Thinking of retirement in 2017?
Important considerations when picking a retirement date
The following changes were made to salary since last September:
- 1 September 2016: €796 restored on the scale in respect of the first half of restoration of Supervision and Substitution money;
- 1 April 2017: Pay restoration of €1,000 on all points of the scale
On 1 September 2017, €796 will be restored on the salary scale in respect of the second half of restoration of Supervision and Substitution money.
The Haddington Road Agreement (HRA) cut to salaries over €65,000 still applies until 1 January 2018. Retiring teachers are protected from this by virtue of the “Grace Period”.
The Grace period also protect the pre2013 value of the supervision and substitution payment which was €1769.
However, due to the increases outlined above, in some circumstances, a teacher’s final salary for pension calculation may be higher on 1 September 2017 than it would be if retiring on 31 August 2017.
Below is a simple outline of the teachers who stand to benefit by being in service on 1 September 2017 and those who will not. This is INTO advice based on information available from the DES at present:
Teachers who will benefit from being in service on 1 September 2017.
- Teachers earning less than €65,000 at present.
- Teachers who opted out of the Supervision and Substitution scheme when it was paid as an allowance (prior to 2013)
Teachers who will not benefit from being in service on 1 September 2017 (ie retire on 31 August).
- Teachers earning in excess of €66,850 at present. For this group of members, retirement from 31 August which would be their normal retirement date, and on that date they will still be able to avail of full benefits for pension/lump sum calculation protected by the Grace Period.
Teachers who should seek advice on retirement date.
- Teachers earning between €65,000 and €66,850 at present – benefit may be minimal if you stay until 1 September 2017.
- Teachers who have received a new (eg principal) allowance in the last 3 years – due to impact of the pro rata rate of allowance applied to retiring salary.
Can I wait until 2018?
For those members who have decided not to retire in 2017, please note, the full restoration of the HRA pay cuts will be effective from 1 January 2018 and the Grace Period will also be in force until April 2019. This means the earliest optimum date for retirement for all members with earnings over €65,000, would most likely be from January 2018, i.e. after the Christmas break.
Please note the INTO is not licenced to give financial advice. Pension figures supplied or information given are estimates/opinion only and should not be considered a substitute for professional financial advice. The DES will supply the final figures for Pension and Lump Sum.
Grace Period Extension to 2019
All teachers considering retirement in the coming period should note under the Lansdowne Road Agreement the grace period was extended to April 2019 for the duration of the HRA/LRA process. The June 2016 date therefore no longer applies.
Important Tax Relief Notice For Teachers Who Have Recently Retired/Are Planning To Retire
Tax relief can be claimed for all deductions from the tax-free Lump Sum payments which are deducted by the DES as contributions to the Teachers' Pension Scheme and/or the Spouse and Children's Scheme. At retirement, teachers will receive a certificate(s) headed "Important for Tax Purposes", showing the amount deducted and the details of the relevant scheme receiving the deduction. The relevant certificate/receipt will need to be sent to the Revenue Commissioners within a four year period to receive the tax rebate.
Please note, there are limits to the value of the total contributions, eligible for tax relief, that can be made in any one year. The calculation of the annual limits should also include the standard fortnightly contributions to the Teacher's Pension Scheme, the Spouse and Children's, AVC Fund and/or any other pension funding arrangement in place, if applicable.
The current percentage relief limits are:
|Age||% of Net Relevant Earnings|
|Under 30 years||15%|
|30 – 39 years||20%|
|40 – 49 years||25%|
|50 – 54 years||30%|
|55 – 59 years||35%|
|60 years and over||40%|
Further details are available on the Revenue Commissioners website. Consultation with a financial advisor is highly recommended, before retirement date if possible, in the event that the total amounts deducted in a financial year are likely to exceed the above limits.
Information on the early withdrawal option from AVC accounts is available at http://www.cornmarket.ie/latest-news-on-avcs-public-sector-prsa
New 'Single' Public Service Pension Scheme
In January 2013, the Minister for Public Expenditure and Reform Brendan Howlin signed the order commencing new pension provisions for new entrants to the entire public service. This means new teachers entering teaching for the first time, or returning after a break in service of 26 weeks or more will have pensions based on career "average earnings" and not "final salary".
The DES published Circular 0007/2013, which outlines the details of the revised scheme.
Effective from 1 Jan 2013, the key provisions of the new 'Single Scheme' include:
- Section 6 (2) states that Chapter 2 (the new Single Scheme) "does not apply to pre-existing public service pension schemes".
- Section 10 defines who is and who is not a Scheme member and provides that a person who was serving in a public service body before the operative date and left but subsequently takes up an appointment as a pensionable public servant either "under the same contract of employment" or "within 26 weeks after his/her last day of service before that date", "shall not be a Scheme member". (This is the provision whereby a six month gap in a contract may bring a person into the 'Single' scheme).
- Section 13 provides that the normal retirement age for a public servant is 66 years, or the age from which a person is eligible to receive a contributory State Pension.
- Section 16 sets out the pension contributions to be paid by various categories of public servant. The rate for most public servants is (as at present and since 1995) 3.5% of net pensionable remuneration together with 3% of pensionable remuneration.
- Section 19 sets out the methodology by which retirement benefits are calculated for most public servants, including teachers.
- Section 40 provides that both referable amounts and pensions in payment will be increased following an annual examination by the Minister of the consumer price index and that both will be increased to reflect any such increase in the price index.