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NOTE: A recent article in InTouch gives comprehensive information on teachers’ pensions. It can be accessed HERE
CHECK YOUR PENSION HAS BEEN CALCULATED CORRECTLY
On retirement, the DES will furnish you with a detailed spreadsheet laying out how your pension has been calculated. It is important that you check this for accuracy immediately and revert to the DES if it is incorrect. It is much easier to remediate mistakes earlier.
The two key pieces of information required to calculate pension are “Length of service” [how long you have been in in pensionable employment in the public service] and your “retiring salary ” [the salary at which your pension and lumpsum will be based.]
“Retiring salary” is the point of the scale that you are on at retirement [generally the top point] plus any additional allowances you hold. To be fully included in “retiring salary” allowances have to be held for the final three years of service [1095 days.] Where an allowance is not held for the full 3 years an averaging arrangement applies. A person, for example, who received a new allowance in the last two years of service would have 2/3rds of the allowance reflected in the calculation of “retiring salary.” In the interests of accuracy, the DES gives credit for every day served in the three years. Thus, a person in the latter case would be credited with 730/1095ths of the allowance.]
A separate article on this website shows how pension and lumpsum is calculated. Two different formulae apply.
One calculation applies to teachers who commenced work prior to 6 April 1995 and have not incurred a break in service since. Teachers in this group, who paid the lower Class D rate of PRSI for the duration of their careers have pension and lumpsum paid in full by the DES. At present the majority of retirees are in this position. The calculation of pension and lumpsum is straightforward:
A teacher’s pension is calculated on the basis of 1/80th of “retiring salary” for every year of pensionable service (or part thereof)
A teacher’s lumpsum is calculated on the basis of 3/80ths of “retiring salary” for every year of pensionable service (or part thereof) Thus, a teacher retiring after 35 years’ service will receive a pension of 35/80 of retiring salary and a lump sum of three times this amount
A more complex calculation applies to teachers who started teaching or returned to teaching after a break in service on or after 6 April 1995.
Teachers in this category now pay the higher Class A rate of PRSI and have their DES pension coordinated with the State Pension [previously known as the Old Age Pension.] The lumpsum is paid in full by the DES in the normal manner.
Teachers with “coordinated pensions” i.e. those with Class A PRSI contributions should also read the next section on Supplementary Pension.
ACTIVATE SUPPLEMENTARY PENSION
This section is only relevant to teachers who pay the higher Class A PRSI i.e. those who started teaching on or after 6 April 1995 or those who, following a break in service, returned to teaching after that date. Approved leave of absence either paid or unpaid does not constitute a break in service.
At present the majority of teachers are not eligible for the State Pension (previously know as the Old Age Pension) and have their pensions paid in full by the DES. This arises because at present most teachers reaching retirement age have paid PRSI at the lower Class D rate for their full careers. This lower rate of PRSI does not cover eligibility for the social welfare State Pension.
However, teachers who commenced employment or returned after a break in service on or after 6 April 1995 pay the higher Class A PRSI. The higher rate of contribution may give an entitlement to the State Pension. However, the occupational pension paid by the DES is lower for this cohort. This arrangement is known as a coordinated pension, as there is a link between the occupational pension (paid by the DES) and the State Pension (paid by the Department of Social Protection).
At present teachers, subject to meeting the minimum service requirement, can retire from age 55 onwards. However, the State Pension is only paid from age 66. There is a mechanism in place to ensure that there is no income gap for these teachers. In the interval between a teacher’s retirement from school and his/her 66th birthday, the DES will pay the teacher an additional amount of pension referred to as a ‘Supplementary Pension’. On reaching age 66, when the State Pension commences the additional ‘supplement’ paid by the DES will cease (or in some cases reduce).
However, the DES will not commence the payment of the supplementary element automatically. A teacher must apply to the DES for this additional payment.
Furthermore, the DES will not pay the Supplementary Pension if the teacher is already in receipt of a payment from the Department of Social Protection (with the exception of Widow’s/Widower’s & Surviving Civil Partner’s Pension.)
In assessing applications for the Supplementary Pension the DES will require the retired teacher to have a form completed at his/her local social welfare office, confirming whether or not he/she is eligible for any social welfare payments.
On calling to the social welfare office teachers discover that their Class A contributions make them eligible for Jobseekers Benefit (JB). This is a weekly payment which lasts for 9 months. They will be advised by social welfare to apply for this Benefit. If the JB is granted they will also have to comply with certain “signing on” requirements for the duration of the 9 months.
For those who pay Class A PRSI engaging with the Department of Social Protection is not optional. It is not open to the retiree to refuse to claim the JB and elect for the Supplementary Pension. Where an entitlement to JB exists, the DES will not pay the Supplementary Pension until the JB has been exhausted.
At the end of the 9 month period the teacher must get a form stamped at their social welfare office confirming for the DES that the JB has been exhausted and that the teacher has no further entitlement from social welfare. At that point the DES will commence the payment of the Supplement.
Reference: The DES website has an Information Note and Q&A on Supplementary Pension; A Supplementary Pension application Form (to be returned to the DES) and the form to be completed by social welfare (to accompany the application) can also be downloaded. To access, click HERE
CLAIM YOUR TAX RELIEF FROM DEDUCTIONS ON LUMPSUM (if any)
Some teachers may have a deduction taken from the lumpsum in respect of outstanding pension contributions.
This most frequently arises, in the case of women who joined the Spouses’ and Children’s Pension scheme (Sp & Ch) when it was introduced in 1981. A deduction for this benefit is made from the teacher’s lumpsum in respect of any service prior to 1981. For example, a woman teacher who started teaching in 1977 and who joined the scheme in 1981 will have outstanding contributions for the first four years of her career deducted from her lumpsum.
Some women who were in service when the Sp & Ch scheme was introduced in 1981 and who chose not to join at the time, were given a further opportunity to join the scheme in 2005. The women who joined in 2005 will have an even greater deduction from the lumpsum, as outstanding contributions are required for service prior to joining.
These deductions are pension contributions and will therefore attract tax relief. The retiree must apply to Revenue for the tax refund and to facilitate this, the DES will include in the documentation issued at retirement, a certificate for presentation to the Revenue Commissioners stating the amount of the deduction.[Note: The option not to join the Sp & Ch scheme was only extended to women who were in service when it was introduced in 1981. Joining became compulsory for any woman who commenced teaching from 1981 onwards. The Sp & Ch scheme is compulsory for men since 1969 so the issue of deductions from male teachers’ lump sums no longer applies!]
Teachers can also have deductions from lumpsum in relation to the “buyback” of substitute service. In the past (circa 1980s and earlier) a pension contribution was not deducted in respect of service given in a substitute capacity. It is now possible to have this service converted to pensionable service by the payment of a pension contribution at retirement (also deducted from lumpsum.) The DES will also include a certificate for the Revenue Commissioners in this circumstance.
DEDUCTION OF VHI PREMIUM FROM PENSION
Teachers who have VHI premiums deducted from salary and who wish to continue to have premiums deducted from pension should note the following:
- VHI deductions from salary will not automatically continue as deductions from your pension;
- Therefore, you must inform VHI that you are retiring. You will be asked to sign an Authorisation Form which gives authority to the Pension Section of the DES to deduct subscriptions on behalf of VHI. This applies even if you previously had premiums deducted from salary. The Authorisation Form is issued to you by VHI and must be returned to VHI;
- Even if you do this prior to your retirement there will not be a seamless continuation in deductions. This arises because VHI will require your new Pension Number which you will only receive with your first pension payment, before it can complete the administrative process;
- This will give rise to an interruption in payroll deductions;
- The annual renewal date for the Retired Teachers’ Scheme, is 1 January. Advise VHI that you want your premium deductions re-commenced from that date. You will then have to pay the premiums due for the period Sept to Dec directly to VHI by cheque/card.
- This information note assumes a retirement date of 31 August. However, the same principles apply to teachers retiring at other times of the year.
- The key message: Contact VHI and discuss your options.
VHI Tel: 1890 – 44 44 44
RTAI Group Scheme No 13/655
NOTE: At present other Health Insurance providers do not have a facility with the DES to have premiums deducted from salary/pension.
WORKING IN SCHOOLS FOLLOWING YOUR RETIREMENT
If you intend to do occasional substitute or fixed-term work following your retirement it is essential that you maintain your Teaching Council Registration (The annual renewal fee of €65 euro will apply). The DES is precluded by law from paying salary to any unregistered teacher. Your annual renewal notification will be issued to you by the Teaching Council in the normal manner i.e. the Council will not be aware that you have retired unless you inform them.
If you are one of the teachers who to date has not been subject to Garda Vetting you must also complete this process. It is now an offence for a BOM to take on a “new” employee who has not been vetted. Vetting applications to the Vetting Bureau are made via the Teaching Council and there is no additional fee for the vetting process.
Taking out Substitute Membership of the INTO (€85 per annum) is strongly recommended. Issues in the workplace arise from time to time for all teachers, even those who are retired and only working intermittently. The function of RTAI is to advise members on matters that affect them in retirement and the Association is not in a position to advise in relation to matters that occur during periods of employment as a teacher. Substitute membership of the INTO is a very cost effective protection and necessary in this circumstance. You can get more information about INTO membership HERE
Note: From a payment perspective, retired teachers returning to the classroom are treated as if they were recent graduates i.e. salary is linked to the starting point of the scale and not the point the teacher was at prior to retirement!
Further detailed information on teaching after retirement may be accessed HERE