Public Service Pensions - related Deduction

Frequently Asked Questions

Who does this deduction apply to?
What is a “public service body” for the purposes of this deduction?
Is anybody employed by a public service body exempt?
What income is subject to the deduction?
I am a pensioner who works part-time in the public sector. Is all of my income (pay and pension) subject to the deduction?
What is the rate of the deduction?
Does the rate of PRSI I pay affect the rate of deduction?
Are the normal pension contributions affected by this change?
When does the deduction take effect?
Do I get tax relief on the deduction?
Does the deduction affect the overall threshold levels for tax relief on pension contributions?
Do I receive any additional pension benefits as a result of this deduction?

Who does this deduction apply to?

Who does this deduction apply to? In outline terms, the deduction applies to a public servant who is employed by or holds an office or position in a public service body and is a member of a public service pension scheme, or receives a payment in lieu of membership of a pension scheme

What is a “public service body” for the purposes of this deduction?

In the education sector, a “public service body” means-

• The Department of Education and Science
• A recognised primary, secondary, community or comprehensive school
• A VEC
• A statutory body
• Any company financed wholly or partly by the Minister for Education and Science, in respect of which a public service pension scheme exists, applies or may be made.
• Any other body wholly or partly funded out of public monies and in respect of which a public service pension scheme exists, applies or may be made.

Therefore the levy will apply to all teachers and SNAs in schools, and to all staff of VECs, Universities, Institutes of Technology, etc., as well as staff employed in bodies under the Department's aegis.

Is anybody employed by a public service body exempt?

The draft legislation does not classify exemptions, save for the Judiciary and the President, and anyone employed by a public service body would be prima facie subject to the deduction but a person who is not a member of a public service pension scheme, as defined in the legislation, or in receipt of a payment in lieu of same would not be subject to the deduction.

What income is subject to the deduction?

All income, both pensionable and non-pensionable, is subject to the deduction. Therefore, acting-up allowances, allowances payable to certain people on secondment as a “top-up” of salary, overtime and other non-pensionable payments or allowances will be included in calculating the cost of the deduction. Travel and subsistence allowances are an exception to this as they are not considered income and so are not subject to the deduction.

I am a pensioner who works part-time in the public sector. Is all of my income (pay and pension) subject to the deduction?

No. Where a pensioner returns to work income in respect of that work is subject to the deduction but his or her pension is not.

What is the rate of the deduction?

The rate of deduction is based a person’s gross income. The deduction rates applicable are as follows:

                                        €0-€15,000                     3%
                                        €15,001-€20,000           6%
                                        €20,001+                         10%

A table showing the effect at different income levels is set out at the final page of this document. A calculator for the deduction is on the Department of Finance’s website. Please click on the following link –  http://www.finance.gov.ie/viewdoc.asp?DocID=5654

Does the rate of PRSI I pay affect the rate of deduction?

No. The same rate of deduction applies to a person who pays D Rate (or modified) PRSI and to a person who pays A Rate (or full) PRSI.

Are the normal pension contributions affected by this change?

No. The existing rate of pension contributions will continue to apply in addition to this new deduction. This includes rates to purchase notional service or to purchase actual (or PCW) service. So, the cost of purchasing past service under the PCW Agreement at retirement is unaffected by the new deduction which will be treated separately.

When does the deduction take effect?

The deduction takes effect from 1 March 2009. The Department will endeavour to have all necessary payroll arrangements in place for the first full pay period in March. However, it is likely that some arrears will arise and will have to be recouped at a later date.

Do I get tax relief on the deduction?

The deduction will operate under what is known as the “net pay” arrangement operated by employers for the Revenue Commissioners. Under this arrangement, pension contributions for PAYE employees, including those in the public sector, are deducted from gross pay before applying income tax, PRSI and the health levy. As a result, the amounts deducted in respect of the new levy will be exempt for tax, PRSI and health levy purposes. As the income levy applies to gross pay, this will include the amounts deducted for pension purposes and there will be no reduction in the amount of the income levy paid at present.

Does the deduction affect the overall threshold levels for tax relief on pension contributions?

No. The deduction does not count towards a person’s limit to receive tax relief on pension contributions. So, for example, a person aged between 40 and 49 can contribute up to 25% of their gross income towards pension and receive tax relief on those contributions. The deduction will not count towards that 25%.

Do I receive any additional pension benefits as a result of this deduction?

No. Additional pension benefits do not arise as a result of this deduction.

Table showing the Effect of the Pension-related Contribution
At Different Income Levels

Contribution of 3% on first €15,000, 6% on next €5,000 and 10% on balance

Salary	Amount of  deduction	Deduction as % of overall salary
€15,000	€450	3.0%
€20,000	€750	3.8%
€25,000	€1,250	5.0%
€30,000	€1,750	5.8%
€35,000	€2,250	6.4%
€40,000	€2,750	6.9%
€45,000	€3,250	7.2%
€50,000	€3,750	7.5%
€55,000	€4,250	7.7%
€60,000	€4,750	7.9%
€65,000	€5,250	8.1%
€70,000	€5,750	8.2%
€75,000	€6,250	8.3%
€80,000	€6,750	8.4%
€85,000	€7,250	8.5%
€90,000	€7,750	8.6%
€95,000	€8,250	8.7%
€100,000	€8,750	8.8%
€125,000	€11,250	9.0%
€150,000	€13,750	9.2%
€175,000	€16,250	9.3%
€200,000	€18,750	9.4%
€225,000	€21,250	9.4%
€250,000	€23,750	9.5%
€275,000	€26,250	9.5%
€300,000	€28,750	9.6%