retrospective pension option

My employer avoided paying me a pension which I was entitled to (as contracted employee) under the fixed-term workers act which was first introduced in July 2003.

Recently they were forced to pay the pension (10% of total co-ordinated salary, approx 25k) retrospectively from July 2003 but will only do so if I make a employees contribution of 6.5% (13-14k). The other option given to me is too forgo the retrospective pension payment (including my 6.5% contribution) and only set a current starting date for the pension.

I am from overseas, been in Ireland for 4 years, and planning to head home in the next few years. I'm needing advice on this situation. Do I need to make these employee contributions in this situation? If so, would it be worthwhile making this 6.% contribution if I eventually wanted to close the pension (thus losing a signficant portion) and take my money home.

Much appreciated.

Is the pension scheme a defined benefit or a defined contribution scheme? Mention of (coordination) leads me to believe that it is DB.

I would assume that it is a defined benefit plan.

Yes - you would have to make the contribution also.

If you plan to stay in pension scheme for two years or more it may be worth your while to do this (in fact it sounds like if you join July 2003 you will already have > 2 years so it probably is worth your while).

You should discuss your situation with the broker/consultant to the company pension scheme.

As I see it you have two options.

Option A: Buyback 3 years service costing you about 14k (EE contribution 6.5%).

Option B: Forego the retrospective pension and start membership now. (EE contribution of 6.5%)

In order to make an informed decision you would need to get a copy of the rules of the pension scheme. It is possible that this is an excellent civil service DB scheme with pay parity indexation. Or it may be a poor DB scheme with no indexation at all.

What is the financial state of the company (assuming it is outside the public service)? What is the financial state of the pension scheme (assuming that it is a funded scheme).?


Speak to the HR department.

Speak to long standing colleagues who are members of the scheme.

Even if you are not a union member it can always be worth while to speak to the union rep.

If the company make the services of their pensions consultant availiable to employees then contact them (as CCC suggests).

In general (and there are exceptions) DB schemes do not suit people on short term contracts who change job frequently.

aj

Thanks for your comments which gave me some confidence when going into bat. Knowledge is power.

I spoke to a consultant on the scheme. The pension is transferable after 2 years membership. I have fortunately been moved to a higher pay schedule retrospectively which offsets the 6.5% contribution to only 1.5%.

cheers

Hi Flory,

Can you be explicit: Is the scheme DB or DC?

aj

It is a defined benefit scheme.

Thanks for the confirmation Flory,

When you say "The pension is transferable after 2 years membership" what do you mean?

"I have fortunately been moved to a higher pay schedule retrospectively which offsets the 6.5% contribution to only 1.5%." Does this mean that you get the same benefits but with only a contibution of 1.5%?? If this is the case then this is a "no brainer". Pay the retrospective pension contributions and maximise your service with the company. If you leave to go home in a few years time then the pension will be deferred.

Assuming that this DB scheme is part of the Public Service it might be possible to buy notional service in the scheme. Ask your employer for details on this. Are you a memeber of a trade union? Even if you are not (and many people taken on on a contract basis are not) it might be worth talking to your union rep.

Be sure to get a copy of the rules of the pension scheme. Questions to ask are Is this a contributory or a non contributory scheme? Is this a funded or an unfunded scheme? When you retire and are in reciept of pension is it indexed with the current pay scales, indexed at CPI, indexed at a fixed percentage, or not indexed at all.