Public Sector Superannuation Advice
Public Sector Superannuation is the name used to define the entitlements of Public Sector workers in Ireland.
We at Money Maximising Advisors ltd have vast experience and knowledge of the public sector superannuation scheme. If you are a public-sector worker, for example a nurse or doctor, teacher or lecturer, a guard or an army officer etc, then you need specialised financial advice as your benefits and entitlements are both complex and unique to other sectors. Our team has vast expertise in the public sector as well as the private sector and so can be of great benefit to you. Below is a detailed description of the main rules of the Superannuation scheme.
The term Superannuation is the name given to the benefits and entitlements that public sector workers in Ireland are entitled to. The benefits and entitlements compromises of 3 main categories;
1. A Defined Benefit Pension
2. Death in Service Benefit
3. Sick Pay Entitlements
These are explained in more detail below;
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1: Superannuation Pension Scheme
The public sector pension scheme is one of the most complicated to explain as there are so many different rules for different departments within the public sector (for example Department of Education, HSE, Department of Agriculture, Defense Forces, civil service, some semi state bodies, etc). Also within these departments there are also contrasting rules on how pensions are calculated, depending on the year in which you commenced work on a full time basis. For example,
- A Teacher/Nurse etc who started working pre 1995 (D1) has different pension calculation rules than that of someone who started post 1995 (A1).
- A teacher/Nurse etc who started Pre 2004 has a different Normal Retirement Age from a Post 2004 entrant
- A teacher/Nurse etc who started in 2013 has contrasting rules for calculating their pension and also has different retirement ages (NRA) than everyone else.
So as you can see it is very difficult to calculate these pension benefits and entitlements. The best way to get these calculations is to liaise with a Financial Advisor is familiar with all of these public sector superannuation pension rules.
Would you like to calculate your Pension Benefits now?
In general, most public sector employee superannuation pension entitlements are similar except entrants hired post 2013. These are unfortunately entitled to much smaller pension pot. If you are one of these entrants it is much more difficult to calculate your pension benefits. The new rules to post 2013 entrants are very vague. Please click below for more information.
Tax Free Lump Sum Calculations (Pre 2013)
For every year that you work, you are entitled to 3/80ths of your final salary as a tax-free lump sum (TFLS). If you work 40 years as a public sector employee, you will have a maximum service for pension purposes.
Therefore, the maximum TFLS that any employee can be entitled to is; 40 years x 3/80th (120/80)
Formula = (Number of years’ service at retirement x 3/80ths) x final Pensionable Salary/Remuneration*
John is a teacher. He is a class A1 employee and he is on annual salary of €65,000. When John retires next year, he will have 30 years’ service worked.
He will be entitled to a Tax Free Lump Sum (TFLS) as follows; (30 years x 3/80th) x €65,000 = €73,125
If John decided to work on 2 extra years, then his years of service would increase to 32 years at retirement. His TFLS will be therefore be;
(32 years x 3/80th) x €65,000 = €78,000
Pension Income calculations (Pre 2013)
For every year that you work, you are entitled to 1/80th of your final Pensionable Salary/Remuneration as a pension income on retirement. 40 years is the maximum years of service that a public sector can work for pension purposes. Therefore, the maximum pension entitlement is; 40 years x 1/80th = 40/80ths
Formula = (Number of yrs. service at retirement x 1/80ths) x Final Pensionable Salary/Remuneration
If Johns has 30 years’ service completed at retirement, is a D1 PRSI payer and has a final pensionable salary of €65,000, his pension will be calculated as follows;
(30 years x 1/80th) x Final Pensionable Salary
30/80 x €65,000 = €24,375
Pre 1995 Public Sector Entrant (D1)
If you commence work pre 1995, then you are classed as a D1 Employee. These employees pay less PRSI contributions but as a result are not entitled to a state pension, unemployment benefit or state illness benefit.
Post 1995 Public Sector Entrant (A1)
If you are a post 1995 entrant you are classed as an A1 employee. You pay more PRSI contributions through your salary than a D1Employee, However for this extra contribution you do are entitled to;
- a State Pension
- State Illness Benefit and Unemployment benefit if needed (after your public sector sick pay entitlement ceases)
- One Complementary annual Dental Hygiene appointment with a qualified professional
- Complementary annual eye appointment with a qualified professional
*Final Pensionable Salary vs. Final Pensionable Remuneration
There are a number of contrasting definitions of the term Final Pensionable Salary depending on your occupation. However the most common definition for most public sector positions as defined by the Superannuation legislation is;
‘The average Salary of any 3 or more consececutive years ending not earlier than 10 years before the date of Retirement’.
This figure does not take into account;
- Overtime earnings,
- Other Benefit in Kind earnings
Please note that the definition of Final Pensionable salary/Remuneration as defined by the Public Sector Superannuation schemes legislation differs from that of Final Pensionable Salary/Remuneration as defined by the Revenue. In some cases it is more beneficial to use the revenues definition of Final Pensionable Salary/Remuneration as this does take into account other earnings and allowances such as overtime, Bonuses, BIK etc. Just remember that they higher your Pensionable Salary/Remuneration is, the higher your Pension will be.
This is quiet complicated and may differ from each employee so please ask us to go through this in person with you. It is really worth your while financially to get external financial advice on this area prior to retirement as it can have a significantly increase on your pension benefits.
Calculating years of ‘Reckonable Service’
Calculating your pensionable years of service can be very difficult, especially if you moved locations, positions within your career in the public sector. When get closer to retirement, you can request your retirement papers for the relevant public sector department. They will have your reckonable years of service worked out on the statement. However, it is very important to examine this document in detail so that all of your service has been accounted for-from our experience, sometimes it is not.
The following is classed as Reckonable Service
- All of your Full time established Service
- Any job sharing or work sharing service
- Any non Established service prior to your appointment to an established post
- Additional Service or ‘Added Years’ granted
- Transferred service
- Any Notional or Actual years service purchased
Part Time Service
From our experience, part time service is where there is most confusion in relation to calculating your years of reckonable service. The following is classed as reckonable part time service
- Civil servants in paid employment on or December 2001
- If prior to this, the part time service had to be at least 8 hours per week to qualify on a consistent basis. It is calculated as a percentage of the full time equivalent of this position.
It is important that you claim all of the reckonable service that you worked. If you would like any more information on this, we are here to help.
Some public sector professionals qualify for additional Notional added years which is over and above the actual years that they worked. The added years differs from job to job. 10 years is the maximum added years with which any employee can qualify for? Some examples include Army Officers, Guardai, and various Medical consultants.
Buying Back Years:
If you are likely to have less than 40 years service by your retirement age, you can top up your pension through buying back years. This means buying back missing years of service by lump sum or a regular payment which would be a percentage of your salary.
You can buy back years in the following two scenarios:
- Purchase of Previous Actual Service
This is where you can purchase years that you have actually worked but did not pay into the superannuation scheme. Such purchase of years may be applied to years of part-time service. This option provides excellent value for employees and costs less than the other option listed below.
- Purchase of Notional Service
This is where you can purchase years that you did not actually work. i.e. ‘notional years’. Notional Service may be purchased by regular deduction from salary or by payment of lump sum. This is usually a very expensive option; it is rarely cost effective or advisable to avail of this option as annuity rates available in general are very low.
Cost Neutral Early Retirement
If you retire prior to your Normal retirement age (NRA) or before you qualify for the 35 year rule (pre-2004 employees only), you have two options in drawing down your pension:
- Defer drawing down benefits until NRA to avoid any penalties
- Draw down pension benefits and incur the relevant penalties to your tax-free lump sum and pension.
The supplementary pension may form part of the pension paid to Class A PRSI payers. The combined public sector pension entitlement plus the supplementary pension benefit should equal the amount a Class D employee would receive.
A supplementary pension may be payable by your Employer when you retire if:
- You are not employed in any capacity paying PRSI contributions, including self-employment.
- You are not entitled to the following social welfare benefits or qualify for less than the maximum benefit due to circumstances outside of your control;
- Jobseeker’s Benefit
- Illness Benefit
- Invalidity Pension
- Contributory State Pension.
If you have any questions in relation to any of the above, we would be more than happy to help.
2: Death In Service
All public sector workers have automatic life cover entitlements with their job. This entitlements are quiet a significant. The entitlements are illustrated below;
If a civil servant dies in service, then the remaining family/personal legal representative may be paid a lump sum equal to the greater of:
- One times annual salary at the date of death OR
- The retirement lump sum that would have been received if they had retired on grounds of ill-health on the date of death (maximum 1.5 times salary).
Broadly speaking death in service pays one times salary if you have less than 20 years’ service and 1.5 times salary if over 20 years’ service.
Please note that once the employee has retired and started receiving pension income, there is no lump sum paid after this point on death.
If an employee dies in service or dies after retirement, there is a pension to be paid to the surviving spouse or civil partner, and where applicable their children. This is based on what the pension the deceased would have received at normal retirement age (NRA).
The main benefits of the scheme for spouse/civil partner:
- They will receive a pension equal to half of the deceased pension holder’s pension. (excluding their state pension if applicable).
- If death occurs in retirement, the surviving spouse will receive half of this pension (excluding their state pension if applicable).
The main benefits of the scheme for children are:
- They will receive 1/6th of the deceased potential pension, for each child up to a maximum of three children.
- If there are more than 3 children, 50% of the potential pension will be divided equally among them.
In summary, children up to 22 and in full time education, or if they are permanently incapacitated, qualify for this entitlement.
It is very important to take all these superannuation death-in-service benefits/ life cover entitlements when examining the amount of life cover that you and your family needs. From our experience, if one spouse is working in the private sector and the other in the public sector, The private sector spouse may be under covered. If you balanced the cover out and include the public sector death in service entitlements, the family as a whole would be better off. Often this significantly reduces the life insurance premiums.
For more information on Life Insurance click here (link to insurance page).
3: Sick Pay Entitlements
The info graphic below illustrates in detail the main sick pay entitlements that public sector employees are entitled to;
A public-sector worker is entitled to the following sick pay entitlements:
- Three months (92 days) full pay in a one year period followed by three months (91 days) half pay. This is subject to a maximum of 183 days paid sick leave in a rolling four-year period.
After this leave you may also be entitled to Temporary Rehabilitation Pay (TRP) for a further 18 months (see below for explanation).
However, if an employee has a critical illnesses or serious physical injuries, then the sick pay arrangements change as follows;
- Six months (183 days) full pay in a one year period followed by six months (182 days) half pay. This is subject to a maximum of 365 days paid sick leave in a rolling four-year period.
The ‘rolling four-year period’ means that all sick leave (both certified and self-certified) taken over the previous four years, up to the date of the current illness, is taken into account when calculating eligibility for further paid sick leave. A further look-back of 12 months will determine what rate the sick leave should be paid at.
After this leave you may also be entitled to Temporary Rehabilitation Pay (TRP) for a further 12 months. This then ceases after 2 years.
Temporary Rehabilitation Pay (TRP):
- If you have exhausted your sick pay entitlements and are still unfit to work, then you may be granted Temporary Rehabilitation Pay.
- Temporary Rehabilitation Pay calculation is as follows
Your pensionable Salary to date x (Actual years of service to date PLUS your ill health Added Years**)
- This calculation will be paid for a maximum of 2 years only
- Temporary Rehabilitation Pay will only be available when there is a realistic prospect that you will be able to return to work following your illness.
Ill Health Early Retirement Pay (ERP):
- After you have exhausted your TRP entitlements (2 years maximum) you then have the option to retire early due to ill-health.
- To qualify for this payment, you must be incapable of performing your day to day duties and the illness will most likely be permanent.
- You will be paid an immediate pension and will be awarded ‘ill-health added years’.
So, for example if you have from 5 to 10 years’ service, then you get double the years that you have worked as added years.
Once you have 13 years or over, you are only entitled to 6.66 years added to your actual service. This is then used to calculate you Tax Free Lump Sum and Pension income. Please see table below for illustration;
Please note that once you draw down you ill health early retirement pension, you have in effect left your position on a permanent basis. You can never go back to work on your current arrangement. If you do decide to go back to work, you will be treated as a new 2013 entrant in relation to recruitment process qualify for their reduced pay and superannuation entitlements
- If a pregnancy- related illness occurs before maternity leave commences and you are medically certified as unfit for work due to pregnancy-related illness leave and you have exhausted your entitlement to sick pay in accordance with the normal sick leave rules, you will continue to receive sick leave at half pay (less any social welfare benefit to which you may be entitled to) for the duration of your illness until maternity leave commences.
- If you are unfit for work following maternity leave (irrespective of whether or not the illness is related to pregnancy or childbirth) your entitlement to sick leave at half-pay will be extended by the period of absence due to pregnancy-related illness.
- prior to the commencement of maternity Leave
If you give birth to a child, or reach the 24th week of pregnancy, you are entitled to 26 weeks paid maternity leave and 16 weeks’ additional unpaid maternity leave.
- Maternity leave will ordinarily begin on such day as you select, unless medically certified that the leave should commence on a particular date.
- However, the commencement date must be not later than 2 weeks before the due date and four weeks must be taken after the baby’s birth.
- If the birth occurs in a week before you started your maternity leave then the maternity leave must start immediately and the employer must be informed.
- Unpaid maternity leave commences on the day immediately following completion of paid maternity leave, you have the option to take a maximum of 16 consecutive week’s statutory additional unpaid maternity leave.
- If you avail of statutory additional unpaid maternity leave you may be entitled to receive PRSI credits.
Most public sector workers/civil servants, in addition to the sick pay entitlements above, also insure their salary to protect themselves financially in the event that they are unable to work due to illness and/or injury. If you get a long term illness in your early years of employment, you will only have accumulated a small amount of years of service. Subsequently you will only be entitled to a very low retirement income for the rest of your life after your initial 6 months of sick pay ceases. This is a situation that you do not want to be in…….unable to work and earn an income to pay your bills and no substantial replacement income after the initial 6 month period.
If you would like to learn more about how income protection please CLICK HERE.
Frequently Asked Questions
Normal Retirement Age Rules
If you were employed before the 1st of April 2004 your normal retirement age is 60.
If you were employed on or after the 1st of April 2004 to the 31st of December 2012 your normal retirement age is 65.
If you were employed on or after the 1st of January 2013 your minimum retirement age is the state pension age (68) to a maximum retirement age of 70.
What is the 35-year Rule for Teachers?
If you are a teacher who has reached the age of 55 and has 35 years’ pensionable service, you may retire without penalty if you wish. Two years will be subtracted from your 35 years if you completed a 4-year training period and one year for a 3 year training period. This is to assist teachers reaching the 35 year threshold. So if you are a primary teacher, you can retire at 55 with 34 years pensionable service as you would have been in college for 3 years to gain the relevant qualification. If you are a Secondary teacher you can retire with 33 years pensionable service (or whatever age you complete 33 years’ service) as your qualification would have taken 4 years to complete.
What is FEMPI?
The Financial Emergency Measures in the Public Interest (FEMPI) Act 2013 provides for the reduction in remuneration for certain public servants currently on salaries of €65,000 and greater (inclusive of allowances in the nature of pay) and to persons whose salaries (inclusive of allowances in the nature of pay) rise above €65,000 on or after 1 July 2013.
Annualised amount of Reduction*
Any amount up to €80,000 – 5.5%
Any amount over €80,000 but not over €150,000 – 8%
Any amount over €150,000 but not over €185,000 – 9%
Any amount over €185000 – 10%
Remuneration will not fall below €65,000 as a result of the application of the reductions set out above; pro rata reductions apply to staff who work on a part-time or work-sharing basis.
Public Sector Pay Scales
Most public servants have different pay scales and different grades. For example Teachers have 25 grades where as nurses have between 8 and 10 grades.
See Pay Scales for Teachers in the image below.
Pay scales for HSE professionals: click below to download.
Am I on the correct pay scale?
Many Public sector employees end up being on the incorrect pay scale for two main reasons
- Starting off on the wrong grade from the start or
- Being put on the incorrect grade after switching positions, locations or departments.
For example, as a general rule, nurses will come in to their first job at pay scale 4 grade. This is because they will have been allowed their college years as a scale payment, what sometimes happens is that they start at scale 1 instead of 4 etc and it is never amended. In addition to being paid incorrectly, they could also be paying more tax incorrectly and are due a refund.
It is very important that every employee checks this on a regular basis.
Pensionable and Non Pensionable Allowances- what’s the differences?
Pensionable allowances include:
- Approved special allowances payable in respect of higher qualifications or higher degrees.
- Approved allowances payable in respect of special certificates.
- Approved allowances in relation to special duties, or for working in particular work areas (e.g. location allowances, theatre allowances paid to nurses)
- Living out allowances and approved stand by.
- Approved allowances payable to staff roster within normal working week for weekend, night, bank holiday duty.
Non-Pensionable Allowances include:
The following are not included in your pensionable remuneration;
- Overtime payments, call-out/on-call allowances apart from the special allowances referred to above, are not normally pensionable.
- Overtime, commission, gratuity, special fees, travelling and subsistence allowance are not pensionable payments.
Cost Neutral Early retirement
If you retire prior to your NRA or before you qualify for the 35 years rule (pre-2004 employees only), you have 2 options in drawing down your pension;
Defer drawing down benefits until NRA to avoid any penalties
Draw down pension benefits and incur the relevant penalties to your tax-free lump sum and pension. Please see the table below which shows how these penalties are applied;
INSERT TABLE FROM REPORT
If you give birth to a child, or reach the 24th week of pregnancy, you are entitled to 26 weeks paid maternity leave and 16 weeks’ additional unpaid maternity leave.
Maternity leave will ordinarily begin on such day as you select, unless medically certified that the leave should commence on a particular date.
However, the commencement date must be no later than 2 weeks before the due date and four weeks must be taken after the baby’s birth.
If the birth occurs a week before you started your maternity leave, then the maternity leave must start immediately and the employer must be informed.
Unpaid maternity leave commences on the day immediately following completion of paid maternity leave, you have the option to take a maximum of 16 consecutive week’s statutory additional unpaid maternity leave.
If you avail of statutory additional unpaid maternity leave you may be entitled to receive PRSI credits.
Taking a Career Break
You can be granted a career break for any of the following reasons:
- domestic reasons, e.g. child-rearing;
- educational purposes, e.g. to attain a post-graduate qualification;
- Foreign travel.
You must have completed your probation period to be eligible to apply for a career break.
If you are still on probation you may be granted a career break in exceptional circumstances, e.g. to cope with unusual domestic difficulties, however your period of probation is extended by the length of the career break.
The minimum period for a career break is one year (except where leave is required to cope with unusual domestic difficulties) and the maximum period is five years.
You may take a career break immediately following a period of special leave with nominal pay provided the combined leave does not exceed five years.