Oran Hall | Pension options for public worker
ADVISORY COLUMN: PERSONAL FINANCIAL ADVISER
QUESTION: I am turning 45 this year, and to the best of my knowledge, I will not have a pension when I retire. I am an instructor at HEART Trust, but I work on contract. I previously worked at a government high school and noticed an amount of a little over $2,000 deducted from my salary as 'pension'. I don't know where that amount went. I also worked at a college as a secretary for eight years – I believe that was the number of years since permanency – and paid an item called family benefit scheme, whatever that is. Where do I begin?
FINANCIAL ADVISER: You can have a pension when you retire, but you will have to take responsibility for ensuring that it happens. You will have to take and maintain interest in your welfare from here on.
I am not able to comment on the “pension” contributions you made when you worked at the government high school. If you had given the date of that employment, it is likely that I could have helped you to determine what it was about.
Perhaps you could make contact with the school and get some answers. I am surprised that you do not know where money deducted from your salary went.
We can discuss the family benefit scheme operated by the Government. Under the Pensions (Civil Service Family Benefit) Act, pensionable officers in the public service were able to make contributions to the scheme at the rate of 4.0 per cent of annual salary monthly in arrears so that a benefit could be provided from the Consolidated Fund to the contributor’s beneficiary – a spouse or child.
If the contributor died while in service or in retirement, the beneficiary would receive two benefits: a one-off payment determined by the contributor’s salary and years of service and a pension. A surviving child would be paid a benefit up to age 19 and up to age 23 if pursuing higher education.
A contributor who retired not having a child or spouse, including being without a spouse due to divorce, would be entitled to a refund of all contributions. Contributors with 10 years or more of appointed service would be vested, but those with less would be entitled to a refund of contributions.
In your case, you should apply through your former employer, the Ministry of Education, Youth and Information, for a refund of the contributions you made in the eight years after you were appointed to the position at the college, which seems to be government-operated, if you have not done so already.
Although, with the coming into being of the Pension (Public Service) Act 2017, the final date for contributing to the family benefit scheme was March 31, 2018, as new arrangements became effective on April 1, members due a refund of contributions can still apply for the return of their contributions. You are still some way from retirement, and there is a facility available to make it possible to have a pension when you retire. This is an individual pension arrangement, an approved retirement scheme, which came into being with the passing of the Pensions (Superannuation Funds and Retirement Schemes) Act, 2004, to enable contributors to save for their pension at retirement. Contributors should be self-employed or employed in a non-pensionable post and not be members of an approved superannuation fund.
Members may contribute up to 20 per cent of income and employers may also make contributions, but the combined contributions should not exceed the 20 per cent of income thresh hold.
One very big benefit is the favourable treatment given to contributions. The member’s income is taxed after the pension contribution is deducted. In addition, the investment income the contributions earn is not taxed, but depending on the level of income the contributor receives as a pension, it is likely that the pensioner could pay some amount of income tax.
Several financial institutions market these approved retirement schemes under their own brand, which is generally reflected in the name of the scheme. The investment managers pool the funds of many contributors, which enables them to invest in a wide range of investment instruments, thus spreading the risk of the portfolio.
This does not guarantee, however, that the investment returns will always be at a satisfactory level.
It is important to select a good pension fund manager with a proven track record in managing pension funds – good investment management and competent administration of the scheme are critical to the management of your pension account and your ability to have a satisfying retirement. And always take a keen interest in your affairs.
Oran A. Hall, principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel.