Calculation of Pension for Compulsory and Voluntary Early Retirement (Not Cost Neutral Early Retirement)
Pension and lump sum are calculated on the basis of ‘retiring salary’. ‘Retiring salary’ means, (in relation to a teacher), the sum of:
- The annual rate of scale salary on the last day of pensionable service; and
- The annual rate of any allowance payable on the last day of pensionable service, if:
- The teacher dies in service more than three years before their compulsory retirement date, or
- The teacher retires on grounds of disability before the earliest date at which they would be eligible for pension on voluntary retirement, or
- The teacher has held the allowance for the last three years of pensionable service, and during that period there has not been an increase or decrease in the allowance payable to them due to a change in posts, or a change in the grading of a post, or the gain or loss of an allowance.
- In the case of an allowance to which the provisions of the second clause above do not apply, an amount calculated by dividing by 1095 the annual rate of that allowance and multiplying the result by the number of days on which the teacher held the allowance during the last three years of pensionable service.
Pension is calculated at the rate of one eightieth of retiring salary for each year of pensionable service at the date of retirement subject to a maximum of 40 years. For example, a teacher on a ‘retiring salary’ of €60,000 with 40 years’ contributions to the scheme, will receive an annual pension of €30,000 (ie 1/80th of €60,000 x 40).
A teacher on the same salary with 35 years’ pensionable service will receive an annual pension of €26,250 (i.e. 1/80th of €60,000 x 35).
Pensions are deemed to be income and as such are subject to income tax.
Retired teachers’ pensions increase in line with salary increases awarded to serving teachers.
Lump sum is calculated at the rate of three eightieths of retiring salary for each year of pensionable service at the date of retirement, subject to a maximum of 40 years.
For example, a teacher on a retiring salary of €60,000 with 40 years’ or more contributions to the scheme will receive a lump sum of €90,000 (i.e. 3/80ths of €60,000 x 40).
A teacher on the same salary with 35 years’ pensionable service will receive a lump sum of €78,750 (i.e. 3/80ths of €60,000 x 35).
The lump sum payable on retirement is not subject to income tax.
PRSI and Pension –
On retirement members with Class D PRSI contributions only, have no entitlement to a state pension benefit and will receive their pension in full through the Department of Education.
Members who have Class A contributions, or a mix of Class A and Class D may have an entitlement to the State Pension from the state pension age (currently 66) or to Job Seeker’s Benefit/Age 65 Benefit if they retire before the state pension age.
These members will have to interact with the Department of Social Protection when they retire to claim any benefits they are entitled to which form part of their pension. See our page on Pensions and Pay Related Social Insurance for further information.