Employees who pay Class A PRSI under the social insurance system operated by the Department of Social Protection may be entitled to a range of social insurance related payments from that department by virtue of their PRSI contributions. One such payment is the State Pension (Contributory) (‘SPC’), which is payable to eligible persons on reaching age 66.
A significant number of occupational pension schemes (in both the private and public sectors) take account of the SPC when providing a pension under the occupational pension scheme. This is known as ‘integration’, and is sometimes referred to as 'co-ordination'.
An integrated, or co-ordinated, pension scheme looks at the total pension entitlements available to employees on retirement, including the SPC and their occupational pension benefit. One reason for this is that both employers and employees make PRSI contributions which, in turn, entitle scheme members to certain social insurance benefits, including the SPC.
Occupational public service pension schemes use integration in order to account for an employee’s entitlement to the SPC, to determine:
- the amount of occupational pension payable from their pension scheme, such that the combined pension from both sources (occupational pension and SPC) is at the desired level under the scheme's design; and
- the level of contributions payable by the employee towards the cost of their occupational pension, reflecting the offset of the SPC from their occupational pension benefit.
This is normally achieved by a salary offset in respect of the SPC in the calculation of employee pension contributions and, in the calculation of a pension benefit under an integrated public service pension scheme, the SPC is usually accounted for through an offset built into the rate of pension accrual under the scheme.
In calculating pension benefits under an integrated public service pension scheme, it is assumed that the public servant concerned is entitled to social insurance benefits by virtue of their PRSI classification and is eligible for the maximum rate of those benefits. There are, however, circumstances where a person will not qualify for the SPC, or qualifies at a rate that is less than the maximum rate payable.
In the case of members of an integrated pre-existing public service pension scheme who retire and who do not qualify for the SPC, or qualify for a lower rate of SPC than the maximum payable, they may be entitled to an occupational supplementary pension, subject to certain conditions being met.