be abated is determined by the WTE of your rehire post.

A rough example

Initial retirement PR €70,000
Uprated retirement PR €80,000
Rehire WTE total remuneration €60,000
Total allowable pension: €20,000 (i.e. €80,000 - €60,000)

Annual pension: €35,000
Annual pension subject to abatement: €15,000 (i.e. €35,000 - €20,000)

Rehire WTE: 0.5

Annual abatement €7,500 (i.e. €15,000 x 0.5)

So in this example the total annual pension payable goes down from €35,000 to €27,500.

New calculations will need to be made or each subsequent pay increase, variation in allowances, and change of hours.

Going on the numbers you are positing above, I'd be extremely surprised if your pension wasn't heavily abated.

Your level of abatement will only be determined subsequent to your taking up post.

If you work for a private sector company, there will be no abatement. For example, nurses can work through agency without abatement, but will be abated if they are directly on the HSE payroll.