There are two types of pension scheme in the HSE;
- Final salary scheme for people who were appointed before 1st Jan 2013
- Career average (called the single scheme) for people appointed after 1st Jan 2013
The ill health benefit will be paid out if you are permanently unable to work if the physical or mental health condition is permanent and enduring. There would have to be a medical assessment carried out to determine this. This would be different from a person who is temporarily on sick leave (whereby they get 3 months full salary and 3 months half salary and may need to increase their sick leave entitlement with specified illness or income protection).
Final Salary Schemes
The ill heath benefit is paid out to a person who has over 5 years of service in the HSE. A person will receive a gratuity (lump sum) of 1 * annual salary plus their accrued pension to date. It is possible to receive added years in addition to the years that have been accrued to date. The added years are based on the following table,
|Service (Years)||Added Years|
|05-10||Actual service subject to limit of potential service to age 65|
|(i) Total service not exceeding 20 years, subject to limit of|
|potential service to age 65 or|
|(ii) 6.66 years, subject to potential service to age 60|
|20+||6.66 years, subject to potential service to age 60|
There are a number of different scenarios relating to the table above. Consider the example of a 45 year old consultant in the final salary scheme with 14 years of service. He/she could receive;
- i) an additional 6 years service, i.e., 14 actual years plus 6 additional years total not exceeding 20 or
- ii) an additional 6.66 years as the member would not have reached age 60. As the second one is more beneficial they will get the 6.66 years.
This would equate to the following for a consultant on a B contract (assuming on an uplifted contract);
- Lump sum €208,000
- Pension €46,916
Ill Heath Benefits of the Single Scheme
If a member has over 24 months of service, the accrued pension and lump sum can be enhanced for ill health early retirement. How this is done is either the last years referable amounts (amounts accrued for pension) or the average of the last 3 years (which ever is higher) is taken. Then the time to retirement is divided by 2 and multiplied by these referable amounts. If these are less than 10 times your last years referable amount, you will receive this as your enhanced pension and lump sum.
A consultant aged 45 was appointed 6 years ago. He/she earned €150k for the first 5 years and then this was raised to €160k in the 6th year. There was a break in service meaning that the consultant was placed in the career average single scheme for pension purposes.
Ignoring inflation and previous benefits accrued while working as a junior doctor, he/she will receive the following ill health early retirement benefits;
- Lump sum €112,125
- Pension €37,238
*Please note that we have assumed the pension for the time spent as a junior doctor is €6,000 per year.
While these benefits are generous, it would still mean a sharp decline in earnings during a period in life when expenditure is at its height. There can often be a case for adding private insurance in order to help ensure necessary expenditures such as mortgages, school fees etc can be paid.
However, income protection does rise steeply with age so it is worth looking into this at a younger age if possible. For example our 45 consultant could insure another €75,000* of earnings for €103 per month (€173 before tax relief)
*based on a deferred period of 52 weeks and being a non-smoker
If you would like to learn more about your current ill health benefits to understand if they are appropriate and suitable for your needs, please do not hesitate to get in touch.