What rate of pension levy to pay?

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f/f sam

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I am in the public service, working for DFB. I earn 45000 a year. What rate of the pension levy should I be paying? Is that added to the 6.5% I am paying at the moment?
 
I presume this levy will be also applied to those in the Public Service buying back years pension. If so does anyone know if my salary will be shredded as a result. Feeling rather worried.
 
northsideboy said:
I presume this levy will be also applied to those in the Public Service buying back years pension. If so does anyone know if my salary will be shredded as a result. Feeling rather worried.
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There have been no indications of that. Purchase of notional service schemes are operated on what is supposed to be a cost-neutral basis (and have been relatively recently adjusted - last couple of years - to reflect actuarial risk). You should therefore be paying for the supposed actual cost of the years. In any case, since it's not an element of pay and is a separate scheme, I can't see a justification for increasing the cost.
 
Dreamerb said:
There have been no indications of that. Purchase of notional service schemes are operated on what is supposed to be a cost-neutral basis (and have been relatively recently adjusted - last couple of years - to reflect actuarial risk). You should therefore be paying for the supposed actual cost of the years. In any case, since it's not an element of pay and is a separate scheme, I can't see a justification for increasing the cost.
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Hi Dreamerb. I read your thread with interest. I am purchasing notional years and have been trying to find out if the new pension levy will be applied to the purchase of notional years. If so, I will not have much income left. Do you know if any official information is available regarding this? Many thanks. luhotep
 
I too am paying Notional Years and am worried!

I think this is how it works, some "unofficial discussions" gave me this indication though they couldn't tell for sure. I hope I am wrong because this means I have to decide between the pension and the mortgage! Anyway here we go:

The Levy is a pension contribution and would come under your personal allowance for Tax Relief on pension contributions. So if you are paying 6.5% now and your Pensions Tax Allowance was (say) up to 20% of Gross, you would have 13.5% gross salary left for contributions qualifying for tax relief. If you are buying back years or AVCS and your contributions on that scheme uses up the 20% allowance, then the Levy would attract no Tax Relief.

So whether some part of the Levy attracts tax relief, or none of it, or all of it basically depends on your age, and the amount being paid into Notional Years or AVCs.
 
luhotep said:
[...] if the new pension levy will be applied to the purchase of notional years.
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This query doesn't quite make sense. Do you mean will the rate for purchase of notional service be increased? If that's it, then (as previously) I don't think you need be concerned since it's already on a full cost-recovery basis. [Though if they do moot such a thing I'll be cancelling my own service purchase and working to 64 and three quarters!].

Kipper1 does bring up an interesting - and somewhat worrying - issue regarding tax relief. Some people who are buying back a substantial number of years may be pushed over the relief thresholds by this. Do a rough tot of the levy, your standard pension contributions and your buy-back and check what the total is as a percentage of gross salary. If it exceeds the percentage below for your age bracket, it may make sense to reduce the purchase of notional service to stay within the threshold.

Under 30: 15%
30 to 39: 20%
40 to 49: 25%
50 to 54: 30%
55 to 59: 35%
60 and over: 40%

I've just done the calculations on my own situation and I'm safely under the threshold - but had I been buying back seven or eight years I'd be ringing personnel right about now to reduce it.

Unless the levy is excluded from the thresholds, this is definitely something to watch out for for people making AVCs of purchasing service.
 
Yorky said:
Is PNS not exorbitantly expensive now? I know someone who had a quote of circa. €17K for one years service with a present salary of €55K. they would need 6 years so this would cost €102,000!
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Remember that they would get tax and PRSI relief on that, making the net cost closer to €60K (assuming tax relief at 41%) - not bad for 6 years added service!
 
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