Moving to Teaching from Private Sector

[Early Riser]

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.

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/
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[orka]

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.

 

[Early Riser]

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).

 

[orka]

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...

 

[Early Riser]

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.

 

[Purple]

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.