10% PRD levy to be replaced by 10% ASC levy in January 2019

gaiscioch

This will impact all teachers so it's worth discussing it.

It is definitely a question for somebody familiar with public service pensions, and teachers' pensions in particular, to answer. Essentially: now that teachers are supposed to pay a full 10% of our gross income, on top of our income tax, for our teachers' pension, what is the status of that pension in terms of its value? If I recall, I was told that my pension would be something like €12,000 pa after 27 years of service. Could that paltry figure possibly be correct? If so, paying an extra 10% levy for it sounds like poor value. Is it?

I feel I'm working harder these days, and seeing much less of the money. A huge part of that is the PRD (Pension Related Deduction), which is a colossal 10% of my gross income just taken before any other deductions. I thought I heard it's being removed so I checked and it is, only to be replaced with a permanent PRD called the ASC at the same rate. In other words, we'll be paying 10% extra on top of our income tax permanently now. Permanent FEMPI.


Here's the summary from this website:

1. 'NB: Section 4 of the Public Service Pay and Pensions Act 2017 abolishes PRD with effect from 1 January 2019, i.e. PRD will no longer apply after 2018. It will be replaced by an “Additional Superannuation Contribution” (ASC) payable by public servants on their pensionable pay. ASC is provided for in law by Part 4 of the 2017 Act, and will commence on 1 January 2019.'

2. If this Agreement is ratified, the yield from PRD will fall from over €700 million at present to some €550 million in 2020 which will now become a permanent additional superannuation contribution (ASC). These reforms will make a major contribution to the future sustainability of public service pensions.

3. Those public servants who are members of pre-2013 pension schemes with fast accrual terms (for example, members of An Garda Síochána, Prison Officers, or Full-time Firefighters) will have to make a pension contribution once they begin earning above €28,750. This is in contrast to the threshold of €34,500 which will apply to their standard accrual counterparts.

4. 'Q: How will these changes affect public servants who are members of pre-2013 pension schemes with standard accrual terms?

A: The ASC rates for these public servants will be similar to the current PRD rates. However, the thresholds for payment of these rates will be raised so that those earning up to €34,500 will be fully exempt from the ASC by 1 January 2020.


5. Q: How will these changes affect public servants who are members of the Single Public Service Pension Scheme?

A: Similar to their pre-2013 counterparts, members of the Single Public Service Pensions Scheme who earn up to €34,500 will be fully exempt from the ASC by 1 January 2020. However, unlike their pre-2013 colleagues who will continue to pay the ASC at rates similar to those of the current PRD, Single Scheme members will make lower ASC contributions on earnings (66.66% less than their colleagues) above this €34,500 threshold. These lower ASC rates are intended to reflect the lower value of pension available to Single Scheme members, and will cause the overall pay increases due to this cohort under
this Agreement to range from some 7% to 10%.

6. Essentially, for most teachers, all income between €34,500 and €60,000 will have an added 10% imposed on it under the guise of the ASC. Every salary for the rest of your career. Anything you earn over €60,000 will have a 10.5% rate imposed.

RTÉ summary of differences between "fast accrual" and "standard" pensions. Will any teachers be in receipt of the "fast accrual" pensions/can they retire on full pension before 40 years service?:

As a result, they could end up with three different categories of public servants for pension purposes.

Around 25,000 public servants including gardaí, Defence Forces Officers and judges currently qualify for what is known as "fast accrual", which means they can retire after fewer years on full pensions.

However, they only pay the same contributions as other workers who have to complete 40 years to get a full pension.

It is believed those 25,000 could face a higher contribution.

In the case of gardaí, this would reduce some of the gains they secured in their €50 million special pay deal late last year.

Others recruited before 2013 to the standard "legacy" scheme would see the existing pension levy consolidated into a higher contribution rate.

However, post-2013 recruits could see a significant reduction in their pension contributions, as their new scheme is less generous and less costly.

Sources note that as most of those post-2013 recruits would be on the controversial lower pay scales introduced during the crisis, this would boost their net income and go some way towards addressing the two-tier pay structure which has been slated by unions.

On pay, the senior union figures expect the Government will want pay increases pushed out beyond 2018 - as the State's finances are forecast to be particularly tight next year.

However the sources stressed that unions have to sell any deal to their members, and it would not be possible to have zero increases in 2018.

On the recruitment and retention challenges, the union sources said there were "pockets" where retention was an issue such as the military, helicopter pilots, doctors, nurses and therapy grades.

Geuze

The entry threshold to the PRD is being increased, as part of pay restoration.

So although the main rate will remain at 10%, your PRD payment will fall.


2016 threshold = 26,083

2017 threshold = 28,750

2019 1st Jan = 32,000

2020 1st Jan = 34,500


http://www.cspensions.gov.ie/faq5.pdf

http://www.pseu.ie/_fileupload/circulars2017/bc03117.pdf


NB: this applies to pre 2013 PS, who are not members of the new Single PS pension scheme.

Geuze

Yes, you are correct, all PS hired pre-2013, will be paying a 10% additional pension cont on any earnings above 34,500, as well as their regular 6.5% pension conts.

chocoholic999

I notice this ASC in on pensionable pay. Does this mean that work with the state exams commission will no longer be subject to pension levy?

Mardy Bum

Is there anyone here on the pre 2013 pension but on the post 2013 salary?

sitstill

chocoholic999 wrote: »

I notice this ASC in on pensionable pay. Does this mean that work with the state exams commission will no longer be subject to pension levy?

Correct. From 2019 work for the SEC will not be subject to this levy.

TheDriver

Is the 10% still subject to tax relief at higher rate of tax if applicable?

Geuze

Yes.

All pension conts get tax relief.

Although an ESRI report has suggested changes......

http://www.esri.ie/publications/the-tax-treatment-of-pension-contributions-in-ireland/

Sir123

Don't get me started with the "pension levy". I personally think it's very unfair on all public sector workers but to make matters worse, those of us on the single pension "career average" scheme still have to pay it.

I do realise that rates have been cut for us commencing 2019 however, it still isn't enough as I'm paying for a compulsory pension scheme that will cost me more money than I will ever receive in benefits as well as working until 70 years of age with 45 years plus of service. Ludacris.

gaiscioch

This is the thing. Are we getting good value now from our pension, which was along with the holidays the attraction to compensate for the lower pay?

Is 16.5% of our salary going on a pension a lot? What percentage of the pension when it's paid out will come from the state's contribution? How does state contribution now compare with private sector contributions from say the US multinationals in Ireland?

According to Revenue.ie here are the pension contribution limits up to which you can get tax relief:

The age-related earnings percentage limits
You can get tax relief on your pension contributions up to the relevant age-related percentage limit of your earnings in any year. This relief is only from the employment in respect of which the contributions are made.

The age-related earnings percentage limits are:

under 30: 15%
30-39: 20%
40-49: 25%
50-54: 30%
55-59: 35%
60 or over: 40%.
For example, an employee who is aged 42 and earns €40,000 can get tax relief on annual pension contributions up to €10,000.

Does this mean the 30-year-old could now pay tax on 1.5% of their pension contribution? Or have they put the ASC into a different category? Also, if we leave teaching early - at say 50 after paying into this new ASC for 10 years -are the benefits better than they were if we hadn't paid into it, or is it entirely about paying extra to maintain the older benefits?

10% extra of salary gone every fortnight feels like an awful lot more than 10% (if that makes sense) on top of all the relentless increases to health, car and every other annual insurance bill along with crèche fees.

Geuze

gaiscioch wrote: »

This is the thing. Are we getting good value now from our pension, which was along with the holidays the attraction to compensate for the lower pay?

Is 16.5% of our salary going on a pension a lot? What percentage of the pension when it's paid out will come from the state's contribution? How does state contribution now compare with private sector contributions from say the US multinationals in Ireland?

There is no employer direct contribution, as there is no fund.

It is an unfunded pension,

Your contribution is not directly linked to future value of future benefits.

The benefits you receive are not directly linked to the euro value of your contributions.

Geuze

gaiscioch wrote: »

This is the thing. Are we getting good value now from our pension, which was along with the holidays the attraction to compensate for the lower pay?

Is 16.5% of our salary going on a pension a lot?

A few points.

• No PS will pay 16.5% of their entire salary.
  
• The 10% PRD is on earnings over 28,750, soon to be 32k, then 34,500.
  
• But, on any increment, payrise, over 34,500, yes you will pay 10% PRD, as well as 48% tax and normal pension cont.
  
• The 6.5% standard cont is not on all your salary, it's complex.

I think it's fair to say that on extra income/increment/payrise over 34,500, people are paying 16.5% pension conts on the extra income.

The media keep stating that PS don't contribute at all to their pensions, or that the PRD was their first time contributing.

This needs to be challenged.

Yes, PS pensions are good, but the new post-2013 scheme is less generous, and PS make large contributions to their pensions.

Geuze

gaiscioch wrote: »

Also, if we leave teaching early - at say 50 after paying into this new ASC for 10 years -are the benefits better than they were if we hadn't paid into it, or is it entirely about paying extra to maintain the older benefits?

PRD does not mean any extra benefits.

You are paying more for the same benefits.