Semi state DB pension

Hi all,
I am in a DB pension with a semi state company.
I don't really know a whole lot about my pension but I really do want to know how it works. I get a statement every year and the last one said my projected retirement benefits at NRA (Normal retirement age, which will be 65) is €17,099 per year with a lump sum of €90K. The state pension has to be added to this, which i will only get from 67 (is that correct?) so there's a 2 year gap where i am on the 17k PA, which works out at €328 per week. Does this seem about right?
This is after 17 years service.

It is not sure what you are questionning

I would be pretty sure that the statement is correct

You don't say what age you are and the rules may change by the time you reach 65

jpd said:

It is not sure what you are questionning

I would be pretty sure that the statement is correct

You don't say what age you are and the rules may change by the time you reach 65

Click to expand...

I’m 40. Just want to see should I be looking at AVC’s or just carry on the way things are?

Looks like a lump sum of 1.5 times salary, and a pension of 2/3 salary * 17yrs service/40.
can you buy back years or make AVCs to cover the shortfall?

ginslia said:

Looks like a lump sum of 1.5 times salary, and a pension of 2/3 salary * 17yrs service/40.
can you buy back years or make AVCs to cover the shortfall?

Click to expand...

Do you mean cover the shortfall in the difference between salary now and pension when I retire?
Sorry I’m really not up to speed with the whole pension thing!
As far as I know I can do AVC’s but I don’t know how much it costs per week now and how much this is worth to me when I retire.

If you stay in your current job, and got pay increases or promoted, your lump sum on retirement will also increase. So say +10k in salary would add +15k to the lump sum.
same with the per annum amount, every extra year you work there, adds to the service part of the equation, and the pay rise/promotion to the salary part (unless it’s a career average scheme).

however what you need to live on between 65 and the state pension, and beyond depends on your expenses and lifestyle etc And don’t forget you’ll be paying tax on the combined state pension + DB if it’s over 18k approx.

I'd suggest you read through the existing information on this site, as all your questions have been answered already. Not being smart.

But to sum up some of the main points that might help. Note, for brevity I've left out some of the subtleties, but this is an overview.
1. Your pension will be calculated using the formula Final salary (averaged over 3 years) less twice the old age pension (around 25K), multiplied by (number of years working there) divided by 80.
In other words, if you have a €50,000 salary,, and you've been there for 20 years, your pension will be (50,000 - 25,000) X (20/80). So € €6,250 pa.
If you were there for the full 40 years, it would be €12,500 pa

2. Your tax free lump sum will be 1.5 times your salary multiplied by (years worked/40). So again, if you don't have the full 40 years worked there, your lump sum will be reduced accordingly.

3. AVCs can be used to increase your pension and tax free lump sum up to the revenue approved limits.

4. AVCs are tax efficient in that for every 100€ you pay in, it costs you 60€ net as you are saving tax, assuming you are on the 40% tax band. The AVC is taken out of your gross pay, and you see the net reduction in your take-home pay.

5. You are correct in that the old age pension is now payable from 67, but could, and probably will, change before you retire.

You will definitely have an in-house pensions person, talk to them and they will run the numbers for you. You can then decide if you can afford to pay AVCs and how much you want to pay.

With 25 (or 26, 27, 28, ...) years before retirement age, the only certainty is that the rules will be different from today's

Tom1ie
I take it from your post that your current salary is €60,000. So if you retire at 65 with 40+ years service, the you will get a lump sum of 150% of your Final Salary with a pension (including State Pension) of c50%. You certainly can contribute AVCs, but such will only increase your ultimate pension (up to a max of 50% PLUS the State Pension), since your lump sum will be at the Revenue maximum. Therefore the question that needs to be addressed is whether it is tax efficient to contribute AVCs (on which you might get 40% tax relief) only to pay (perhaps marginal rate tax (currently 40% + USC) on the resulting income in 25 years tine. Clearly it is impossible to predict at this stage what your Final Salary will be at 65, what your combined pension (plus any other income) might be and what tax rates might apply at that stage.
Currently the State Pension age is 66 (not 67). But that is expected to increase in the future, if the recommendations of the Pensions Commission are adopted by Government (of what colour) in the future.
I certainly recommend that you discuss your circumstances with whoever in your organisation is responsible for Pension issues (or with whatever Pensions Consultancy firm is advising your Employer).