Key Post The Single Public Service Pension Scheme

[LDFerguson]

I believe if you are in active employment in another role simultaneously with your public service role you would be able to set up a separate PRSA in respect of that employment.

Congrats on an excellent thread.

This is correct and examples can be seen in the medical professions, where a medic is working in a salaried job for the HSE and doing private work. Such people can have a Personal Pension or PRSA in respect of their private income.

The €115,000 salary cap affects this, however. If the "pensionable" (e.g. HSE) income is already greater than €115,000 then this takes precedence and the person has no scope to contribute to a Personal Pension or PRSA in respect of their private income. Their only option is to make AVCs in respect of their pensionable income.

As another example, if the public service pensionable income is €75,000 and the private income is €60,000, then the person can make Personal Pension or PRSA contributions in respect of up to €40,000 of their private income (to bring them up to the €115,000 salary ceiling) as well as AVCs in respect of their €75,000 public sector pensionable income.

In any situation where a person's only earned income is a public service pensionable income, then any additional contributions must be to purchase referable amounts, AVCs or AVC PRSA contributions. Not an "ordinary" PRSA.

 

[GSheehy]

Administratively it is more burdensome to go this route because you have to either (i) claim tax relief at the end of the year (which will impact your cash flow) or (ii) fiddle around with your tax credits on revenue’s MyAccount system to simulate salary deductions.

(i) It is not burdensome. You can upload the PRSA2 Certificate when it's issued with the policy document. You do not have to wait until year end so it won't impact your cash flow. Tax credits will be populated on screen (at equivalent of 20% income tax relief) and where tax relief due at 40%, the additional 20% will be allocated as an increase in the standard rate cut off point

(ii) Here's how to do it (page 2 - Using MyAccount to make return)

 

[Ent319]

Thanks guys.

@GSheehy – to be fair I did say it was more (relatively speaking!) burdensome than the standard AVC route, which is correct. I'm murky on the details here because I'm probably never going to have to do it but if you could explain the process and the sequencing a bit more that would be great.

For example, I've gone on myaccount to submit my credits for the current year and it's asked for the following info:

> Estimated Net relevant earnings
> Amount of AVC payable by you in 2025 on which relief has not already been granted
> Amount of AVC contributions relieved under the net pay arrangement in 2025
> Amount of total net pay contributions relieved under the net pay arrangement in 2025
> Amount carried forward from a prior year from which relief has not been obtained

There's then scope to upload your PRSA2 certificate. The descriptions revenue provide aren't helpful. Is this something that's spelled out really clearly on the certificate when you get one? If not - could someone explain this a bit more? What happens when your salary increases during the year - does it get corrected next year? etc.

 

[GSheehy]

You set up your AVC PRSA (regular or single contribution) and when the policy is isuued you receive a PRSA2 Certificate. You can then log in to My Account to update the tax credits (if it's regular) or submit for a refund (if it's single) via the process above.

I have no idea what Revenue descriptions you're talking about. I'm not a My Account user but any Revenue descriptions they have would be the same for net pay arrangements as they would be for claiming the relief via My Account. I presume you can submit the PRSA2 Certificate (still) via post if you don't want to use My Account.

People that go the net pay route also use My Account for additional regular or single contributions they make to less costly products they buy. Maybe, as @S class says, they don't want the employer to know all their pension business. Perhaps that helps in understanding why they have different categories/decsriptions of payments above (?).

If your salary increases and you want to increases your contribution (I presume that's what you mean) then you can notify the provider that you want to do that. Or, they can wait until years end and just make a lump sum payment to the same AVC PRSA. In both cases you just follow the same process, decribed above, for the tax relief.

Cornmarket's fees are actually much better than originally explained in the OP. Their promotional material makes it seem like all funds start with a 1% AMC but you can actually get access to funds with a lower starting AMC and the discount then applies to that.

In the interest of product transparency, did you have any luck in getting any document that explains the policy terms and conditions, a breakdown of the other fund charges (other than AMC) or the commission payable from either Cornmarket or Irish Life?

 

[S class]

The amount of effort needed to claim pension tax relief on myaccount is minimal. Having a separate AVC PRSA means that a person gets familiar with the procedure of claiming tax credits and refunds.

They will gain long term by claiming all tax refunds due to them.

Lots of people are either unable or afraid to interact with Revenue. They end up losing out on amounts of money.

All PAYE employees should be regular users of myaccount,
yearly pension claims are ideal for this purpose.

 

[Ent319]

Thanks guys. You haven't quite sold me on the simplicity of this but I'm sure it's all easy when you can work your way around MyAccount!

See attached screenshots with descriptions provided. You have to upload the certificate and provide the specific information requested by revenue. If the certificate gives you the info requested plainly, great, simple as. Otherwise, maybe this could be explained a bit more in the thread. Agree it makes sense for everyone to be familiar with all aspects of Myaccount etc.

In the interest of product transparency, did you have any luck in getting any document that explains the policy terms and conditions, a breakdown of the other fund charges (other than AMC) or the commission payable from either Cornmarket or Irish Life?

Re: Policy Terms and conditions: When I asked for the policy terms and conditions I was informed that the new entrant documents I received contained my T&Cs and I should refer to the fee sheets for each scheme re: charges (e.g. the one for the Forsa Scheme). The new entrant docs were just the bland docs you get when you sign up to the scheme. Nothing exciting / interesting in there.

Re: Charges / Potential for Hidden Fees: Cornmarket confirmed charges were per the fee sheet for the scheme (linked above). They also confirmed there were no exit charges and there was 100% net allocation. To double check re: entry fees I cross referenced the total value of contributions I made to my AVC on my payslips for 2024 with the amount of money that actually entered my funds on Pension Planet Interactive for 2024 and they were aligned. So Cornmarket is not skimming off the top via entry fees.

Cornmarket's Remuneration: I didn't get any more information than what's already available in their Remuneration Document. For the AVC (which is with Irish Life) Cornmarket gets 0.42% renewal commission from the fund and 2.25% or 3.25%* on Single Premiums + initial set up fees of €100 or €595 (where relevant). Cornmarket's Fee Sheet confirms: "Cornmarket is paid initial and renewal commission out of the opposite referenced charges for the ongoing administration and marketing of your AVC Scheme. They are not additional charges." So this doesn't affect your bottom line as an investor.

Other Fund Charges: I'm taking it as granted that these are per the KIDS documents on the Irish Life funds. I've attached these for some of the funds referenced in the thread. Obviously the 1% life assurance charge wouldn't apply but other ongoing costs would presumably be the same. Also the AMC would be whatever the AMC is under the public sector AVC scheme rather than what's listed there (issue explored in section 5 of main post).

 

[GSheehy]

For the AVC (which is with Irish Life) Cornmarket gets 0.42% renewal commission from the fund

This means if you have a AVC fund worth €300,000 and a fund’s standard AMC is 0.65% everything between €40,000 to €100,000 will have a 0.4% AMC and everything over €140,000 will have a 0.15% AMC.

Maybe one of the actuaries can explain how this works i.e. why ILAC would pay 0.42% from 0.65%, 0.40%, 0.15%.

Unless you mean that the 0.42% is in addition to the quoted AMCs giving effective AMCs of 1.07%, 0.82% and 0.57%.

 

[Ent319]

Maybe one of the actuaries can explain how this works i.e. why ILAC would pay 0.42% from 0.65%, 0.40%, 0.15%.

The fee notice doc linked above explains that this is to cover the ongoing costs of the administration/ marketing of the scheme.

Unless you mean that the 0.42% is in addition to the quoted AMCs giving effective AMCs of 1.07%, 0.82% and 0.57%.

No. This is not the case. The fee sheet confirms the providers remuneration comes out of the listed charges on the fee sheet and is not an additional charge. The AMC Discount / Rebate applies to the AMC of the funds you pay into.

 

[LDFerguson]

Something's confusing me here. Let's say I have an AVC fund with Cornmarket of €240,000 and I'm in a fund with a standard AMC of 0.65%.

• First €40,000: 0.65% AMC
• Next €100,000: 0.4% AMC
• Next €100,000: 0.15% AMC

Weighted average of the above three is 0.3375% on the whole fund. This weighted average will come down as my fund gets bigger as any additional money will be charged at 0.15%.

I can't see how Irish Life can pay Cornmarket 0.42% trail commission when they're only making 0.3375%. I know that Irish Life own Cornmarket but as they're operated as separate entities, I doubt if Irish Life are willing to take a loss for Cornmarket.

 

[Ent319]

Thanks guys following up on this one with Cornmarket to clarify.

 

[CharlieMac]

@Ent319. In your first post in section: "6.3 The Defined Benefit Salary Limit" you have a table that illustrates the maximum value someone’s pension can be as a member of the Single Scheme. Can you explain how the numbers are calculated?

For instance taking the example of Jimmy who you used there. Are you using a capitalisation factor? I have to use 19.404 to get 970,200?

2/3 * 75000 = 50000

50,000×19.404=970,200

Or maybe you used a different formula altogether?

The calculations assumed you retire at your normal retirement age which is currently 66? Single Scheme members could choose to work until they are 70. How would that change the calculations?

That calculation is about figuring out how much the max it will cost to max out your work related pension benefits isn't it? So how much to fund 2/3rds of your final salary as a pension AND the tax free lump sum which is 1.5 times final salary at age 66, yes?

But is there any upper limit on how much you can save in your AVC fund? Is that the Max Fund Threshold? Are you allowed to have that much in an AVC fund?

I read somewhere, I think, that whatever amount your fund reaches in your AVC OVER the max that applies to you in your table there, that amount isn't forfeited. For a start you could fund your lump sum up to 200k and the rest you would just have to take it as taxable cash or put it in an ARF? That sounds right to you?

 

[Ent319]

Hi @CharlieMac - if you want to get into the detail on calculation methodologies and the scheme / capitalisation factors you can find them in Chapter V of the Revenue Pensions Manual. See page 10: https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-05.pdf

The capitalisation factor in Jimmy's case was 19.6 because he is an unmarried male with an NRA of 66.

The example on page 9 of Chapter V of the manual covers a lot of the issues you highlight. The "Gratuity" is the lump sum of 1.5X salary.

The calculations assumed you retire at your normal retirement age which is currently 66? Single Scheme members could choose to work until they are 70. How would that change the calculations?

I don't think it would affect the limits in any material way assuming you already had the potential for ten years of service by the time you hit age 66. Chapter 6 of the revenue pensions manual explores further: https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-06.pdf

I think I remember reading somewhere that there's a weird quirk where if someone has more than 40 years service in a DB scheme their limits can be higher than 40/60s but someone with actual expertise here would need to advise. I don't think that's relevant in your case in any event.

But is there any upper limit on how much you can save in your AVC fund? Is that the Max Fund Threshold? Are you allowed to have that much in an AVC fund?

The SFT described in 6.2 and the defined benefit pension limit described in 6.3 operate concurrently.

The SFT is the absolute max limit on the value of all pension benefits from all employments anyone can have. If you exceed the SFT there is a huge excess tax.

The defined benefit pension limit in 6.3 is an additional limit imposed on the size of the pension you can receive from any defined benefit pension scheme you are a member of (in this case, the Single Scheme). This will typically be lower than the SFT.

The maximum amount of money that you can fund in an AVC is your pension shortfall as explored in section 6.3 of the OP. I've made this a bit clearer now.

I read somewhere, I think, that whatever amount your fund reaches in your AVC OVER the max that applies to you in your table there, that amount isn't forfeited. For a start you could fund your lump sum up to 200k and the rest you would just have to take it as taxable cash or put it in an ARF? That sounds right to you?

The revenue limit on the lump sum that you can have as a Single Scheme member is 1.5x your annual salary. If this is greater than €200,000 you will pay a 20% tax on the excess. Over a long career there'll be a large gap between the lump sum you receive from the single scheme and the revenue max because you accrue lump sum from the Single Scheme on a career average basis. You'll also have a big gap to fill if you're a late entrant. You can use your AVC to top up your lump sum.

I've never seen a definitive answer here about what happens if you fund your AVC over the defined benefit pension limit discussed in section 6.3. I think I might have read that revenue will effectively disgorge you of the tax relief benefit. Other threads suggest that the benefits you receive under the main scheme may be reduced to compensate.

I am a member of the "Ram as much money in your AVC as you can" camp, subject to revenue limits and providing it makes sense for you to invest long term (per section 4). Pensions are the best long-term investment you can make in Ireland besides potentially purchasing your PPR. Your PPR is not an investment as such but it saves you money you otherwise would have been expending on rent.

 

[CharlieMac]

Thanks @Ent319.
I have read these documents and can still hardly understand anything, it's my own stupidity.
I would like to work out my own "Max revenue limit for my defined benefit pension" so I can then work out my own Pensions shortfall to see what is the most I would be allowed to have in my employer-linked (HSE) AVC fund.

Taking your example of Jimmy: "unmarried, just joined the public service, has twenty years to go until he can retire at his normal retirement age (66) and is paid a static 75,000 for the duration of his career:"

In the table in section 6.3 how did you get €970,200.... can you show me that calculation please?

Thank you.

 

[Ent319]

Hi Charlie - I think revenue might have tweaked the capitalisation factors since I did the equations initially (or maybe I did some rounding).

To work out Jimmy's DB pension limit you would take Jimmy's salary (€75,000), multiply 2/3 and then multiply by 19.6. So:

75,000 * 2/3 * 19.6 = €980,000

Then to work out the shortfall it's this amount minus the result of the following equation in section 6.3:

(Gross Salary / 2) - State Pension = X
X * 0.025 * (Years to work till NRA) * (Scheme Factor) = Value of referable Pension
(Gross Salary) * 0.0375 * (Years to work till NRA) * Scheme Factor = Value of Lump Sum
Value of Pension at NRA = Value of referable pension + Value of Lump sum

You would then add the value of any existing pension benefits.

So using 25 as the Scheme Factor (for simplicity's sake - in reality this would be about 23.4) and an assumed state pension of €14,500:

75,000 / 2 – 14500 = 23000
23000 * 0.025 * 20 * 25 = 287500
75000 * 0.0375 * 20 = 56250
287500+56250 = €343750
€980,000 - €343750 = Approx AVC Shortfall = €636250

Jimmy's salary would increase substantially over the twenty years he's a public servant and he might get married so in reality this is probably a big underestimation.

 

[CharlieMac]

@Ent319 Now we're suckin' diesel. Thank you!

In your OP you say that "Bad things can / will happen to you if you exceed Caps imposed on money you can invest in your AVC". But what are the consequences? I've read so many posts on these forums, in particular posts from people like @S class which sound like it is possible to have more in an AVC fund at retirement than what you are saying. Of course I could be mis-understanding things.

Let's pretend that Jimmy never gets married and his salary doesn't ever increase. He works for 20 years until his NRA, makes regular DB contributions from his salary all that time and AVCs too... BUT... he made great choices with the funds he invested in his AVC account and at retirement his AVC fund grows to €736250? This would be 100k more than your calculations say are allowed.

Let's say at retirement Jimmy takes his full lump sum and purchases the full amount of referable amounts (pension years) he can to add to those he built up from actually working so he got the max possible DB pension after all despite only working in the public sector for 20 years and all this would cost him €636250 yes?

What will Revenue have to say about the other 100k? Can he not keep his lump sum and weekly DB pension benefits and put the 100k in an ARF and pay taxes on the money he withdraws from it? Does he have to forfeit the 100k or pay tax on it?

If he can't keep the 100k then what should Jimmy have done differently to optimise his retirement plan? Putting funds in to a separate AVC PRSA is not an option I don't think because like the AVC account it is also linked in with your "(?employer pension) scheme rules" OK the employer won't know about this other AVC fund but Revenue will. Or such is my understanding.

And if he had not yet reached the SFT then how could he have? (Before he retired) Not by making any more pension contributions from his salary it seems? He would have had to create another source of income and direct that in to a PRSA and when added to the value of his AVC they would eventually reach the SFT?

Alternatively I guess, he could have made home improvements, invested in property, gone on holidays, put money in to ETFs? In other words spend his days reading threads on askaboutmoney!

 

[GSheehy]

Not all AVCs are equal and you can source them from different providers and they have different advantages and disadvantages. The three main factors that will typically make one AVC better than another are: (i) Convenience; (ii) Fees and (iii) Fund Choice.

I'd probably add in the non-disclosure requirement on commissions for an Occupational Pension Scheme AVC versus the disclosure on an AVC PRSA and the transferability issue you'd have if you wanted to move the AVC to an AVC PRSA (for whatever reason). You'd need to pay for a Certificate of Benefits Comparison if you wanted to move from OPS AVC to PRSA AVC.

 

[Ent319]

Hi folks. Still clarifying that outstanding issue re: cornmarkets remuneration. Will do an update for this and other posts in thread when I get the response (which hopefully confirms what they say on their fee sheet!).

 

[Ent319]

Hi everyone. Here’s the update post as promised.

1. Cornmarket’s Fees, Remuneration and Transaction Costs

The question of whether Cornmarket’s public sector AVC may have “hidden” costs has now been explored extensively in this thread.

I’ve received an update from Cornmarket on the renewal commission point (posted below). I think it would be helpful to consolidate the information we’ve gathered on fees / remuneration into a single post:

• Cornmarket’s document setting out the fees for the public sector AVC schemes with the tiered AMC reduction can be found here. It states that:
  • There is a 0% charge on regular contributions. I have verified this by comparing the amount of money that goes out from my Payslips with the amount of money that ends up in my AVC pot from Pension Planet Interactive (Irish Life’s online pension Interface). So there are no hidden “entry fees”.
  • There is a 4% charge on ‘single” contributions to your AVC. So contributions you make to an AVC other than through your payslip will incur this cost.
  • That the AMC of the funds you can invest in with your AVC will vary. We have established in the thread that you will have to email Cornmarket to find out (i) what specific funds are available for you to invest in under the particular public sector AVC scheme your employer has signed up to and (ii) what the AMCs are of those funds (because this information is not currently made available on Cornmarket’s website).
  • That a “tiered” AMC applies which reduces the AMC by 0.25% on any amount in the AVC between €40,000 and €140,000 and by a further 0.25% on any amount greater than €140,000.
    • Cornmarket has clarified in correspondence that this operates as a “rebate” once the fund value is over €40,000 and works as follows:
      • The first €40,000 of the member's value does not have any reduction in AMC.
      • The AMC for each fund code reduces by 0.25% on the member's value that's between €40000 - €140,000 (the value of the specific fund code doesn't have to be over €40000 but all fund codes combined. In other words, the rebate applies to the overall AVC pot rather than to the amount you have in specific funds).
      • The AMC for each fund code reduces by a further 0.25% on the value that's over €140000.
  • That a €595 consultancy fee will apply if you take advice from Cornmarket. Cornmarket’s website clarifies that if you decide to set up an AVC on an execution only basis you must pay a €100 fee.
  • That Cornmarket is paid initial and renewal commission “out of the opposite referenced charges” on the fee sheet for the ongoing administration and marketing of your AVC Scheme.

To get into Cornmarket’s remuneration / commission in more detail:

• Provision 4.58A of the Central Bank of Ireland’s Consumer Protection Code requires all intermediaries to make available a summary of the details of all arrangements for any fee, commission, other reward or remuneration provided to the intermediary which it has agreed with its product providers.
• Cornmarket’s remuneration document explains information regarding their remuneration in detail.
• The remuneration document states that Commission is: “the payment (made by the product provider) that is earned by Cornmarket for work undertaken on behalf of both the provider and the consumer. The amount of commission is generally directly related to the quantity or value of the products sold.”
• As regards the public sector AVCs with Irish Life, the remuneration document clarifies that:
  • Cornmarket may receive a 2.25% or 3.25% of a single premium payment as commission, depending on the particular scheme.
  • Cornmarket receives 0.42% of the value of the fundas renewal commission.
    • When queried further about this, and whether the renewal commission is in addition to the AMC, Cornmarket has clarified that “The 0.42% renewal commission noted is what Irish Life pays to Cornmarket, the AMC would remain the same and that commission is not included in any client fees.”
      • Cornmarket’s fee sheet backs this up and states expressly that commission it receives does not amount to “additional charges”.
  • More generally, The CBI Code requires that a regulated entity must ensure that in all its dealings with customers and within the context of its authorisation it:
    • ... acts honestly, fairly and professionally in the best interests of its customers and the integrity of the market;
    • ... acts with due skill, care and diligence in the best interests of its customers;
    • .... does not recklessly, negligently or deliberately mislead a customer as to the real or perceived advantages or disadvantages of any product or service
    • ... makes full disclosure of all relevant material information, including all charges, in a way that seeks to inform the customer;

As regards other ongoing costs on the Irish Life funds:

• There is no reason to believe these are any different from the other ongoings costs for same funds if they were invested in outside a pension – and which are disclosed in the KIDS document Irish life makes publicly available. Some of these are explored in Post 26.

So I think we have now gathered enough evidence to say that the AVC product with the tiered AMC “Does what it says on the tin” as far as fees, remuneration, charges etc… are concerned. I think it would be a stretch to suggest otherwise.

2. Going with Cornmarket vs. Other Providers

I want to be absolutely clear that:

• I think the default strategies / funds Cornmarket advices its customers to invest in (cautious, balanced, adventurous) are awful value.
• That Cornmarket’s customer service is diabolical. It has taken me more than a month to clear up basic queries by email in some cases.
• That it is reprehensible that Cornmarket does not inform prospective customers of the fact there may be very low fee options on some of the Irish Life index funds via the execution only option (depending on the scheme in question).

Notwithstanding the above, Cornmarket may still be far and away the best option for an AVC if the member can take advantage of the tiered AMC rates in combination with a low AMC on index funds

If a public servant wasn’t able to avail of the tiered AMC rate to its fullest potential or if index funds with sub 0.8% AMCs weren’t available on a tiered scheme, then AVCs with a discount provider would certainly be worth exploring.

I’ve tweaked the wording slightly in the main OP to reflect this.

3. Queries on Pension Limits / Why this thread exists

@CharlieMac You’ve asked some detailed questions that I’m afraid I wouldn’t be in a position to offer any comment on. Somebody that actually works in pensions and posts on this forum like Liam Ferguson, Gerard Sheehy, Steven Barrett, Marc Westlake (if you’re super rich!) etc…. would have to explore.

I put this thread together because I wanted to provide public servants on the Single Scheme with info on their pension benefits, to understand the scope to grow their wealth through AVCs, to provide some general tips re: investment options and to provide some general insight on AVC limits within DB schemes.

The thread’s essentially a consolidation of everything I wish had been explained to me as a Single Scheme Member a number of years ago. Old posts from users like @Conan have been particularly helpful in building that knowledge over the years. At my stage of life I’m a lot less concerned about how I spend my pension / what happens if I hypothetically reached the AVC limits and more concerned about accumulating wealth. The thread’s contents and the limits of my own knowledge / experience reflect that.

Pensions are notoriously complicated and it may really make sense to pay for advice or post a money makeover to get more considered options for your particular circumstances.

4. “Paying Hospital Bills”/ buying additional scheme benefits with an AVC via the Purchase / Transfer facility

I’ve made a small tweak to the OP to reflect this is possible – per the Post here. I might post a bit more about the purchase / transfer facility in the future.

 

[Ent319]

As ever, I'm open to being corrected if I've gotten anything wrong.

Edit - For completeness, Cornmarket's registration for the purposes of the CBI Code can be found in the attached doc.

 

[GSheehy]

I'm not going to wreck this fine thread by going over the same doubts I have about the transparency of the one Cornmarket AVC product in question here. Plus, I've too much skin in the game to be leading the charge on it and the optics of that wouldn't be great.

If someone wants to start a Are Irish Life a Charity (paying the intermediary 0.42% trail commission from 0.65%, 0.40%, 0.15% tiered AMCs) thread, with specific reference to the pricing/charges/commissions on the product, I'll definitely contribute. It's really surprising that the resident actuaries here haven't contributed anything meaningful to explaining the convoluted sructure in terms of the breakdown of what ILAC charge and what they pay to the intermediary. This should be manna from heaven to them.

It may well be an anomal, but, based on the information disclosed it's just not credible to me.