Teaching Pension and PRSA's

A

abbey

Registered User
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Hallo Folks,

I have a question about pensions. I thought maybe someone might have some opinions to add.

I started teaching a couple of months ago and was trying to work out my options. I have seen all the negative postings about Cornmarket and don’t really want to deal with them.

I also have to consider buying back years so I can retire at 65. I probably will do this. However at the moment they seem to only take out 120 .00 Euros a month out of my pay for pension payments. It doesn’t seem very much. Hence I was thinking of setting up a low-cost PRSA that I could make AVC’s to every now and then especially to benefit from the tax benefits.

Also I have a maturing SSIA and was thinking of taking 7,500.00 of this and putting it in the PRSA to get started and as I earn less than 50,000.00 I would get the government bonus as well.

That’s the plan, any of you more knowledgeable people have any comments to make???


Míle Buíochas
 
Couple of thoughts:

You ought to consider buying some notional service. Search AAM for some views on this.

Do you have any non-pensionable service you could buy back? This is always the cheapest option.

Avoid Cornhill like the plague. Search AAM for low cost providers, including LA Brokers.

What age are you? How much service will you have by 65?

Are you a higher rate taxpayer yet? If you are, avoid the SSIA pension scheme. If you're not, I probably wouldn't buy extra provision until you are.
 
Hallo Oysterman,

Thank you for replying. I'm 29 and I have being thinking about buying back years. I would have 36 yrs. by 65 However when I rang the dept. today, the lady said that it is really expensiver and that the price is double what it was 2 yrs. ago.

I have being looking at labrokers, ferga etc. and was thinking about setting up a standalone PRSA that I could contribute random amounts to whenever I could.

Really showing my ignorance here, but don't know at what rate I start paying the higher rate of tax....I think earn about 33,600 Gross

Do you mean not to buy back years until I am paying the higher rate of tax?
 
Does anybody have any idea how much it costs to buy back "notional service" years as a primary teacher? What are the actual costs involved either as a lump sum or as a monthly contribution
I will be returning to Ireland to work again as a teacher and wondered if it was feasible to 'buy" back the years I have worked abroad. I have eight years of PRSA already logged but that won't be much of a pension! I will be fifty when I return so that won't give me a lot of time to catch up!
I would appreciate any information,
Dubai
 
dubai said:
Does anybody have any idea how much it costs to buy back "notional service" years as a primary teacher? What are the actual costs involved either as a lump sum or as a monthly contribution
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[broken link removed] will give you the cost (this is for secondary teacher but with the Common Basic Scale I presume the cost is identical for primary teachers) for lump-sum purchase (note that you should take the figures from the "integrated" column and that the retirement at 65 option is the only one open to you).

I can't find the revised periodical deduction figures (think they were revised 2006 so if anybody can find a link, please post).
 
abbey said:
when I rang the dept. today, the lady said that it is really expensiver and that the price is double what it was 2 yrs. ago.
Click to expand...
That's outrageous. Since when has the DES been employing financial advisers? You got the brush-off from a lazy civil servant there and took it. Notional service purchase costs have risen but it's a cheap lie to say they've doubled. Get back on to them and request "notional service purchase quotations for both lump-sum contribution and by periodic deduction based on retirement at age 65". Do this before you explore the PRSA route.
abbey said:
Do you mean not to buy back years until I am paying the higher rate of tax?
Click to expand...
Yes in the sense that I wouldn't advise buying AVCs while still a lower rate payer. However, it could well be worth your while buying notional service by ongoing contributions because the contribution amount is at its smallest at the start of your career while you are buying a benefit you will draw down based on a much higher salary level at the end of your career.

It'll take them quite a while to provide you the quote. Do post details of it here and we'll see what it looks like.
 
Thank you for the link Oysterman - unfortunately I still don't understand it! Using the integrated scale I would be at 28.1 percent. What does that mean? 28.1 percent of what? I am truely out of touch with all things related to Irish taxes and pensions!
Thanks for your help,
Dubai
 
dubai said:
Using the integrated scale I would be at 28.1 percent. What does that mean? 28.1 percent of what?
Click to expand...
You'd have to pay 28.1% of your gross salary (including allowances) to buy each year of notional service on a once-off basis.

For example, if you'd have 32 years pensionable service on retirement at age 65 you could buy a maximum of 8 extra years notional service (maximum pensionable service is 40 years). The cost now would be 8 x 28.1% (i.e. 224.8%) of your current salary.

You would get tax relief on that purchase at your marginal rate (which is obviously more advantageous to a higher rate payer) which would be spread across a number of years because there are age-related annual pension contribution limits in calculating tax relief.

That would then buy you an increase of 24/80s of final salary (tax free) lump sum on retirement and 8/80s of final salary ongoing pension. (The huge benefit here is that these enhancements will increase in line with pay increases for serving teachers when you're in retirement - this is what makes notional service so much more valuable than AVCs in the view of many people.)

Naturally, it's most likely that you don't have a big lump of money to fund this on a once-off basis so that's why you should get a periodic contribution quote. I would imagine that the vast majority of notional service purchasers do so by periodic contribution (i.e. a deduction from every payslip until retirement).
 
Thanks Osyterman. It is all beginning to make sense now! I assume that it may be possible to make up the years with a combination of a lump sum and regular contributions? All I have to do now is get a job! Hopefully something will turn up close to the time I expect to return to Dublin.
Thanks again
Dubai
 
As an accountant, taxation advisor and a QFA ... seriously doubt lots of info on this board,-half truths and mis-understandings abound. A serious amount of behind the school sheds gossip. Get professional advice.
 
Thefurze said:
..Get professional advice...
Click to expand...

I would add get independent professional advice and draw your attention to AAM's disclaimer (below).

I would also add that I have found it very very difficult to get independant professional advice on the various "Public Sector Superannuation Schemes" from accountants, tax advisors and QFA's.


 
I recently took an early retirement option from primary teaching.I bought back years through notional service.I was contributing by periodic contribution . Originally I was trying to buy back 2 years but in the end I only got about O.5 years added on as I left teaching much earlier than expected.My wife has been purchasing notional service for the last 10 years and will continue for the next 15 years hopefully.
Generally I opted for the Dept.notional service as I was put off by the hard sell approach of a cornmarket advisor.You should contact Dept and get the necessary info.from them and please try and ask another official at the Dept to explain the details.At least with notional service there is no one trying to sell you all sorts of life policies as well and you can make up your own mind without any pressure.Go for it and best of luck.
I was in the Salary protection scheme with Cornmarket for 22+years,thank God I did not need to avail of it healthwise but I had a major difficulty in trying to find out from Cornmarket what contributions I had paid them over the 22 years ,basically what money I had given them for peace of mind health wise but with no returns financial wise
 


Just to update this post in case some else is looking for this information.
The revised rates for Notional Service Purchase Primary and Secondary teachers can now be found at http://www.education.ie/servlet/blobservlet/cl0129_2006.doc

Warren
 
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