sick pay changes & changing pension landscape presentation to hmi hr group november, 2013....
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Sick Pay Changes &
Changing Pension Landscape
Presentation to HMI HR GroupNovember, 2013.
Cornmarket Group Financial Services Ltd. is regulated by the Central Bank of Ireland. A member of the Irish Life Group Ltd. Irish Life Assurance plc is regulated by the Central Bank of Ireland. Telephone calls may be recorded for quality control and training purposes.
• Founded in 1972 (40th Anniversary in 2012)
• One of Ireland’s largest brokers recognised as market leader in affinity schemes for Public Sector employees.
• Acquisition of Marsh VGS’s in January 2013
• We now deal with over 14 Public Sector unions and administer over 50 Schemes covering over 53,000 public sector employees
• Now a member of the GreatWest LifeCo group of companies.
Proposed changes to paid sick leave
Paid Sick leave
Self-certified sick leave reduced from 7 days in 1 year, to 7 days in a rolling 2 year period
From 1st January 2014 - 3 months full pay & 3 months half pay (in a rolling four year period)
Paid Sick leave for ‘Critical’* Illness - 6 months full pay, and 6 months half pay (in a rolling four year period)
*Not yet defined
Pension Rate of Pay re-branded ‘Temporary Rehabilitation Pay’
Already in place
Already in place
TemporaryRehabilitation Pay
€3,931
Early Retirement Pension
€5,678
State Illness Benefit
€9,776
State Invalidity Pension
€10,062
100%
75%
25%
50%
Up to 13 weeks
After 13 weeks
After 26 weeks
After 2 years
Half Pay
Full Pay
€45,000
€22,500
Could you survive on a fraction of your salary?
Proposed Sick Pay Arrangements
The example above is based on a permanent, full-time Public Servant, who is a member of the Superannuation Scheme, with 15 years’ service earning €45,000 p.a., paying PRSI at the ‘A’ rate, who is now unable to work due to a long-term illness or disability. Claim is not for a critical illness. Member had no previous illness before joining the Scheme.
Could you automatically go onto HALF PAY if you fall ill in 2014?
2010 2011 2012 2013 2014
HALF PAY
Example: In early 2011 Mary, a Public Sector employee, broke her leg and couldn’t work for 12 weeks. In 2012, she fell ill again and was out of work for a further 2 weeks. Since then Mary hasn’t been out sick. However, come January 2014, Mary needs to know that if she falls ill again and cannot work, her pay will automatically drop to HALF PAY; as she has already used up her 13 weeks full pay allowance.
12 WEEKS 2 WEEKS ?No sick leave
What constitutes a Critical Illness has not yet been defined but as per insurance industry the typical examples are:
CancerStrokeHeart related illnesses
It will be provided for 6 months full pay, followed by 6 months half pay in a rolling four year period.
(This Critical Illness entitlement is at the discretion of the employer)
Critical Illness
Previously known as ‘Pension Rate of Pay’ Payable for UP to 18 months after the 6 months
certified sick pay run out You must apply for Rehabilitation Pay before your
sick pay runs out – will be subject to periodical reviews (probably every 3 months)
Reviews will be carried out by an Occupational health consultant or by MedMark occupational healthcare.
Temporary Rehabilitation pay
What happens after 18 months?3 Options1. Early Retirement Pension – Use of Early Retirement
Pension table to calculate pension & gratuity Retiring on Ill Health means you cannot return to work
in the Public Sector
2. Option to go back to work3. You can opt to a maximum of 12 months of unpaid
leave After 12 months you must either:
I. Take Early Retirement Pension II. Go back to work orIII. Resign from your current position
Cornmarket can advise on all options
2 Options to Protect Your Salary
1 Union Salary Protection Group Schemes • INMO • SIPTU Schemes • Impact • PNA • IHCA
2 Private Salary Protection Plans• AVIVA • Friends First • New Ireland • Irish Life
SchemeBenefit
TemporaryRehabilitation
Pay€3,931
Early Retirement
Pension
€5,678
State Illness Benefit
€9,776
State InvalidityPension
€10,062
SchemeBenefit
€20,043
Scheme Benefit
€18,010
100%
75%
25%
50%
Up to 13 weeks
After 13 weeks
After 26 weeks
After 2 years
Half Pay
Salary Protection Schemes Post 1st January
2014
With Salary Protection you will receive up to 75% of your
salary*
Full Pay
€45,000
€22,500
€11,250
*Less any Temporary Rehabilitation Pay, Early Retirement Pension an/or State Illness Benefit to which you are entitled.The example above is based on a permanent, full-time Public Servant, who is a member of the Superannuation Scheme, with 15 years’ service earning €45,000 p.a., paying PRSI at the ‘A’ rate, who is now unable to work due to a long-term illness or disability. Claim is not for a critical illness. Member had no previous illness before joining the Scheme.
What does it mean for you?
Salary
€45,000
Service
15 years
After 26
weeks
€33,750
After 13
weeks
€33,750
After 2 yrs
onwards…
€33,750
Salary
€45,000
Service
15 years
After 26 weeks
€13,707
After 13 weeks
€22,500
After 2 yrs onwards…
€15,740
Example: WITH Salary Protection
Example: WITHOUT Salary Protection
Example above is based on a Public Servant, who is a member of the Superannuation Scheme, with 15 years’ service earning €45,000 p.a., paying PRSI at the ‘A’ rate, who is now unable to work due to a long-term illness or disability. Standard sick leave is assumed. Member had no previous illness before joining the Scheme. The example above assumes that Temporary Rehabilitation Pay and State Illness Benefit is paid for up to a maximum of 2 years and, thereafter, the member is granted an Early Retirement Pension and State Invalidity Pension.
The teams responsible for the smooth administration of Salary Protection schemes are:-
Phone Assistance One to one meetings in Office or Clients home
nationwide Assistance with arranging medicals Help with Appeals process with the Insurance
Company Help with FSO (Financial Services Ombudsman) if
required.
Tara CassidyAssistant Manager in charge of Claims
Claims Handling
People living longer in retirement
• 1950: 7.2 people aged 20-64 for every 1 person over
65
• 1990: 5:1
• 2012: 3.5:1
• 2050: 1.8:1In other words, every couple will be supporting a pensioner
“Ireland’s numbers in retirement will double before 2040 to over 1m people with the biggest increase in the over 85s age group”*
*Source – Department of Health
Source: The Economist – 07.04.11
In the USA, if a married couple both retire at 65, there’s a 50% chance one will live to 90+
1. People Live Longer
greater need for private health care nursing homes
additional pressure on health care services
increased health costs
longevity
Source: The Economist – 07.04.11
3. Governments and companies cannot offer DB schemes
If pensions are underfunded or government does not have enough money to pay pensions, they can reduce cost or burden by:
– Raising taxes for existing workers– Current generation of workers fund more to Pension– Raise retirement age– Halt practice of early retirement – Auto-enrolment: compulsory for everyone to pay into a
Pension– Link retirement age to longevity.
Spending in RetirementIn retirement, people’s spending profile is U-Shaped
years
spen
ding
60s 70s 80s
Travel & spend
Still active
more time at home
spend less
accumulate
healthcare
spend more
Source: The Economist – 07.04.11
•OAP now moving from age 65 -> 68•Tax relief on pensions still available @ 41%*•Once-off option to withdraw up to (maximum) 30% of the value of your AVC Fund, subject to tax
Currently different Pension Schemes exist in the Public Sector:
Category 1. Pre 1995 Category 2. 1995 to 2004 Category 3. 2004 to 2009 / 2010 to 2012 Category 4. 1st January 2013
- Single New Pension Scheme
What are your options? …NSP, AVCs/PRSAs etc.
Salary Age Service Pension
€55,000 60 30 yrs €20,625
Pension Entitlements
Pre 2004 (inc Supp Pen for A Class PRSI)
€8,68630 yrs60€55,000
Cost Neutral Early Retirement
Post 2004
*subject to paying the higher rate of tax
Benefits payable from your Superannuation Scheme
Pension Lump SumSpouse & Children’s
Benefit
Taxed & Paid for Life
Tax-Free & Paid Once
Payable on Death
What’s important when working out my pension?
•Starting dates & re-entry dates •Service history•Final salary (except for 2013 Scheme)•Relevance of Social Welfare in your pension
• New Single Public Service Pension Scheme (Career average earnings)
• Retirement in line with State pension age (SPA): 66 to 68Minimum pension age of 66to 67 in 2021 and to 68 in 2028 Pensions being linked to life expectancy(from 65 to 66 in 2014)
• How will it work?• Referable amounts will accrue for each year service• Accrual rates of 0.58% on first €45k and 1.25% on balance• Lump-sum accrual rate of 3.75%• Annual increase in referable amounts in line with CPI.
New Pension Scheme for 2013
Retirement planning is still a very tax efficient way to save
Contribution €100
Less tax relief
(assuming tax @41%) -41.00
NO PRSI rate (removed in Budget 2011)
Real cost to you for every €100
€59.00
1. Repurchase Superannuation credit for yrs spent in part-time/temporary service OR any Gratuity or Refunds
2. Buy Superannuation credit for missed years of service - Notional Service Purchase Scheme (NSP)
3. Fund additional benefits for your retirement
- Additional Voluntary Contribution Scheme (AVCs) or
- Personal Retirement Savings Account (PRSA).
Options Available
€00,000
€00,000
Top up tax free lump sum to its max
Mixture of other options
Pension (Annuity)€000 p.a.
Employer options
How an AVC can be usedHow an AVC can be used
ARF/AMRF€00,000
Issues to be aware of for Retirement Planning
1. Public Sector Pensions Act 2012 (Career Averaging)
2. Public Service Superannuation Act 2004
3. Cost Neutral Early Retirement
4. Personal tax rates – now & in retirement
5. Social Welfare entitlements
6. Tax Relief Scope & limits
7. Fee, Charges, Commissions on Advice, AVCs & PRSAs
8. Partner Pension Details (if applicable).
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