Pensions Decisions Case Studies

Mary began her employment with a public authority in 1984 in a permanent position. 11 years later, in 1995, Mary took a career break and in September 1996 began employment in a temporary position in the same public authority. In June 1997, Mary was again given a permanent position with the public authority. At all times during the course of her employment with the public authority, Mary was part of the public service pension plan. Mary’s PRSI classification was originally Class ‘A’ while she held a permanent position between 1984 to 1995. However, when Mary took a temporary position in September 2006, her PRSI classification was correctly amended to Class D. Unfortunately, however, this Class D classification was incorrectly retained even though Mary had a permanent position as of June 1997, which should have provided her with a Class A PRSI classification for the purposes of her public service pension plan.

Some 20 years later, in February 2019, Mary wrote to her employer’s pension department requesting an estimate for “cost neutral early retirement” (CNER). In August 2019, Mary was provided with an estimate of a pension of €19,232.69 annually, together with a lump-sum payment on retirement of €63,689.23. Based on these figures, Mary retired in May 2020.

In July 2020, Mary’s employer’s pension department identified that Mary’s PRSI had been classified as Class D for 24 years in error. In September 2020, Mary’s case was referred to the SCOPE section of the Department of Social Protection by her employer, in order for it to clarify the correct PRSI classification applicable.

In early November 2020, Mary was made aware of the potential PRSI misclassification. In December 2020, SCOPE determined that Mary’s employment between June 2007 and May 2020 was insurable at PRSI Class A level. The misclassification of Mary’s PRSI as Class D for 4 years meant that the estimate for CNER provided to Mary was incorrect. Mary sought for her employer to pay the pension which was reflected in her payslip for 24 years and as set out in the estimate for CNER.

Mary appealed SCOPE’s decision, but in March 2021, SCOPE upheld its original decision that Mary’s employment between 1997 – 2020 was insurable at PRSI Class A level.

Mary’s lump sum and pension amounts were revised on the basis of her combined service as a Class A officer and Mary was informed that she was only entitled to €7,511.32 annually, with a lumpsum payment of €41,692.95. Mary complained that she received no apology or explanation as to how the PRSI misclassification happened. Furthermore, she stated that she had to apply twice for a portion of her lump sum payment to be paid so that she could manage financially, as her first pension payment was only issued in January 2021, 8 months after her retirement. Due to the financial shortfall suffered, Mary was forced to end her retirement.

Mary complained to the Financial Services and Pensions Ombudsman. The Ombudsman noted that Mary’s employer accepted that it had misclassified Mary’s PRSI class and that it was only after Mary had been retired some 6 months that her employer realised its error.

The Ombudsman accepted that the error had cost Mary financially, physically and psychologically. The Ombudsman noted the delays throughout the process were primarily due to the delays obtaining information regarding Mary’s career break from her employer and from Mary herself.

With regards to the lack of communication maintained by her employer with Mary once the error was discovered, the Ombudsman was of the opinion that regular communication with Mary should have been maintained.

The Ombudsman acknowledged that Mary’s employer ought to have identified the PRSI misclassification earlier and that her employer was largely responsible for the financial impact incurred by Mary. However, the Ombudsman agreed that Mary had, in fact, been given the benefits she was correctly entitled to once the error of the misclassification was addressed.

As a result, the Ombudsman determined that it was not open to the Ombudsman to make a direction for any financial compensation as Section 61(5) of the Financial Services and Pensions Ombudsman Act, 2017, provides that financial redress shall not exceed any actual loss of benefit under the scheme concerned. However, given the nature of the error, together with the extensive period of time the error persisted for, the Ombudsman referred this decision to the Pensions Authority, for such action as it may consider necessary in the circumstances.