I am paying more for somebodys public sector pension than my own Private pension

Naz_st

kindajaded wrote: »

Just to clarify one thing - I had the impression that Naz thinks people should just get from a pension what they pay in. This makes absolutely no sense.
And in the same way that private pension companies make money out of funds paid in until they have to pay out so the state can too - using the funds in recent times being an obvious example but even out of recession money makes money.
I really think alot of people on this thread just don't understand how pensions work.

I agree, but as point B in my last post - it's hard to quantify the returns. Provide the statistics of average annual return and I'll update the numbers. Or feel free to re-work out the numbers yourself and post them!

Naz_st

ixoy wrote: »

Thanks for the above there - and it doesn't even begin to take into account inflation either.

Yeah, I actually forgot all about pay pension parity link and the pension increases after you've retired. I may try and add that in tomorrow somehow...

Thoie

Interesting task for tomorrow (or tonight if anyone's awake enough to do the maths) - take a Public Service single employee earning €63k a year at retirement, assume a life expectancy of 15 years, then use the earlier calculations provided to see what they contributed vs what they receive (including inflation and index linked receipts)

Then work backwards with a private sector employee earning the same amount at retirement, with the same benefits, and see how much they should have been putting away to match the public sector.

I'll have a go at it tomorrow night if no-one's already done it.

kindajaded

""

Naz_st wrote: »

First, I did point out that not all public service workers come out with a fantastic pension, but it seems clear that most PS workers who contribute towards a DB public pension get out more than they put in (even after the pension levy)

Second, yes it is based on a a single person or couple with 2 pensions. Do you have statistics on how many public service retirees, now and in the future, have or will have dependent partners with no separate source of income?

A) I omitted PRSI contributions as all workers public and private pay that, and it's not just a pension contribution it also pays unemployment benefits etc. Also, I was rebutting the original calculations by grahamo who also omitted it for the same reason:
Fine, but this depends on where the money is invested. As far as I know unlike private sector pension funds, the public sector defined benefit pension reserve fund is used to pay current pensions (when it's not being used to bail out banks!). So I don't think you can quantify the interest returns easily. But if you have statistics on these annual returns, please provide them and I'll gladly update the spreadsheet.
C) That has no bearing on what I was trying to demonstrate - this is about the public service pension and the cost to the taxpayer, private sector pensions aren't a part of it.
D) Again, irrelevant""


Naz:

in particular : it's not just "fine, but it depends on where the money is invested". This is the crucial part of the whole argument. People here - including you - are saying things like "public sector workers get out of pensions much more than they put into them". Duh. WHY WHY WHY WOULD YOU EXPECT IT TO BE OTHERWISE?? WHAT IS A PENSION FOR?? SHOULD WE ALL JUST OPEN SAVING ACCOUNTS OR HIDE IT UNDER THE BED INSTEAD??.
Secondly, wrt : pension funds are used to pay pensions to anyone CURRENTLY retired and take in money from anyone CURRENTLY working - private or public.
The reason private companies bother with pensions is that they can make money out of them - the government makes some money out of the funds, at least interest (and if they were creative about it could do alot more without much risk), and it is currently saving their/our bacon with the banks - also worth alot of money to us all.
Thirdly: As a general principle workers get pensions. The employer contributes. The state is the employer of PS workers - not the private sector. We all pay tax and no one works for free. If the pensions are unfair (and I am not sure they even are) they are not nearly as dramatically so as the people on this thread think. "The cost to the taxpayer" is the cost of being part of a society that hires workers who are entitled to some form of pension. And that costs.
Finally: The other points are relevant. Go back to the first post and read some of the rubbish since. And consider the fact that the cost of private sector overcharging for the last 10 years has cost public sector workers. The cost of paying for high salaries to bankers costs the customer, the cost of food, the cost of tradesmen, the cost of houses, the cost of beer.. It all costs public sector workers. I guarantee you you will see more loss of earnings to PS workers as prices go down. Same as everyone else. And same as everyone else they will complain and fret for a while and then get on with it.

kindajaded

ixoy wrote: »

Just to clarify - his lump sum + yearly pay out (from pension) + state pension was greater than her lump sum + yearly pay out?

yes, he did make more but it still worked out better - he did say that if he had left a few years later it wouldn't have

kindajaded

Naz_st wrote: »

I agree, but as point B in my last post - it's hard to quantify the returns. Provide the statistics of average annual return and I'll update the numbers. Or feel free to re-work out the numbers yourself and post them!

Afraid I wouldn't be able to do that Naz. What is clear to me is that even the financial whizzes here haven't really worked it out and that the whole thing has at least been exaggerated.

Thoie

kindajaded wrote: »

Thirdly: As a general principle workers get pensions. The employer contributes. The state is the employer of PS workers - not the private sector.

Quick point - in my experience these days it's quite rare for employers to contribute to pensions. Yes, 40 years ago it was the norm for employers to contribute to pensions, sometimes in excess of the employee contribution. In my own working experience my current job is the only one I've had where the employer has contributed anything at all, and even now it's only a small percentage of my contributions. This is one of the main reasons for the introduction of PRSAs - so many private companies had no pensions at all that employees were forced to go out and arrange their own.

Naz_st

kindajaded wrote: »

Naz:

in particular : it's not just "fine, but it depends on where the money is invested". This is the crucial part of the whole argument. People here - including you - are saying things like "public sector workers get out of pensions much more than they put into them". Duh. WHY WHY WHY WOULD YOU EXPECT IT TO BE OTHERWISE?? WHAT IS A PENSION FOR?? SHOULD WE ALL JUST OPEN SAVING ACCOUNTS OR HIDE IT UNDER THE BED INSTEAD??.

Because that's how defined contribution pensions work, which is what the majority of private sector workers have, if they have any at all. In a defined contribution pension, you HOPEFULLY get back more than you pay in due to the increase in value of a competently invested pension over its lifetime. In a defined benefit pension (the Public Service pension) the amount you contribute from your annual salary is not directly related to the amount you get out of the resulting pension. In reality, in the current financial market, it's quite possible that a lot of private sector workers have contributed more of their salary to their pension than their pension is currently worth - so they really would have been better sticking the money under the mattress!

Secondly, wrt : pension funds are used to pay pensions to anyone CURRENTLY retired and take in money from anyone CURRENTLY working - private or public.

Public sector pensions work this way. What's your point?

Thirdly: As a general principle workers get pensions. The employer contributes. The state is the employer of PS workers - not the private sector. We all pay tax and no one works for free. If the pensions are unfair (and I am not sure they even are) they are not nearly as dramatically so as the people on this thread think. "The cost to the taxpayer" is the cost of being part of a society that hires workers who are entitled to some form of pension. And that costs.

The whole public sector pay bill is "the cost of being part of a society that hires workers who are entitled to some form of pension". I have no problem with that. I have a problem with people complaining that the public sector pension contribution is some sort of massive burden that they shouldn't have to bear. The taxpayer is the one footing the bill for the public sector pensions, not so the private sector employer contributions.

Finally: The other points are relevant. Go back to the first post and read some of the rubbish since. And consider the fact that the cost of private sector overcharging for the last 10 years has cost public sector workers. The cost of paying for high salaries to bankers costs the customer, the cost of food, the cost of tradesmen, the cost of houses, the cost of beer.. It all costs public sector workers. I guarantee you you will see more loss of earnings to PS workers as prices go down. Same as everyone else. And same as everyone else they will complain and fret for a while and then get on with it.

Well, the high costs have affected everyone, public and private sector. But that is something for a different thread I think.

Thoie

Naz_st wrote: »

I agree, but as point B in my last post - it's hard to quantify the returns. Provide the statistics of average annual return and I'll update the numbers. Or feel free to re-work out the numbers yourself and post them!

We could use the pensionsboard.ie pension calculator assumption figures as below?

Assumptions used:
Investment return will be 5% per year before age 65 and 4% per year after age 65
Salary will increase at 3% per year
Pension will increase at 2% per year in retirement.
The State Pension will increase in line with salary increases.

As a point of interest, from that calculator, a 30 year old male, currently earning 50k, who wants a pension of 50% of their salary at retirement, and starting a pension from scratch at the moment should be putting away 11% of their salary from now to achieve that at retirement. Entitlement to a state pension is assumed and included as part of the target pension. This does not provide for any lump sum on retirement.

kindajaded

Naz_st wrote: »

Because that's how defined contribution pensions work, which is what the majority of private sector workers have, if they have any at all. In a defined contribution pension, you HOPEFULLY get back more than you pay in due to the increase in value of a competently invested pension over its lifetime. In a defined benefit pension (the Public Service pension) the amount you contribute from your annual salary is not directly related to the amount you get out of the resulting pension. In reality, in the current financial market, it's quite possible that a lot of private sector workers have contributed more of their salary to their pension than their pension is currently worth - so they really would have been better sticking the money under the mattress!




Public sector pensions work this way. What's your point?



The whole public sector pay bill is "the cost of being part of a society that hires workers who are entitled to some form of pension". I have no problem with that. I have a problem with people complaining that the public sector pension contribution is some sort of massive burden that they shouldn't have to bear. The taxpayer is the one footing the bill for the public sector pensions, not so the private sector employer contributions.


Well, the high costs have affected everyone, public and private sector. But that is something for a different thread I think.

EXACTLY: "IN THE CURRENT FINANCIAL MARKET". If there was only a small "hope" of making a small return on a pension then pension companies would never have had any customers. How your benefit relates to your contribution is based on risk. A low risk pension pays less. A high risk one a few years ago DEFINITELT would have paid more and I know this from family experience. What about a system of everyone paying 15 - 20% of their salary for the same pension, either low risk or defined benefit. And low risk pensions are still worth more than the mattress.

My point wrt the last few bit is that it DOES cost the public sector if private sector workers are more expensive - either because of salaries or pension contributions. It costs indirectly and is alot harder to gripe about for that reason.
Also you are talking about a "massive burden" but if you hire people you have to pay them, pension them etc.. If there is an inequality it should be recitified - either improve pensions for the private sector or cut them for the public sector but it must be done on correct information and figures - none of which has been done here and it is very clear that alot of the comments are very badly informed.

Naz_st

Thoie wrote: »

We could use the pensionsboard.ie pension calculator assumption figures as below?

Assumptions used:
Investment return will be 5% per year before age 65 and 4% per year after age 65
Salary will increase at 3% per year
Pension will increase at 2% per year in retirement.
The State Pension will increase in line with salary increases.

As a point of interest, from that calculator, a 30 year old male, currently earning 50k, who wants a pension of 50% of their salary at retirement, and starting a pension from scratch at the moment should be putting away 11% of their salary from now to achieve that at retirement. Entitlement to a state pension is assumed and included as part of the target pension. This does not provide for any lump sum on retirement.

Thanks for that... will take a look if I get some time tomorrow. Those numbers for private sector defined contribution pensions right? I wonder where the stats are on the annual return to the state from the pensions reserve fund?

kindajaded

Thoie wrote: »

We could use the pensionsboard.ie pension calculator assumption figures as below?

Assumptions used:
Investment return will be 5% per year before age 65 and 4% per year after age 65
Salary will increase at 3% per year
Pension will increase at 2% per year in retirement.
The State Pension will increase in line with salary increases.

As a point of interest, from that calculator, a 30 year old male, currently earning 50k, who wants a pension of 50% of their salary at retirement, and starting a pension from scratch at the moment should be putting away 11% of their salary from now to achieve that at retirement. Entitlement to a state pension is assumed and included as part of the target pension. This does not provide for any lump sum on retirement.

So, it's not really that big a difference anymore with the levy. What would it be if you brought it up to the full 14% which is what a PS worker on 50k pays?

Naz_st

kindajaded wrote: »

If there is an inequality it should be recitified - either improve pensions for the private sector or cut them for the public sector but it must be done on correct information and figures

I agree completely

- none of which has been done here and it is very clear that alot of the comments are very badly informed.

Again, I totally agree. To be fair, I've been pretty open that I'm no way saying that I have all the answers, I'm happy to correct and add to the original post. I was just posting what I thought was a more thorough example because of the same sense that there was a lot of misinformation about this issue floating around.

jimmycrackcorm

grahamo wrote: »

I see the public sector bashers are now conspicuous by their absence. They can't dispute the figures in this thread so I think the public sector bashers have lost this debate.:)
Could it be time for them to go and pick on someone else now;)

Looks like you've gone a little quiet now.

I wish I had an employer to contribute to my pension over the last 20 years but in the private sector that is rare and when they do it is only a defined contribution scheme which you haven't even considered for any comparison.

The government has concentrated on taxation policy as the first volley in the public finances deficit - I look forward now to when they will have to tackle public service pay so that guys like you get a real dose of reality.

dresden8

jimmycrackcorm wrote: »

The government has concentrated on taxation policy as the first volley in the public finances deficit - I look forward now to when they will have to tackle public service pay so that guys like you get a real dose of reality.

Well, I think that sums up these public sector threads, envy and hatred.

P. Breathnach

dresden8 wrote: »

Well, I think that sums up these public sector threads, envy and hatred.

It's a little -- no, a lot -- more complicated than that. There is also ignorance and misunderstanding on both sides; there is an amount of ineptitude in how the government is dealing with public service pay and costs; there are people on both sides of the divide who misrepresent the facts or who make inappropriate comparisons. And a common motive for all the unbalanced argument is a wish that somebody else should take the pain.

There are not many participating in discussions here who look past their self-interest to the general good. They seem unable or unwilling to accept a version of the general good that has might have a negative impact on their individual circumstances.

Folks, we are all in this together. Yes, I know it is not your fault or mine that the ship has hit the rocks, but we are all on the same crippled ship, and we need all hands at the pumps.

Thoie

kindajaded wrote: »

So, it's not really that big a difference anymore with the levy. What would it be if you brought it up to the full 14% which is what a PS worker on 50k pays?

I'm not sure, that's why I was saying I'd take a look at the full maths this evening. To help me with the sums, are you including PRSI in the 14% or is it 14% + 6.5% PRSI?

grahamo

From Naz's post
Total Contributions: €237,851.46
Retirement Lump Sum: €95,040.00
Contributions - Lump Sum: €142,811.46
50% Final Salary: €31,680.00
State Pension: €11,975.60
Contributory Pension: €19,704.40
15yrs** of Pension: €295,566.00
Total Deficit: -€152,754.54

Again the public sector bashers are cherry picking their arguments.
In the example above it is absolute f***ing rubbish to say there would be a deficit.
Lets say even if you didn't bother with a pension but you put all those contributions into a savings account for 40 years. How much interest would be accrued?
Deficit my arse!!!!
I'd imagine the above example is from one of the better paid public sector employees so the lower paid will get an even worse deal.
And again what would the public sector pension be if the employee had a wife or other dependents?
What about the poor suckers who don't live to 65 or the people who don't reach average life expectancy?

Thoie

grahamo wrote: »

Again the public sector bashers are cherry picking their arguments.

Grahamo, we're trying to be logical, not emotive about this. As you've seen, both Naz and I have offered to do some sums for everyone's comparison.

I picked a random male, 30 year old, single on 50k

If you'd like to suggest another scenario (it appears you'd like to include a scenario of a married person with a dependant spouse), I'll attempt to include that in my figures as well.

I have found the pensionsboard.ie and am using that as a basis for assumptions regarding the private sector, can you help by providing some similar assumptions for the public sector?

P. Breathnach

grahamo wrote: »

From Naz's post
Total Contributions: €237,851.46
Retirement Lump Sum: €95,040.00
Contributions - Lump Sum: €142,811.46
50% Final Salary: €31,680.00
State Pension: €11,975.60
Contributory Pension: €19,704.40
15yrs** of Pension: €295,566.00
Total Deficit: -€152,754.54

That post involves some very bad assumptions, and can not be reasonably used to prove anything.

Again the public sector bashers are cherry picking their arguments...

I am not a public service basher, having spent most of my working life in the public service, and now being a public service pensioner. But some of the supposed defences of the public service pension also involve cherry-picking.

gazzer

Thoie wrote: »

Grahamo, we're trying to be logical, not emotive about this. As you've seen, both Naz and I have offered to do some sums for everyone's comparison.

I picked a random male, 30 year old, single on 50k

If you'd like to suggest another scenario (it appears you'd like to include a scenario of a married person with a dependant spouse), I'll attempt to include that in my figures as well.

I have found the pensionsboard.ie and am using that as a basis for assumptions regarding the private sector, can you help by providing some similar assumptions for the public sector?

Thoie. I would like to see the figure for 25 year old wanting to retire on the same amount. A PS worker will only get full pension benefits after 40 years service so that might be a better figure to start with. On top of that can we calculate that the state pension will be for the worker and their spouse?

Naz_st

grahamo wrote: »

Again the public sector bashers are cherry picking their arguments.
In the example above it is absolute f***ing rubbish to say there would be a deficit.

First off, you are the one trying to personalise the thread, and then you moan about public sector "bashers". I was merely pointing out a more thorough calculation based on a defined salary scale that corresponds to a large percentage of the entire public server pay & pensions bill. I hardly think that counts as "cherry-picking" and certainly not as much as assuming all public sector workers both start and finish on 40k as per your original post!

Lets say even if you didn't bother with a pension but you put all those contributions into a savings account for 40 years. How much interest would be accrued?
Deficit my arse!!!!

On the interest accrued: public sector posters on boards are very quick to point out that "it's not a pension levy, it's a wage cut" precisely because the extra money doesn't all go into a pension fund, but instead straight into the state coffers. Make your mind up! For this reason, you can't just treat the contributions like they are going into a big deposit account somewhere every year for 40 years so it's not a fair comparision.

I'd imagine the above example is from one of the better paid public sector employees so the lower paid will get an even worse deal.
And again what would the public sector pension be if the employee had a wife or other dependents?
What about the poor suckers who don't live to 65 or the people who don't reach average life expectancy?

I would have thought it was fairly obvious that using the average life expectancy is fairest way of working it out otherwise you could say "what about those people who live way beyond the average age" (I could have used average female life expectancy btw, which would have been worse).

If you have statistics on the number of workers who have retired, or will retire, with dependents that have no pension or other income source, please provide them and I can use them to make the calculations more accurate.

Naz_st

P. Breathnach wrote: »

That post involves some very bad assumptions, and can not be reasonably used to prove anything.

I am not a public service basher, having spent most of my working life in the public service, and now being a public service pensioner. But some of the supposed defences of the public service pension also involve cherry-picking.

To be fair, I have consistently pointed out that I am no way claiming that this is the definitive calculation (the reality is likely far more complicated than an Excel spreadsheet can work out!). But I was posting as a rebuttle to the assumptions made in the first set of calculations.

jimmmy

10000maniacs wrote: »

Get real and smell the coffee.
This is whats known in private worker circles as pension apartheid.
The vast majority of the 357,000 people employed in the public sector are members of a defined-benefit pension scheme which provides a guaranteed 50pc of final salary on retirement.
Oh yes I forgot......the lump sum of 1.5 times final-year salary.
This is for a contribution of 6.5% of income per annum plus a levy of 4% after tax relief.
Pretty good deal if you ask me.
Now both private and public sector workers pay equitable PRSI, so PRSI is not an issue here.
If I was to arrange a pension like that for myself in the private sector, I would have to put aside 25+% of my salary until I retire, and depending on how the portfolio does on retirement date, maybe I could pick up a comparable income. NOT a guaranteed income.

This is what the public sector people on this forum fail to comprehend....I know many public sector workers who privately agree public sector pensions are way out of line.

P. Breathnach

Naz_st wrote: »

... On the interest accrued: public sector posters on boards are very quick to point out that "it's not a pension levy, it's a wage cut" precisely because the extra money doesn't all go into a pension fund, but instead straight into the state coffers. Make your mind up! For this reason, you can't just treat the contributions like they are going into a big deposit account somewhere every year for 40 years so it's not a fair comparision...

Public service workers pay towards their pension entitlements. They have no control over what the government does with that money. The government has chosen over the years to treat it as current income rather than capital to be placed in a fund. But the government had signed up to the pension scheme so it was assuming a responsibility to fund it out of future current budgets. It is reasonable for the user (the public sector employee or pensioner) to regard the arrangement in the same way as if there were an actual fund.

One of the few things that Charlie McCreevy did which I thought a (somewhat) good idea was the creation of the National Pensions Reserve Fund. But it was not created solely for public service pensions, nor was the size of the fund linked with public service employee contributions. Almost from the day it was created, politicians were eyeing it as a slush fund. Opposition parties promised to raid it if they got in. And when our ship of state hit a rock, it was indeed raided.

Do not hold it against public service employees or pensioners that our politicians are improvident in arranging for their pensions.

Thoie

gazzer wrote: »

Thoie. I would like to see the figure for 25 year old wanting to retire on the same amount. A PS worker will only get full pension benefits after 40 years service so that might be a better figure to start with. On top of that can we calculate that the state pension will be for the worker and their spouse?

Can you clarify please? Do you want the 25 year olds starting on 50k now, or less? Actually, one convenient figure to have would be the assumed salary increases for the public sector. Using the Pensions Board figure I'll assume a 3% annual rise for private sector - if I don't get any other figure I'll assume the same rise for public as well.

So - two starting scenarios (for each sector).
Married 25 year old on 50k, unmarried 25 year old starting on 50k (that sounds like a lot to me, so shout if you want to reduce the starting salaries).

K-9

P. Breathnach wrote: »

Public service workers pay towards their pension entitlements. They have no control over what the government does with that money. The government has chosen over the years to treat it as current income rather than capital to be placed in a fund. But the government had signed up to the pension scheme so it was assuming a responsibility to fund it out of future current budgets. It is reasonable for the user (the public sector employee or pensioner) to regard the arrangement in the same way as if there were an actual fund.

One of the few things that Charlie McCreevy did which I thought a (somewhat) good idea was the creation of the National Pensions Reserve Fund. But it was not created solely for public service pensions, nor was the size of the fund linked with public service employee contributions. Almost from the day it was created, politicians were eyeing it as a slush fund. Opposition parties promised to raid it if they got in. And when our ship of state hit a rock, it was indeed raided.

Do not hold it against public service employees or pensioners that our politicians are improvident in arranging for their pensions.

Was actually going to make this point.

Does the Pension fund cover Public Sector pensions and the State ones?

grahamo

In reply to the OP who stated that he is paying for all public sector pensions:D I attempted to show the average Joe in the public service is not getting back what he paid in. I stand by it. In general a public sector worker will not get back what he puts into the pension fund. I'm no actuary but I'm pretty sure that all money paid in to the fund will accrue some type of interest at the very least over 40 years of a persons working life.
The only people who tried to rebutt the claims are Naz st and Thoie and fair play to you for having a go.
There are a lot of factors that would come into play in the calculations but whatever way you dress it up any money paid into a fund for 40 years would make a few quid.
I can tell you all for a FACT that in my case I definitely will not get back what I put into it as I've spent 17 years of my 26 years in the workforce in the private sector. (I now work commercial semi state)
ALL the people on contract I know will get nothing back as even though they don't pay into the pension fund they are still charged the pension levy (Is that a rip off or what?).

P. Breathnach

K-9 wrote: »

... Does the Pension fund cover Public Sector pensions and the State ones?

Not any more!

Yes, it was broadly intended to help cover both public sector and state pensions.

Thoie

grahamo wrote: »

The only people who tried to rebutt the claims are Naz st and Thoie and fair play to you for having a go.

Pssst I'm not trying to rebut anything, I'm just tired of conversations like these going round and round in circles, and would like to have some black and white figures showing direct comparisons, whichever way they turn out

For the record, I'm private sector, and long before the recent budget I always thought the public sector pensions sounded like a good deal. My suspicion (but I'll wait until I can do the maths) is that with the new budget both sides will be coming out pretty much even.