Circular PEN 14/05 (Word)
Revision of the Spouses’ and Children’s Pension Scheme Option to join the Revised Scheme
Original 1981 Scheme
The Spouses’ and Children’s Pension Scheme provides benefits for the surviving spouse and eligible children of teachers who die, either in service or following retirement.
Members of the Spouses’ and Children’s Scheme pay an additional pension contribution of 1.5% of gross salary and allowances.
The main benefits of the scheme are:
- The spouse of a teacher who dies before retirement will receive a pension equal to one-half of the deceased teacher’s maximum potential pension.
- The spouse of a retired teacher will receive one-half of the retired teacher’s pension.
- Where children are left as well as a spouse, an amount equal to 1/3rd of the spouse’s pension will be payable for each child up to a maximum of three
children. Children up to age 16, or the age of 21 if in full time education, fall within the terms of the scheme. Specific provision is made for children who are permanently incapacitated.
- Provision is also made for the payment of a pension to eligible children in the event that a teacher is not survived by a spouse.
Points to note
- To be eligible for benefit under the Spouses’ and Children’s scheme specific contribution requirements have to be met. Outstanding contributions to the scheme, i.e. contributions in respect of years of service given prior to entry to the scheme must be paid at the time of retirement (only applicable to men in service prior to 1969 and women in service prior to 1981 who did not opt out of the scheme).
- In the case of married or widowed teachers a deduction of 1% of retiring salary will be made from the teacher’s lump sum for each year of pensionable service for which contributions have not already been made (subject to a maximum of 40).
Example: A female teacher commenced service in 1965 and retired in 2005. She joined the scheme in 1981. At the time of retirement she has approximately 24 years’ contributions to the Scheme. Sixteen years’ contributions are outstanding at the date of retirement.
A deduction of 16% of the teacher’s annual retiring salary is made from the teacher’ lump sum in respect of these outstanding contributions.
Where a deduction from a teacher’s lump sum is made in respect of outstanding contributions to the scheme, tax relief is subsequently allowed at the higher marginal tax rate on the deduction which considerably reduces the cost of repaying the outstanding contributions.
Teachers who have not married by the date of retirement are refunded all deductions made from their salary in respect of the scheme. Such refunds are subject to income tax currently deducted at a rate of 20%
Spouses’ & Children’s Pension (Revised Scheme)
A revised option to join the Spouses’ and Children’s Pension Scheme is being extended to the women who opted out of the scheme at the time of the original option in 1981. (The scheme became compulsory for all women who commenced teaching since 1 November 1981).
The DES has also confirmed to the INTO that all primary (and secondary) teachers in service on or after 1 April 2004 will be given the option to join the Revised Spouses’ and Children’s Pension Scheme.
The contribution rates that apply to the revised offer are as follows:
- Periodic Contributions: 2% of salary;
- Deductions in respect of service prior to joining the scheme: 1.5% of final salary per outstanding year.
Teachers will have until 31 March 2006 to consider the matter and make a decision as to whether to opt in or not. The DES has also confirmed that in the event that a woman teacher dies before she has the opportunity to join the scheme, she will be included in the scheme (providing she was in service on or after 1 April 2004) – if it is to the financial advantage of her spouse/dependants.
Deduction of arrears for the period 1 April 04 – 31 August 06
As detailed in section 9 of Circular PEN 14/05 (Word) there are two options open to teachers to pay the arrears for the period 1/4/04 – 31/8/06. These options apply to those who were not members of the original scheme and who exercise an option to join the revised scheme now.
- The arrears may be paid in a lump sum; or
- The arrears may be paid in instalments over a period of two years and five months. This period corresponds to the duration of the period to which the arrears relate.