Pension Abatement
Pleases note that this document is an RTAI Information note for general guidance
Can a retired teacher work in a substitute/fixed term capacity?
A school can engage a retired teacher to work in a substitute/fixed term/part-time capacity in circumstances where it has not been possible to recruit a teacher who is not retired.
What is pension abatement?
There is no limit to the number of days a retired teacher can return to work in a school.
However, when working in a school (or indeed elsewhere in the public sector), the retiree’s combined income from pension and pay cannot be more than the salary he/she was earning prior to retirement1.
In other words, a retired teacher will not receive more remuneration from the Department of Education [DE] as a retiree, than he/she received when in full time service.
Where combined earnings are more than pre-retirement salary, the retiree’s pension is temporarily reduced or abated, to ensure that the ceiling of pre-retirement earnings is not breached. But abatement will cease once the retiree stops working.
It is important to note that abatement is calculated and applied on a daily basis.
Abatement of pension applies throughout the public service and is not unique to the school system.
DE Circular 3/2021
In January 2021 the DE issued Circular 3/2021.
This Circular provides that for the calendar years 2021 – 2023, and ‘in order to alleviate the current teacher supply difficulties’ the first 50 days worked in a calendar year2 will not be subject to abatement. This is referred to in the circular as an ‘abatement waiver’. (Example 1) For the purpose of the waiver any day in which a retired teacher works is counted as 1 day, regardless of the number of hours worked.
Therefore, it is only where a retiree works more than 50 days in a calendar year that the question of pension abatement could potentially arise. (Examples 2, 3, 4 and 5).
Is pension automatically reduced if a retiree works more than 50 days?
Abatement does not automatically arise if the work stretches beyond 50 days.
This is a key point: reducing (or abating) pension will only arise if the retiree’s combined income (pension and pay) during the period of employment is more than what he/she would have received over a similar period prior to his/her retirement.
Since a retired teacher is moved to the first point of the ‘new entrant’ scale on returning to employment, the vast majority of retired teachers will not be subject to any abatement as a result of occasional substitute work. (Examples 2, 3 and 5 are based on the 1st point of the scale.)
Abatement becomes somewhat more likely for a retiree who has returned to employment so frequently, that he/she has advanced up the incremental scale. However, even in this circumstance the majority of retirees will not be subject to any abatement. (Example 4 is based on the 5th point of the scale.)
It is also worth noting, that the higher a teacher’s salary is at the time of retirement it becomes less likely that abatement will arise.
Where abatement is applied, the amount of the reduction to pension will generally not be so severe as to deter someone from working.
Nonetheless, once a teacher has worked for 50 days, he/she will be advised by the DE that the
‘50 waiver’ period has expired, and that the DE will assess whether abatement is required.
How does the DE determine whether abatement is required and how does it calculate the amount of the reduction, if applicable?
As outlined earlier once the 50 days ‘waiver period’ has expired abatement is calculated on a daily basis. Three figures are required for each individual calculation:
gross daily rate of salary prior to retirement1
- gross daily rate of pay on return to schooll3
- gross daily rate of pension4 and 5
In each case the daily rate is calculated by dividing the annual rate by 182, i.e. the number of days in the school year at primary level.
Example 1 Retired teacher Michelle worked as a substitute teacher for less than 50 days in a calendar year.
Q Will Michelle’s pension be subject to abatement?
A The issue of abatement of pension doesn’t arise as the ‘waiver’ set out in Circular 3/2021, provides that abatement does not apply to a period(s) of employment of 50 days or less in a calendar year.
Example 2 Recently retired teacher Rosemary earned €86,346 prior to retirement. After 40 years’ service she is on an annual pension of €43,173. She is working as a substitute teacher for more than 50 days.
Q Will Rosemary’s pension be subject to abatement?
The calculations unique to Rosemary are as follows:
Daily rate of pension (€43,173/182) €237.21
Substitute daily rate (€39,838/182) €218.89
Total (pension plus pay) €456.10
Daily rate of salary prior to retirement (€86,346/182) €474.43
A Pension abatement is not required in Rosemary’s case. as her combined daily earnings (pension plus pay) are less than her pre-retirement daily salary,
Example 3 Recently retired teacher Micheál earned €77,688 prior to retirement. After 37 year’s service he has an annual pension of €35,931. He is working as a substitute teacher for more than 50 days.
Q Will Micheál’s pension be subject to abatement?
The calculations, unique to Micheál are as follows:
Daily rate of pension (€35,931/182) €197.42
Substitute daily rate (€39,838/182) €218.89
Total (pension plus pay) €416.31
Daily rate of salary prior to retirement (€77,688/182) €426.86
A Pension abatement is not required in Micheál’s case as his combined daily income (pension plus pay) is less than his preretirement daily salary.
Example 4 Miriam is retired for many years and has been subbing almost continuously since her retirement. She has therefore advanced several points on the salary scale and is paid at the 5th point of the scale (€45,235) for any substitution work. Her salary prior to retirement of €77,688 and pension of €35,931 are identical to Michael’s figures in example 3.
Q Will Miriam’s pension be subject to abatement? The calculations, unique to Miriam are as follows:
Daily rate of pension (€35,931/182) €197.42
Substitute daily rate (€45,235/182) €248.54
Total (pension plus pay) €445.95
Daily rate of salary prior to retirement (€77,688/182) €426.86
A Pension abatement is required in Miriam’s case as her combined daily income (pension plus pay) is more than her preretirement daily salary. The daily abatement rate will be €19.09 , (i.e. €445.95 – €426.86).
Once Miriam, has gone beyond the 50 day waiver, her fortnightly pension will be reduced by €19.09 for each day that she works in that fortnight.
Example 5 Recently retired teacher Anne earned €73,520 After 35 years’ service she is on an annual pension of €32,165. She is working on a fixed-term contract but on a half day basis i.e. her effective annual salary on return is therefore €19,919 (half of €39,838).
Q Will Anne’s pension be subject to abatement?
The calculations unique to Anne are as follows:
Daily rate of pension (€32,165/182) €176.73
Daily pay rate (€19,919/182) €109.45
Total (pension plus pay) €286.18
Daily rate of salary prior to retirement (€73,520/182) €403.96
A As Anne’s combined daily earnings (pension plus pay) are less than her pre-retirement daily salary, pension abatement is not required.
Summary
There are three key points to remember if, as a retired teacher, you are contemplating returning to school:
- 50 days is not the maximum number of days you are permitted to work in a calendar year;
- even if you go beyond 50 days, abatement does not automatically apply; and
- where abatement of pension does arise, on its own, it is unlikely to be a deterrent to continue working.
What’s the worst case scenario?
Returning to school for 50 days or less will have no impact on your pension. From day 51 onwards the worst outcome is that for each day you return, your combined earnings (pension plus pay) will be ‘capped’ at what you were earning for any day prior to your retirement.
Key take away
Abatement is about a ceiling on combined earnings (pension plus pay) from the DE and not about a restriction on the number of days you are allowed to work.
Final note: The provision of Circular 3/2021 are enforce to end December 2023. It is possible that revised arrangements might apply in 2024
Notes:
- The calculation of ‘salary at retirement’ is based on current salary level i.e. including increases since retirement. The figures used in this document are taken from Circular 64/2022 i.e. the rates from 1 October 2022.
- Abatement applies across all government departments, therefore, it is measured over the calendar year and not the school year.
- The daily substitute rate of pay in examples 1, 2, 3 and 5 is €218.89. This is based on the 1st point of the ‘new entrant’ scale i.e. €39,838, dived by 182.
It is important to note however, that a retiree who has worked for significant periods over many years since retirement could have progressed to a higher point on the incremental salary scale which could make abatement some what more likely.
The daily substitute rate of pay in example 4 is €248.54. This is based on the fifth point of the ‘new entrant’ scale i.e. €45,235, dived by 182.
[A flat daily rate of €225.50 applies to the first 40 days of substitute service, thereafter the daily rate is calculated as above]
- To calculate ‘daily pension’, first multiple the fortnightly gross pension by 26.09 to get ‘annual pension’; and then divide by 182.
- Where a retired teacher is in receipt of a supplementary pension, this element of pension, is not included in any abatement calculations.