Sick Pay Changes
&
Changing Pension Landscape
Presentation to HMI HR Group
November, 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.
Key topics of today’s presentation
Current proposals represent the
biggest ever changes to sick pay for all
Public Sector employees.
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’
100%
75%
50%
Proposed Sick Pay Arrangements
Full Pay
€45,000
Half Pay
25%
State Illness Benefit
€22,500
€9,776
Temporary
Rehabilitation Pay
€3,931
Up to 13
weeks
After 13
weeks
After 26
weeks
State Invalidity Pension
€10,062
Early Retirement Pension
€5,678
After 2
years
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?
12 WEEKS
2010
2011
2 WEEKS
2012
No sick leave
2013
?
2014
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.
HALF PAY
Critical Illness
 What constitutes a Critical Illness has not yet been defined but as per
insurance industry the typical examples are:
 Cancer
 Stroke
 Heart 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)
Temporary Rehabilitation pay




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.
What happens after 18 months?
3 Options
1. Early Retirement Pension – Use of Early Retirement
Pension table to calculate pension & gratuity

2.
3.
Retiring on Ill Health means you cannot return to work
in the Public Sector
Option to go back to work
You can opt to a maximum of 12 months of unpaid
leave

After 12 months you must either:
I.
II.
III.
Take Early Retirement Pension
Go back to work or
Resign from your current position
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
Cornmarket can advise on all options
Salary Protection Schemes
100%
75%
Full Pay
€45,000
Scheme
Benefit
Scheme
Benefit
€20,043
€18,010
€11,250
Half Pay
25%
State Illness
Benefit
€9,776
€22,500
Temporary
Rehabilitation
Pay
€3,931
Up to 13
weeks
Post
January
2014
With Salary
Protection you
will receive up
to 75% of your
salary*
Scheme
Benefit
50%
1st
After 13
weeks
After 26
weeks
State Invalidity
Pension
€10,062
Early
Retirement
Pension
€5,678
After 2
years
*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?
Example: WITHOUT Salary Protection
After 2 yrs
Salary
Service
After 13
weeks
After 26
weeks
onwards…
€45,000
15 years
€22,500
€13,707
€15,740
Example: WITH Salary Protection
Salary
Service
After 13
weeks
After 26
weeks
After 2 yrs
onwards…
€45,000
15 years
€33,750
€33,750
€33,750
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.
Claims Handling
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 Cassidy
Assistant Manager
in charge of Claims
Source: The Economist – 07.04.11
Source: The Economist – 07.04.11
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
“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
• 2050:
1.8:1
In other words, every couple will be
supporting a pensioner
1. People Live Longer
In the USA, if a married couple both retire at
65, there’s a 50% chance one will live to 90+
longevity
increased health costs
additional pressure on health care services
greater need for private health care nursing homes
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.
How are Countries planning to deal with this?
Proposed Retirement Dates
Source: The Economist – 07.04.11
Spending in Retirement
In retirement, people’s spending
profile is U-Shaped
Travel & spend
healthcare
Still active
spend more
spending
more time at home
spend less
accumulate
60s
70s
years
80s
Pension Entitlements
Currently
different
exist in the Public Sector:
Pre 2004 (inc
Supp PenPension
for A ClassSchemes
PRSI)
Category 1.
Pre 1995
Salary
Pension
Category 2.Age1995 Service
to 2004
Category 3.
2004 to 2009 / 2010 to 2012
€20,625
30 yrs
€55,000
Category 4.60 1st January
2013
- Single New Pension Scheme
Post 2004
€55,000
60
30 yrs
€8,686
•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
What are your options? …NSP, AVCs/PRSAs etc.
*subject to paying the higher rate of tax
Benefits payable from your Superannuation Scheme
Pension
Lump Sum
Taxed &
Paid for Life
Tax-Free &
Paid Once
Spouse &
Children’s
Benefit
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 Pension Scheme for 2013
• New Single Public Service Pension Scheme
(Career average earnings)
• Retirement in line with State pension age (SPA): 66 to 68
 Minimum pension age of 66
 to 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.
Enhancing your Pension
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
Options Available
1. Repurchase Superannuation credit for yrs spent in parttime/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).
How an AVC can be used
Top up tax free lump sum to its max
€00,000
Mixture of other options
€00,000
Employer
options
ARF/AMRF
€00,000
Pension (Annuity)
€000 p.a.
Last
minute
AVCs –
(Dynamisation)
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).
5 Modules to choose from
E-shot attachments for each module
Booklet & Booking form
Thank you for your attention
Questions?
Proud sponsors:
Cornmarket Group Financial Services Ltd. is regulated by the Central Bank of Ireland. A member of the Irish Life Group Ltd. Telephone calls may be recorded
for quality control purposes.