Source for independent advice for teacher about pension

Hi. Are there any indepedent advisors out there who could look at my wife's specific situation and advise on the best way to proceed to allow her to retire at certain milestone ages and maximise pension, utilising purchasing years/AVC's etc. I was in contact with one company but they have appear to have a vested interest in AVC's, and the more I read online the more confused I get. Thanks very much.

It seems a major issue getting independent advice, basically there is no business in it for anyone. Almost all the companies specialising are the ones making money from AVCs. However with a bit of work you can make a reasonable fist of a starting point using the various online documents and fhe acts supporting them which are all published, as well as documents from the teacher unions. I’ve done a lot of work on that for our specific circumstances and it was pretty useful. Pre 95, pre 04 are the key differentiators really in what age you can access certain options.

You'll probably get decent feedback here if you post all of the relevant details, maybe by way of a Money Makeover.

Thanks for the feedback - I'll keep researching !!

tkc said:

Thanks for the feedback - I'll keep researching !!

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Good luck with that - not easy. On the other hand if you could post up some general information you should get some useful pointers from the ether around here. Eg, wife's age, approx date of entry to pension scheme, any breaks in service, amount/years of pensionable service to date, full or part-time, annual salary, hoped for retirement age, any specific pension concern or aspiration, etc.

Agreed, I worked through my own situation and I got some great advice here with some very patient posters. There are a couple of basic questions.
PRSI Class / Prsi record.
Service to date
Time to retirement.
Target retirement date, various actuarial deductions depend on when you started in the public service.
If you are on D PRSI, there are options to get a state contributory pension in addition to the occupational pension if you have previous service at A. This could even be a summer job etc... The option to defer your public service pension allows you the option to accumulate credits to boost your pension.
it is complicated but manageable with a bit of help.
An AVC might not be the best option in every case, and also there is the opportunity to maxamise your tax free lump sum with a last minute AVC and there are some rules around that as well, such as depending on your age, how much of your pay you can put into your pension and get tax relief.

I am a teacher and I have used the above who offer advice for public service workers. They do not sell any products. I found them good - but you need to do a lot of research first and have a list of questions ready. I was expecting a plan which I didn't get - I was offered a list of possible scenarios if I did XY or Z

sidzer,

Thank you for this.

What areas of research would you need to concentrate on?

I am post 2004, pre 2013 and would hope to retire on an actuarially reduced pension at 62 or 63, with about 25 years worked service plus 5 years notional service.

buzybee said:

I am post 2004, pre 2013 and would hope to retire on an actuarially reduced pension at 62 or 63, with about 25 years worked service plus 5 years notional service.

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A few things come to my mind on this.

1. Your 5 years of notional service don't come with PRSI benefits so from your pensionable teacher service you will have 25 years of PRSI benefits. I don't know about the rest of your PRSI history (or whether you may have any entitlements from Homemaking/Homecaring) but, just on the face of of it, you could have up to 15 years short for a full State Pension. It is unlikely to be this much in reality but you do need to be prepared to get credits for that 63-65 age gap o make up any shortfall.

2. With over 20 years service Revenue will allow you to take a tax free lump sum of 120/80 of pensionable salary at normal retirement age (65 in your case). Your Occupational Pension will pay 90/80 for 30 years of pensionable service. As you are proposing to take CNER both of these limit will be decreased slightly. The max Revenue will allow at 63 is about 112.5/80. You should look to use an AVC to make up the difference in the lump sum. Some people use a "last minute AVC" for this purpose. There is 40% tax relief available and the drawdown is tax free.

3. You need to work out whether it is worth while putting any more into an AVC beyond what is required to top up the tax free lump sum. You can avail of tax relief on the AVC contributions but this advantage vanishes if you are going to be paying 40% tax on your pension drawdown (plus USC). You need to look at your overall income and tax situation in retirement before deciding on this. If it appears that you will fall into the lower tax bracket it may be worth it.

4. You might need to check how you are paying for your 5 years notional service. If you have paid it by lump sum or if you have paid it by reference to age 60 you should be fine. But if you are paying by salary deduction by reference to age 65 you will not have the full 5 years purchased if you take CNER at 63.

You would also have a shortfall on your max potential tax free lump sum that you could use to get tax free money from an AVC as well.

There are revenue tax free limits on pension contributions per year which get better in your 60th year.

This is well worth doing if you dont have the max tax free lump sum.

I was in the same position as outlined by the last poster, I retired recently at 60 and some of my notional service was purchased with reference to 65. This impacted me in 2 ways, as I stopped the payments 5 years early, I had not purchased the full planned service, also this service was actuarially reduced as well. This would also increase the amount of available last minute AVC.

I had purchased another batch of notional service WRT 60 and I got the full value for these.

Also if you could get a promotion later in your career it would be very finically beneficial.

Also regarding your PRSI record, now you can delay drawing down your pension so that you have the opportunity to gain more reckonable credits. There are a few ways to do that as well, some of these need a bit of forward planning, so you would need to calculate your potential PRSI reckonable service at 65/66.

Thank you all for your pointers. I have worked full time in the private sector all my life so I would have prsi contributions. At the moment I am purchasing 11 years notionsl service wrt 65. I will stop paying when I have 5 bought.

I contribute to an avc as well. I am a heo earning 65k. I get the 40% tax relief on the contributions. I may go part time over the next few years, which will mean I won't get the 40% relief. I will cut back on contributions then.

I am trying to go at 62 or 63 on actuarial reduced pension so that I can get a few more good years as I find working fulltime tiring and stressful, even in my 50s.

The pensions calculator said I will get around 17k a year if I go at 62 or 63. Then I will get a further 14k contrib pension on reaching 65.I don,'t mind living on 17k for a few years if it means finishing a bit earlier.

buzybee said:

The pensions calculator said I will get around 17k a year if I go at 62 or 63. Then I will get a further 14k contrib pension on reaching 65.I don,'t mind living on 17k for a few years if it means finishing a bit earlier.

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The Calculator can be misleading as it tends to be behind the time, eg, updating the rate of State Pension is required to give an accurate estimate. Also, it tends to indicate that a full State Pension is available to all at 65, which is not the case. In your case you should get a full State Pension at 66 - because of your previous work/PRSI record.

You don't get the contributory state pension (currently just over €15k pa) until 66. At 65 you get either the Over-65 benefit (if you meet the PRSI eligibility conditions - see other threads) or you can claim a Supplementary Pension form your employer/pension office. The Supplementary amounts to the difference in your Occ Pension as awarded and what it would have been if you had been a Class D PRSI employee ( Pensionable Salary * Length of Service/80 - as adjusted for CNER).

When you retire you can apply for Jobseekers Benefit - it lasts for 9 months.

hi im also thinking of retiring but would like to clarify if its 20 years prsi record or 20 years work record that qualifies a person for lump sum and the 120/80 with revenue

buzybee said:

Thank you all for your pointers. I have worked full time in the private sector all my life so I would have prsi contributions. At the moment I am purchasing 11 years notionsl service wrt 65. I will stop paying when I have 5 bought.

I contribute to an avc as well. I am a heo earning 65k. I get the 40% tax relief on the contributions. I may go part time over the next few years, which will mean I won't get the 40% relief. I will cut back on contributions then.

I am trying to go at 62 or 63 on actuarial reduced pension so that I can get a few more good years as I find working fulltime tiring and stressful, even in my 50s.

The pensions calculator said I will get around 17k a year if I go at 62 or 63. Then I will get a further 14k contrib pension on reaching 65.I don,'t mind living on 17k for a few years if it means finishing a bit earlier.

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Could you check your estimate? Did you do the adjustment for the notional service purchase from 11 years to 5?

I ran the modeller based on a post-2004 entrant taking CNER at 63 after 30 years pensionable service on a pensionable salary of €65k and it came to €11,582 (or €13,057 for a preserved pension at 65). I double checked this using the "longhand" method and I arrived at €11,586 (ie, the same). Maybe I am using the wrong figures?

Zeus2020 said:

hi im also thinking of retiring but would like to clarify if its 20 years prsi record or 20 years work record that qualifies a person for lump sum

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I am not sure on the question here. Once you become eligible for a public service pension at all (2 years service, if I recall correctly) a lump sum is included with your pension - based on pensionable earnings and length of service.` So, for example, with 10 years of service the tax free lump sum is (Pensionable Salary * 10 * 3/80).

Quite separately to this Revenue may allow a larger lump sum to be taken tax free (funded from an AVC). Someone with 20 years service would get a lump sum of (salary *60/80) from the scheme. Revenue would allow them to take a further 60/80 tax free from an AVC (ie, up to a max of 120/80). That is at normal retirement age. If they have less that 20 years of pensionable service the max top up allowed by Revenue is less.

so it has to be pensionable service ive worked 30 years but it was mostly part time so 15 years countable years/service so i wont qualify for 120/80 as per revenue guidelines

Yes - pensionable service.
For 15 years pensionable service you can top up to 72/80 (from 45/80) - https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-07.pdf

thank you ruffian on a salary of 65000 fulltime and and 15 year what would i get pension wise and lump sum if i go at 60 pre 2004 before i make final decision

Zeus2020 said:

thank you ruffian on a salary of 65000 fulltime and and 15 year what would i get pension wise and lump sum if i go at 60 pre 2004 before i make final decision

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About €6,550 pa (I'm assuming you are Class A PRSI). And about €36,600 lump sum.

If you are eligible and applying for a Supplementary Pension it should be about €5,650. But if you are not working you should consider applying for JB first. And continue signed on for credits when JB ends.

buzybee said:

sidzer,

Thank you for this.

What areas of research would you need to concentrate on?

I am post 2004, pre 2013 and would hope to retire on an actuarially reduced pension at 62 or 63, with about 25 years worked service plus 5 years notional service.

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I think it is important to do lots of research before meeting with a FA so that you will get the most from the expensive hour.

There is a lot of wisdom on this site - so spending time reading up post and asking questions when you are stuck. From my experience in the staff room I find that teachers in general are not very pension literate. We pay our 6.5% and expect that someone is taking care of it all and all will be fine when we hit the eject button.

As well as above understand:

Cost neutral early retirement (Seems like you do)
How you pension will be paid out (Dept of Education and Social Welfare) and when you can have access to the SW part of the pension
AVCs - Good to have an understanding about AVCs and how these may augment your pension - especially if you're hoping to go early
Have a basic understanding of the tax system - AVC sellers make a big play on how you can put €100 into your pension, and it is only costing you €60 - but they fail to mention that if your AVC on retirement pushes you over €42k then you will be paying 40% on the draw down.
Play around with the online pension modeller to and get an understanding of the different rates of pension depending on your retirement age https://penmod.education.ie/
Maybe do some research into Purchase of Notional Service https://www.publicservicepensions.gov.ie/en/topic/purchase-of-notional-service/

Best of luck!