PRSI error leaves state staff with shortfall in pensions
A SERIES of blunders mean that huge numbers of public servants have been paying too little to fund their pensions, and will now have to stump up thousands to fund the shortfall.
Pensions Ombudsman Paul Kenny said last night the issue was widespread and he urged state bodies to review their files to identify affected workers. It is understood that these include at least 300 teachers.
He explained that the problem had arisen when temporary workers in the public service were made permanent.
They had been wrongly classified for PRSI (pay related social insurance).
And they continued to be charged the wrong rate of PRSI when they were made permanent, as the system had incorrectly thought they were still temporary workers. This meant they paid too much PRSI, but too little money was going into their pension pots.
They will get a refund for the overpayments, but as the refunds will only go back four years, this is unlikely to make up for the underpayment of pension contributions
The net result will be that huge numbers will not have enough from the refund to make up the shortfall in their pensions contributions.
This means if they have not retired yet they will have to make up the payments into their pension pot over their remaining time in work.
This means extra money out of their pay packet each month.
And if they are retired already they may face having their pension being reduced in order to make up the shortfall.
Several have taken their cases to the Pensions Ombudsman, who last night blamed complicated rules in the public service for the mix-up.
Many of those hit by the blunders are among the 7,500 public servants due to take early retirement by the end of next month.
The issue affects public servants who were temporary workers before 1995 but made permanent after that year.
Temporary workers used to pay a higher level of PRSI but when these people were made permanent they should have been changed to the lower PRSI rate, but many were not.
The result was that they ended up overpaying PRSI and underpaying into their pension.
One teacher, who retired in 2010, was told the shortfall in her pension contributions was €9,000, RTE reported last night.
She got a letter from the Department of Education telling her that she was on the wrong PRSI class for 12 years, meaning her pension fund was short by €9,000. She eventually got an apology for what they called "a clerical error".
The teacher received a PRSI refund of €5,000, leaving her with a €4,000 shortfall.
Mr Kenny said: "The regulations are so complicated it is not a surprise that mistakes have been made".