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Cost Neutral Early Retirement and the 35 Year Rule

Cost neutral early retirement

The department wants 40 years’ service from you! Anything less will be cost neutralized in most cases.

To retire on full pension, you need to have 40 years ‘service and have reached your Normal Retirement Age (NRA). You can go before you reach NRA but no matter what amount of service you have you will be cost neutralized which means a percentage of your pension will be taken off you!

Retirement benefits will be reduced by a formula designed to reflect the additional cost to the state of paying these employees’ pensions over a longer period. Remember they want 40 years from you.

When you take up employment the state assumes you will give them 40 years’ service and will stay to your NRA and takes your pension contributions from your salary based on that, so when Ann decides to retire at 60 with 37 years done the state basically says oh flip, we calculated this one wrong, so they simply take a percentage off your pension and lump sum. This is where an AVC can help make up a shortfall!

Single Public Service Pension Scheme website

If you need help working out exactly how much you will be cost neutralized by, we will be glad to help.

What is the 35-year rule?

So, this only applies to anyone who started teaching before the 1st of April 2004

If you have 35 years’ service and are 55 you can retire without cost neutral penalty so you will be paid for 35 years’ service and credits for pre-service training of either 1 or 2 years is given to help you reach the 35-year threshold.

However, such credits do not count as pensionable service, i.e. a teacher eligible for the maximum credit of 2 years would be able to retire after 33years of service (having reached age 55).

What does this all mean?

While you can currently still retire at your normal retirement age (60 or 65) though you may not become entitled to a State Pension until age 66. Please note the minimum Superannuation pension age for new entrants (members of the new public sector pension scheme) is linked to the State Pension age and so the normal retirement age will be 66.

Stay or go?

Are you wondering if you are financially prepared to retire? Would you like to know what your financial status post-retirement would be? You can discuss your plans with us in terms of the following while we help you make that decision

• Your current financial circumstances

• Your likely financial status post retirement

• Your plans and goals for retirement

• Social Welfare benefits relating to pension entitlements

• Advice on how to best manage your money in retirement.

Taking an early retirement can be complicated. Let us take the hassle out of it. If you’re thinking of retiring early, why not Book a meeting?