moving to part time work and defined benefit scheme

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weston

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Im in a defined benefit pension sceheme and i am thinking of reducing my working week by ten hours would my contributions up to now on a full working week be of any extra benefit to me at retirement
 
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Re: pension entitlement at retirement

You need to check your scheme rules. However, I would guess, probably not. The benefit from most DB schemes is based on final salary. I am guessing that if you are reducing your working week, you are taking a salary cut (more power to you if you're not). If you finish up your employment working part time, and hence on a lower salary, your benefits will be correspondingly lower.

Revenue allow the scheme to look back to any salary in the 5 years prior to retirement, but they don't have to. The scheme will follow whatever the rules say.

It won't matter that you were paying at a "full time" rate in previous years. The whole point of defined benefit is that it is not directly related to the contributions one makes. Although defined benefit schemes usually provide greater benefits than defined contribution schemes, they can sometimes be inequitable that way.
 
Re: pension entitlement at retirement

montano said:
It won't matter that you were paying at a "full time" rate in previous years. The whole point of defined benefit is that it is not directly related to the contributions one makes.
Click to expand...

They may not require a direct monetary contribution, but they do work off the number of years you have put in.
For example you get 1/80 final salary for each year you put in, up to a max of 40/80 for half final salary.

In the civil service db scheme, reducing your hours reduces your years of service, eg working mornings only will reduce your pensionable years by half.
However your final salary used for calculations would be the full rate for the position.
So if you've only ever worked half weeks, it makes no difference (1/4 of final full salary), but if you have years accumulated at full time, you will still get the full benefit of them.
 
Re: pension entitlement at retirement

Most defined benefit schemes operate on what's called a 'converted service' approach whereby benefits are based on the full time equivalent salary and periods of part time service are taken into account on a pro rata basis. Under this approach, someone with (say) 10 years full time and 10 years working 50% of full time hours would receive the same pension as someone with 15 years full time service (and the same full time equivalent salary).

It's therefore likely that you will effectively receive benefits based on your full time salary for periods of full time service and your part time salary for periods of part time service.

The scheme booklet should confirm the position in this regard, but you also have the right to access the scheme rules and, in any event, the scheme administrator should be able to advise you.

Regards
Homer
 
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