Skip to main content

Purchase of Notional Service

Published on Jan. 9, 2023

Last update on Sept. 12, 2023

Table of contents

Introduction

Pre-existing public service pension schemes generally operate on the basis of reckonable service and pensionable remuneration.

Purchase of notional service schemes enable eligible scheme members to enhance their pension benefits at retirement by allowing them to purchase additional years of notional service. This increases the total reckonable service included in the calculation of their pension benefits, subject to maximum limits.

Note: The information on this page relates to the purchase of notional service scheme operating in the civil service. Similar arrangements may have been adopted in various other pre-existing public service pension schemes. Although such schemes may mirror and be guided by the rules in operation in the civil service, pension administrators should consult their own pension scheme rules in the first instance where a query relating to purchase of service arises.

Background

A scheme to enable eligible civil servants to purchase additional years of notional service was introduced with effect from 1 April 1979 under Circular 16/1979 and Letter to Personnel Officers 27 April 1979. That scheme allowed eligible members to purchase an amount of additional service (subject to limits) by reference to a retirement age of 60.

The 1979 scheme has been revised under various circulars and letters since then, most significantly from 1 February 1990 under Circular 01/1990 when the ‘age 60 option’ was replaced with an option to purchase service by reference to the retirement age of 65 only, and again under Circular 04/2006 when the option to purchase service by reference to age 60 was re-introduced, allowing purchase by reference to age 60 or 65 for certain members.

As well as introducing revised purchase rates from time to time, other key changes communicated in these circulars and letters included the introduction of a mechanism to reckon career break periods while on career break, purchase of service for those working a reduced work pattern, additional flexibilities relating to purchase by lump sum contribution and provision for refund of purchase contributions in certain circumstances.

Eligibility criteria and limits on purchase

In order to be eligible to purchase notional service, a member must, at the time of making or commencing the purchase agreement:

  • be serving in the civil service and not on sick leave, special leave without pay, or suspended from duty,
  • have already accrued, or have the prospect of accruing, at least 9 years' actual reckonable service by age 60 or 65, as appropriate.

In addition to the general eligibility criteria, there are also limits on the maximum amount of service that may be purchased. This depends on:

  • a member’s prospective pensionable service at age 60 or 65, as appropriate, and
  • any retained benefits received or receivable by virtue of earlier service under another occupational pension scheme.

In order to determine a member’s maximum permitted purchase, any transferred or transferable service and retained benefits (if any) must be identified and taken into account. The limits on maximum purchase of service are derived from Revenue rules and are set out in the ‘Table of Limits’ in Appendix 2 of Letter to Personnel Officers 12 February 1990.

Key features of the purchase scheme

The scheme allows members to purchase additional service by either:

  • periodic contributions (an ongoing deduction of a percentage amount from the member’s salary, from the date the agreement commences up until age 60 or 65), or
  • lump sum contribution (a single lump sum payment made at any point in the member’s career).

Eligible members may purchase service by reference to a retirement age of 60 or 65, as appropriate, provided that they will be short of 40 years’ service (or equivalent) at that age, and subject to the limits set out in Appendix 2 of Letter to Personnel Officers 12 February 1990.

The minimum lump sum contribution permitted is 10% of annual salary, except where the cost of purchasing the shortfall to 40 years is less than 10%.

Where periodic contributions cease prior to the purchase reference age (60 or 65), an adjustment will be made to the member’s purchased service to reflect the period over which contributions were actually made.

Where a member retires prior to the purchase reference age (age 60 or 65), the purchased service may be subject to actuarial reduction. This is in addition to an adjustment for early cessation of contributions and reflects the fact that pension benefits are being paid earlier than assumed in the purchase contract.

Purchase contributions are levied on salary only. Where a non-salary element (e.g. pensionable allowances) falls to be included in a member’s final pensionable remuneration, an additional purchase contribution will be due at retirement to cover the cost of the notional service arising from that non-salary element.

Purchase rates (cost of purchasing service)

The purchase scheme is intended to be cost neutral to the exchequer, meaning that the member carries the cost of the additional service they purchase. Purchase of notional service rates should be reviewed and adjusted from time to time to ensure that the scheme continues to be self-financing.

The cost to purchase service is determined by a set of actuarially devised tables and depends on a number of factors including the member’s age at next birthday, their purchase reference age (60 or 65), the amount of service being purchased and the terms of the pension scheme they are a member of (e.g. whether integrated or non-integrated, [DF(1] whether membership of a Spouse and Children’s Pension Scheme applies etc.).

The current purchase rates are set out in Circular 04/2006. These rates reflect the cost of purchasing one year of service. Where a member wishes to purchase more than one year of service, the rates are multiplied by the amount of service being purchased.

Periodic contributions are deducted as a fixed percentage of salary (and not a fixed monetary amount). This percentage applies for the entire term of the purchase contract and ensures that as salary increases/decreases, the monetary value of the purchase contribution adjusts proportionately.

Pension modeller: purchase of notional service

The purchase of notional service feature on the pension modellers allows scheme members to obtain an estimate of the cost to purchase notional service based on their inputs and with regard to their shortfall in service and the maximum limits applicable to them. The pension modellers can be accessed here.

Please note that figures obtained from the pension modellers are based on the information input by the user and are illustrative estimates only. They bear no right to benefit and do not indicate an entitlement to avail of the purchase of notional service scheme where no such entitlement exists in accordance with the relevant scheme rules.

Supporting information

Further information on the rules of the purchase scheme is available in the circulars and letters below. Scheme members who wish to enquire about their eligibility for, or the cost of purchasing notional service should contact their HR or pension administrator.

Circulars

  • Circular 16/1979 - Purchase of notional service for superannuation purposes
  • Circular 01/1990 - Revised Purchase Scheme for Established Officers
  • Circular 04/2006 - Purchase of notional service for superannuation purposes by Established Civil Servants and by Non-Established State Employees

LPOs