UNIVERSITY OF LIMERICK Superannuation Scheme

CLASS D PRSI

Presented by Séamus O’Dwyerin association with Liam Mannion,

Rockcourt Financial Services Ltd

1

To provide adequate replacement income in retirement

To provide benefits to certain Survivors on Death of the Member during service or in retirement

To provide a Scheme which is stable and capable of meeting its liabilities

e.g. not to pay benefits before a specified age

To have definite rules stating the basis on which benefits are paid

e.g. Age, Salary, Service, Contributions, Investment

Returns

1. LINKED TO EMPLOYMENT (Occupational Pension Schemes)◦ Defined Benefit Scheme

◦ Defined Contribution Scheme

2. Private Pension Plan or Top-up to Occupational Pension. e.g. PRSA or AVC

Not sponsored by the employer

3. Social Welfare Pension (CSP)

Linked directly to employment◦ Membership is compulsory for eligible staff

◦ Accrual of benefits stops when you leave but possibility to transfer within Public Sector

Defined Benefit◦ A set of Rules

◦ You can calculate the pension for an individual if you have certain facts and know the rules

4

Main Features

Occupational Scheme

Defined Benefit Benefits for the Member (Personal Benefits)

Benefits for Survivors (If also a member for Survivor

Benefits)

Contributions

No Pension Fund – Pay As You Go

5

University of Limerick Superannuation Scheme

Legislation: a new Statutory Instrument (S.I. 582 of 2014): Rules for Pre-existing Public Service Pensions Scheme Members Regulations 2014* - updates the current scheme provisions, subject to certain modifications

*www.irishstatutebook.ie

6

Pension Contributions The main components and how a pension is calculated Minimum Pension Age and Max. Retirement Age Preserved Benefits and Cost Neutral Early Retirement Retirement on Medical Grounds Supplementary Pensions Death in Service Survivor’s & Children’s Scheme Marriage Breakdown and Pension FEMPI Acts– Impact on pension - recent changes New Legislation – will it affect me? Transferred Service Adding to Service - Purchase of Notional Service and

AVCs U.K Pensions

7

Class D PRSI members pay 5% of gross pensionable salary for personal pension benefits

◦ In addition there are contributions for Survivor’s and Children’s Benefits

8

There are pro-rata contributions for part-time staff or worksharers:A x B/C where:

A = the contributions payable by an equivalent whole time member

B = the number of hours (excluding overtime) worked by the member

C = the standard number of hours worked in the equivalent whole time post

9

Examining the Key Elements in more detail………

10

Have reached the Vesting Period?

Member of which Scheme or Scheme Category?

Service Reckonable for Pension?

Pensionable Salary?

PRSI Class?

Accrual Rate (formula to use)?

Minimum Pension Age?

Maximum Retirement Age?

This is the qualifying period to have a pension paid to you

It is currently 2 years’ as an active Scheme Member

Death in Service benefits do not have a Vesting Period condition

Class D members* recruited prior to 6 April 1995

All appointees to a pensionable post.

* There are separate presentations for Class A PRSI members and

members of the Single Public Service pension Scheme

13

1. Actual Service following admission to the Scheme

2. Service transferred from another Public Sector Pension Scheme via the Transfer Networks

3. ‘Notional’ Added years for Death in Service

Ill-health retirement

Professional Added Years

4. ‘Buy-Back’ of earlier service, subject to conditions and where appropriate contributions have been paid

5. Service purchased under the purchase of service scheme6. Service credited from a Transfer Value payment from outside the Transfer Network7. Sick Pay at full and half pay is credited as full time service for whole-time Members

Note: (1) unpaid leave is not pensionable(2) Temporary Rehabilitation is not

pensionable(3) maximum pensionable service is 40 years

16

Have reached the Vesting Period? √

Member of which Scheme? √

Service Reckonable for Pension? √

Pensionable Salary?

PRSI Class?

Accrual Rate (formula to use)?

Minimum Pension Age?

Maximum Retirement Age?

17

Some Pay may not be pensionable…………

18

Pensionable Salary excludes:

- overtime

- special fees or bonus

- travel and subsistence

19

Averaging applies where the member changed grade or salary scale in the final 3 years

◦ Except where -

the member died before age 62 or

the member retired on ill-health grounds more than 3 years before age 60

20

The calculation:

◦ The number of days in the former grade divided by 1095 multiplied by the salary of the former grade at retirement taking into account any increment which would have been if member remained in former grade plus….

◦ The number of days in the current grade divided by 1095 multiplied by salary held at retirement

example

21

Have reached the Vesting Period? √

Member of which Scheme? √

Service Reckonable for Pension? √

Pensionable Salary? √

PRSI Class?

Accrual Rate (formula to use)?

Minimum Pension Age?

Maximum Retirement Age?

22

Class D (Modified) PRSI or

Class A (full) PRSI

Key date: 5th April 1995

You must know this when calculating your pension as it will dictate which accrual rate formula you use in calculating the pension - see

next slide

23

This is the rate of pension credit (or lump sum credit) a member gets for each year of service. It is expressed as a fraction which is applied to the pensionable salary

Class D PRSI:◦ It is 1/80th for pension; and

3/80th for Lump Sum

24

Pre-1995 and Modified PRSI …Accrual Rate 1/80th

Orla is age 60 and retiring with Retiring Salary of €80,000 and no pensionable allowances. Her Pensionable Service is 40 years (the maximum)

Annual Pension = Salary x Service/80

€80,000 x 40/80 = €40,000

25

Lump Sum Accrual rate is 3/80th

Mary is 60 and retiring with Retiring Salary of €80,000 and no pensionable allowances. Her Pensionable Service is 20 years

Retirement Lump Sum

€80,000 x 20 x 3/80 = €60,000

This is the same accrual rate and the same calculation regardless of PRSI Class

26

Have reached the Vesting Period? √

Member of which Scheme? √

Service Reckonable for Pension? √

Pensionable Salary? √

PRSI Class? √

Accrual Rate (formula to use)? √

Minimum Pension Age?

Maximum Retirement Age?

27

This is the earliest age at which you may retire and receive an immediate lump sum and pension without actuarial reduction (except Ill-health)

Age 60 for those who commenced service before 1 April 2004

Age 65 for “New Entrants” as defined in the Public Service Superannuation (Misc. Provisions) Act 2004. Includes all recruits from that date unless they had been in the Public Sector within the last 6 months and were not “new entrants” in that earlier post

For members of the New Single Scheme it is the same as the Social Welfare pension age – now 68 for most new recruits

28

For those who are not “new entrants” or members of the New Single Scheme, the 30th

September after reaching age 65 is the compulsory retirement age

For “new entrants” (2004 Act) there is no compulsory retirement age

For members of the New Single Scheme 70 is the compulsory retirement age

29

Have reached the Vesting Period? √

Member of which Scheme? √

Service Reckonable for Pension? √

Pensionable Salary? √

PRSI Class? √

Accrual Rate (formula to use)? √

Minimum Pension Age? √

Maximum Retirement Age? √

30

Staff Recruited Before 6 April 1995 paying Class D PRSI

Formula for Pension Calculation

Salary * Service/80

31

Pre -1995 and Class D PRSIAs we saw earlier………Orla is 60 and retiring with Retiring Salary of €80,000 and no pensionable allowances. Her Pensionable Service is 40 years (the Maximum)

Annual Pension = Salary x Service/80€80,000 x 40/80 = €40,000

Retirement Lump Sum€80,000 x 40 x 3/80 = €120,000

32

Where a member resigns before minimum pension age, pension and lump sum benefits are Preserved

Must have completed the vesting period

If the member has not completed the vesting period, the member gets a refund of contributions unless he or she is transferring the service

Member has the option of applying for Cost Neutral Early Retirement if within 10 years of min. pension age

33

This allows a member who is resigning and who has completed the vesting period and who is within 10 years of the minimum pension age to apply for an immediate lump sum and pension instead of Preserved Benefits.

The benefits will be actuarially reduced to reflect the early draw-down. The pension will be subject to the reduction because it will now be paid over a longer period

Must be applied for before resignation, otherwise the benefits are preserved

34

If Minimum Pension Age is 60

35

36

If Minimum Pension Age is 65

Formula:

[A + ((B/365) x (C-A))] x Preserved Benefit

Where

A = Actuarial reduction in the table based on age last birthday

B = No of days since last birthday

C = Actuarial reduction factor based on age next birthday

If approved:with more than 5 years actual pensionable service:

1. Pension is payable immediately and

2. Added years may be awardedIf vesting period completed, but less than 5 years actual service, immediate pension but no added years

38

Added years calculation:

Service between 5 and 10 years:The service is doubled but capped at potential service to age 65

Service between 10 and 20 years:Service is topped up to the better of 20 (capped at potential to age 65) or 6 and 2/3rds years (capped at potential to age 60)

Service above 20 years: 6 and 2/3rds years added capped at potential to age 60.

39

When Payable◦ To whom?

◦ In what circumstances?

How is it calculated?

How is it Reviewed?

40

Death Gratuity payable when a member dies in service◦ the more favourable of:

One year’s actual salary

Lump sum payable as if member had retired due to ill health (including added years, if applicable)

Spouses and Children’s* Pension (with additional notional service)

*incl. Civil Partner

41

Impact of Finance Circular 11/2012 on:

◦ Death in Service Benefits

◦ Benefits on retirement on medical grounds

Where the member is working at less than wholetime hours

42

The Scheme originally covered Spouses* and Children but now covers a Civil Partner in a Civil Partnership recognised under the 2010 Civil Partnership Act.

* Includes same sex marriages under the Marriage Act 2015, following the Referendum

43

The S&Cs scheme applies to all male members of the Scheme from1 January 1980 and from 1 September 1984 for female members

Membership is now compulsory for all members recruited who are members of the Superannuation Scheme

44

The Spouse is the legal spouse as recognised in the Irish State.

The legal status of the spouse is not affected by:◦ A Church annulment

◦ A legal or judicial separation under the 1995 Family Law Act.

Since the enactment of the 2010 Civil Partnership Act where the word “widow” or “spouse” is used in the scheme it also includes a “Civil Partner”

45

A Person under 16 or under 22 if in full time education or training and

◦ is unmarried and

◦ is dependent on the Member.

There is no age limit if a person has a permanent disability and the disability occurred before age 16, or 22 if in full-time education or training.

Calculate “the deceased’s” pension

The Spouse’s Pension is one-half of the “deceased’s pension

47

John dies while in receipt of a pension of €30,000:

- the spouse’s pension is one-half of John’s pension = €15,000

The “deceased’s pension” is in some case a notional pension used for calculation of a spouses pension – see the next example…………

48

Mary who was a Class D PRSI member, dies in service. Her pensionable at date of death was €60,000. She died on her 45th birthday and had 22 years and 53 days service.

“deceased Pension” €60k x 40/80 = €30,000* Spouse’ Pension is €30,000/2 = €15,000

*Note 1: potential service to age 65, capped at 40 yearsNote 2: the calculation of the deceased’s pension

following an ill-health retirement is the same

49

Calculate “the deceased pension”SpouseIf 1 Child: 1/6th of “deceased’s pension”If 2 Children: 1/3rd of “deceased’s pension”If 3 or more Children: ½ of the “deceased’s pension”

divided equally among the children

No Spouse:If 1 Child: 1/3rd of “deceased’s pension”If 2 or 2+ Children ½ of “deceased’s pension” divided equally among the children

50

Deducted from salary

Class D PRSI: 1.5% of pensionable salary

Periodic contribution continue beyond 40 years but excess is refunded beginning with the earliest

51

Where all periodic contributions have not been paid e.g. for pre-scheme service, a member has option of paying additional periodic contributions in multiples of 1.5% to clear the arrears or part of the arrears.

◦ e.g. I had 2 years pensionable service in another organisation before I joined UL. I can clear the arrears by paying an addition 1.5% deducted by payroll for a period of 2 years

Alternatively…………………………..

52

Deduction from retirement Lump Sum ((or Death Gratuity) @ 1% of pensionable salary

Payable only if the Member was married (or in a Civil Partnership) during Scheme membership

Payable in respect of periods of service for which contribution have not been paid (e.g. pre-scheme service)

Payable also in respect of potential service to age 65 (capped at 40) in cases of ill-health retirement or death in service

53

Public Sector Transfer Network- Service may be transferred from a Body which is a

member of the Network to another member Body. - Usually on a ‘knock-for knock’ basis but may be

on the basis of transfer value or “16c” - Service is transferred but the terms of the

receiving scheme apply- Outstanding contributions plus interest on the

service being transferred must be paid for- The preserved service in the former scheme is

cancelled

54

A member may add to their pension by:◦ Purchasing additional years in the scheme within

certain limits – this is part of the superannuation scheme

◦ Buying back earlier service where pension contributions had not been paid

◦ Making Additional Voluntary Contributions (AVCs) –this is not part of the superannuation scheme

55

Limits on Purchase (Revenue Rules)

Cannot purchase to be over-pensioned (40yrs)

May purchase by a single lump sum payment or by periodic deductions from salary

May purchase by reference to age 60* or 65

Purchase Tables have the rates. Different rates for purchase to 60 and 65, whether a member of S&Cs Scheme and whether Class A or Class D PRSI

*2004 New Entrants may purchase to 65 only

56

Reductions in the amount purchased if:◦ Leaving earlier than the target date

◦ Taking periods of unpaid leave

◦ Taking Pension before the target date

57

It is the only way you can guarantee actual added years in pension and lump sum

Rules can be rigid. You may have to set up multiple contracts if taking breaks in service

Can be “winners” and losers” – Cross-subsidy.

Cannot buy lump sum only, separate from pension

58

Church annulment

State Decree of Nullity

Divorce abroad

Marriage abroad

Legal Separation

Judicial Separation - 1995 Family Law Act

Divorce - 1996 Family Law (Divorce) Act

Civil Partnership Act 2010

59

A member’s Pension, Lump Sum and Death in Service entitlements along with an actuarial valuation of the pension entitlement may be used by the Courts to make a Pension Adjustment Order for the spouse or dependants

A PAO can be made against the Death Gratuity, Retirement Lump Sum, Member’s Pension or Spouse’s Pension

60

PAOs – made by a Court under the Family Law Acts

These bind the Scheme to pay to the non-member spouse a specified part of the pension which would normally be paid to the member or the member’s current spouse

Can be varied in some circumstances

PAOs override the Scheme rules

61

Shifting sands◦ Pay restoration

◦ PRD (Pension Levy) reductions

◦ PSPR (Pension reductions being restored)

Thinking of retiring?

62

Original Reductions for Retirement between 1 July 2013 and within the Grace Period* Pension Cut only for those on pension above

€32,500: Up to €12K - exempt €12K - €24K - 2% €24K - €60K - 3% €60K - €100K- 5% €100K+ - 8%

Lump Sum not affected.*Rates amended by the 2015 FEMPI Act – see next slides

63

Grace Period Extended to 1 April 2019

Restoration of PSPR (Pension Cuts)

The next table covers pensions which come onto payment anytime after 29 February 2012 but only where the pension is over €32.5K

64

PSPR on pensions (retired after March 2012) above €32,500

2015 2016 2017 2018

Band Rate Band Rate Band Rate Band Rate

Up to €12K 0% Up to €29.3K 0% Up to €39K 0% Up to €60K 0%

€12K —€24K

2%

€24K —€60K

3%€29.3K —€60K

3%€39K —€60K

2%

€60K —€100K

5%€60K —€100K

5%€60K —€100K

5%€60K —€100K

5%

€100K + 8% €100K + 8% €100K + 8% €100K + 8%

Internal Disputes Resolution Procedures

Refer to the Pensions Department in the first instance

Further steps if not resolved:◦ Appeal to the Minister for Education & Skills (and

Minister for Public Expenditure and Reform)

66

Pensions Ombudsman – Procedures and time limits

67

2012 Act Requirements

Pension Act Requirements

Data Protection

Family Law Information Requirements

68

Added to service where the essentialeducational qualification or experience required for the post could not be gained before age 25. Subject to rules set out in Circulars and in the entry competition.

69

CPI Pension increases (Subject to Ministerial order) (S.47)

Abatement across the Public Service (S.52) Cap of 40 years’ service across P.S.

Schemes(S.52) Duty to give information (S.49) Use of PPSN (S.50) Duty to make declarations (S.51) One Survivors’ Pension(S.54)

70

[Section 52, subsections (1) to (5), of the Public Service Pensions (Single Scheme and Other Provisions) Act 2012]

◦ Key innovation in 2012 law: risk of pension abatement where pensioner returns to any public service job

◦ For any new hire:(1) Determine in principle if pension abatement could apply

Pensioner must be “appointed to a [remunerated] position”

… on or after 1 November 2012

(2) Then calculate by how much the pension is abatedRange of outcomes: zero to 100% of pension abated

Calculation basis unchanged in 2012 law, so …

3 parameters: pension (€), new salary (€), old salary (updated) (€)

Abate pension to the extent that [Pension + new salary] > old salary

Have you ever worked in the UK?

You may have a pension entitlement there.

What are your options?

Superannuation Advice

Non Union affiliated

Independent Advice on:

• Income Protection

• Additional Death in Service Cover

• Investments

Transfer of UK Pensions

73

Regulated by the Central Bank Reg. No. C134810

74

Rockcourt Financial Services Ltd, 6-9 Trinity Street, Dublin 2.

Rockcourt Financial Services Ltd, Main street, Glenamaddy, via Castlerea, Co. Galway.

Tel: 01-2091955 / 094-9638533

Email: info@rockcourt.ie

Rockcourt Financial Services Ltd, trading as Rockcourt, is regulated by the Central Bank of Ireland C134810 .

The University of Limerick is pleased to facilitate this presentation but it does not endorse Rockcourt or any Financial Services Company.

This Presentation is intended as a guide only. It is not a legal interpretation of the Scheme. Benefits will only be payable on the basis on the rules, relevant legislation and circulars in force at the time of payment

Rockcourt Financial Services Ltd is regulated by the Central Bank ref. C134810

75