Notional Service Purchase (NSP) or Purchase of Notional Service (PNS)
NSPs is the mechanism built into Superannuation to allow members make up shortfalls in pension benefits at normal retirement age (NRA). It is only applicable to those that will have missing years at NRA. As it is part of Superannuation itself it is a defined benefit scheme. Through Notional Service Purchase you are buying actual 1/80this as opposed to building up a fund of money. This brings a number of valuable benefits. It does also bring with it a number of restrictions and can be inflexible in it's application.
Advantages
- Defined Benefit scheme, benefits are guaranteed and certain
- Contributions rates are set
- Not subject to stock market performance
- Not subject to fees and charges
Disadvantages
- Useful only to those missing years at normal retirement age of 60 or 65. Cannot be geared for early retirement.
- Must purchase all benefits, pension, lump sum and death benefits. Cannot target one benefit such as tax free lump sum
- Inflexible benefits in retirement. Cannot access ARF, draw additional benefits early in retirement or easily pass value to next of kin.
Costs
The cost are determined by a number of factors which include
- Number of 1/80ths being purchased
- Salary
- PRSI class
- Normal Retirement Age
- Members age next birthday
- If member is in Spouses and Childrens Scheme
- Payment by lump sum or regular payment
You can request a quote from your pension department however this can take a considerable length of time depending on your employer. Alternatively you can go the The Department of Finances Civil Service Pension Modellers website to generate an estimate.
Indeed you may access the actuarial tables used to calculate the costings in Circular 4 of 2006 Purchase of Notional Service which outlines the rules of the scheme.
As part of a financial review a PSRA advisor can assist you in producing a quote with reference to the Department's cost tables if requested.