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

The Insider

grahamo wrote: »

If future salary increases by 1.5 x current salary so will the contributions rise by 1.5 x current contributions.

Yes but only when his salary increases, if he goes up another level for the last 10 years of his working life then he will have only paid the higher rate for 10 years not 30!

If he was in the private sector and was on 40,000 now and wanted half of that salary when he retired (not guaranteed and including the standard pension) he would have to be paying €536.12 a month (gross) of his current salary. (Calculated from here http://www.eaglestarlife.ie/investor_centre/prsa_calc/index.jsp ) That's €6432 a year as opposed to the €4000 (or whatever the figure he quoted was) that he is paying now.

Remember the private sector pension would not be guaranteed, would not be index linked and his based on this current salary. €20,000 a year in 35 years time would not be much.

With the public pension his guaranteed 50% of his retirement salary for the rest of his life (index linked). So if he retires on a salary of 120,000 he is guaranteed 60,000... after paying less in then he would in the private pension there is no comparison!!

jimmmy

well put insider

NewDubliner

jimmmy wrote: »

Anyone who has one has paid for it themselves, directly or indirectly.

All of it? The State Pension, is it fully funded by the employee? I don't think so.

Don't some employers also contribute? Does this mean that they charge everyone more for goods and services?

And, if the employee tops up their pension or has a private pension plan, that depends on investments to beat inflation, who pays the cost of inflation-proofing the investments?

P. Breathnach

jimmmy wrote: »

...the fact is the average public service pay is much higher than that ( 966 p.week, plus perks )...

What perks?

Gumbo

The Insider wrote: »

But when you retire you won't be on a salary of 39,873, Say you are in your mid thirties now, in 30 years what would your salary be? 1.5 x your current salary... maybe even double... maybe more.

Secondly correct me if I am wrong but isn't the pension index linked after you retire?

yes sorry, it is index linked, im no accoutant so i wont pretend to even try the maths on that one, but if i do get an increase my contributions also go up.

the maximum salary for my job is 49k, i cant go any higher, that includes 3 long service increments, and the fact that all the increments may be stopped in Dec means i wont get any rise at all.

so assume i retire on the 49k, its an extra few quid yeah but not a gravy train as such as recenty reported in the media.

The Insider

kceire wrote: »

yes sorry, it is index linked, im no accoutant so i wont pretend to even try the maths on that one, but if i do get an increase my contributions also go up.

the maximum salary for my job is 49k, i cant go any higher, that includes 3 long service increments, and the fact that all the increments may be stopped in Dec means i wont get any rise at all.

so assume i retire on the 49k, its an extra few quid yeah but not a gravy train as such as recenty reported in the media.

Yes but in 30 years time the max salary for your job will not be 49k, to give you an example the average industrial wage per week in 1978 was £66.50 (or £3463)!!

You can nearly say give or take your salary will go up an average of say 3% for every year over the 30 years (compounded of course!) which is probably on the low side. So when you retire the salary you will be on could easily be 100k or more probably more. So you will have an index linked pension worth half of that!

Gumbo

The Insider wrote: »

Yes but in 30 years time the max salary for your job will not be 49k, to give you an example the average industrial wage per week in 1978 was £66.50 (or £3463)!!

You can nearly say give or take your salary will go up an average of say 3% for every year over the 30 years (compounded of course!) which is probably on the low side. So when you retire the salary you will be on could easily be 100k or more probably more. So you will have an index linked pension worth half of that!

Thats inflation, but if my salary goes up like that so will everybody elses, just like social welfare payments will, state pension will and childrens benefit.

what was the average PS salary in 1978?

grahamo

The Insider wrote: »

Yes but only when his salary increases, if he goes up another level for the last 10 years of his working life then he will have only paid the higher rate for 10 years not 30!

If he was in the private sector and was on 40,000 now and wanted half of that salary when he retired (not guaranteed and including the standard pension) he would have to be paying €536.12 a month (gross) of his current salary. (Calculated from here http://www.eaglestarlife.ie/investor_centre/prsa_calc/index.jsp ) That's €6432 a year as opposed to the €4000 (or whatever the figure he quoted was) that he is paying now.

Remember the private sector pension would not be guaranteed, would not be index linked and his based on this current salary. €20,000 a year in 35 years time would not be much.

With the public pension his guaranteed 50% of his retirement salary for the rest of his life (index linked). So if he retires on a salary of 120,000 he is guaranteed 60,000... after paying less in then he would in the private pension there is no comparison!!

Not the figures I got Insider. Please let us know how you came up with your figures.. Maybe you forgot to include the state pension as being the major part of that 50% of salary. These are the results I got for a 30 year old male, 35 years to retirement, currently on 40k with contribution indexation required. And you have to remember that in kceire's example he/she won't have the full 40 years service so won't get 50% of salary.
The results I got back from your calculator are as follows:

Your monthly contribution to your Pension should be:
Gross: €333.87
After tax relief: €176.95

Based on your personal details:
Date of birth: xx/xx/1979
Gender: Male
Employment Status: PAYE
Income Tax Rate: 41%
PRSI Rate: 6%
Normal Retirement Age: 65
Annual Income: €40000
Initial Single Contribution: €0
Target: Annuity
Target percentage of final salary: 50%
Include State Pension: Yes
Spouses Pension: 0%
Contribution Indexation Required? Yes

This is A LOT less than your average public sector employee pays for his pension.
Any thoughts on this Jimmmy

K-9

grahamo wrote: »

This is A LOT less than your average public sector employee pays for his pension.

What lump sum do you get with that and is it a defined benefit scheme or defined contribution?

The Insider

kceire wrote: »

Thats inflation, but if my salary goes up like that so will everybody elses, just like social welfare payments will, state pension will and childrens benefit.

what was the average PS salary in 1978?

Yes they will but in the private sector it doesn't matter what your wage is when you retire, whatever is in your pension pot is just that (if your lucky enough to have one). You on the other hand are guaranteed 50% of your current salary when you retire no matter how little you have contributed to your pension!!!

So if your wages where 120,000 when you retire, that's 60,000 per year, let's say the standard pension doubles in the same period to keep everything equal, that means you are getting paid roughly 36,000 per year out of your pension, multiply this by 13 years and you are little short of 500,000 and that's not including the amount it will come up because it's index linked!! You will come no where near paying that amount of your 35 year period, not even close!

Not sure on the average PS salary for 1978 but here is a good link to show you the average PS salary's for the past 8 years, they have nearly doubled in size.

http://www.cso.ie/statistics/public_sector_earnings.htm

dresden8

jimmmy wrote: »

These are very selective figures. eg salary of 39,873

Selective, as in real?

You're the one selectively pick numbers from the air. If 49k is the average and all these professions and pay levels you keep quoting that are higher than this then any sane person would have to accept that there must be a lot of people lower than 49k.

Do you understand that?

The Insider

grahamo wrote: »

Contribution Indexation Required? Yes

This is the important bit, if you read the small print you see this means

Contributions are assumed to increase at 3% per annum.

Hence the different figure, if you want to compare like with like you can't check this box. Even so with this selected you came out with a figure of €333 odd, multiply this by 12 and you get €3996 which is still more then the figure originally posted.

On top of paying less you are coming out with a deal which is completely different then a normal pension fund, rather then just getting what you put in (plus whatever your fund makes for you) you are getting a guaranteed 50% of your retirement salary (in 35 years time!!!) which is index linked... how in god's name are people in the Public Service thinking this is not a fantastic deal.

kceire wrote: »

ok, so lets take PRSI out of it that provides all workers with a pension of €230.

from this post http://boards.ie/vbulletin/showthread.php?t=2055558156

my contributions from my salary of 39,873 is :

paye 137.61
prsi 107.00
income levy 30.59
pension contribution 67.17
pension levy 73.39
all of the above is per fortnight

so lets base it over 35 years which is all i will be with the PS if i last till 65 years old.

pension levy + pension contribution
= €67.17+€73.39
= €140.56 (per fortnight)

€140.56*26 = €3654.56 (per year)

€3654.56*35years = €127,909.60 of a pension fund.

so lets assume retirement at 65 and after 35 years service i get a lump sum of €55,000 as i only have 35 years service not 40 (€127,909.60-€55,000 = €72,909.60)

so my yearly pension is half salary which is €17,447. as i dont have the full 40 year service

€17,447/26 = €671.03 per fortnight

€671.03-state pension of (€230*2) = €211.03 per fortnight

so my PS pension is now €211.03 per fortnight

€72,909.60/€211.03 = 690 weeks (13 years)

so the pension costs the government nothing until after the 13th year of retirement. (78 years old)

grahamo

The Insider wrote: »

This is the important bit, if you read the small print you see this means



Hence the different figure, if you want to compare like with like you can't check this box. Even so with this selected you came out with a figure of €333 odd, multiply this by 12 and you get €3996 which is still more then the figure originally posted.

On top of paying less you are coming out with a deal which is completely different then a normal pension fund, rather then just getting what you put in (plus whatever your fund makes for you) you are getting a guaranteed 50% of your retirement salary (in 35 years time!!!) which is index linked... how in god's name are people in the Public Service thinking this is not a fantastic deal.

Its a great deal if your a TD or a judge but we don't all have the top jobs. Spare a thought for the bloke on
40k a year who happens to be married. Because he's got a dependent his state pension will make up 50% of salary therefore he receives NO public sector pension after paying out for it for 40 years. Fair enough he will get a lump sum but he has more than paid for that over his lifetime. The point is it isn't the big deal its made out to be for most workers.
PS you seem to misunderstand. You don't get 50% of salary from your public sector pension. You get the State pension which is then topped up to 50% salary (only with 40 years service) via the public sector pension.

Gumbo

The Insider wrote: »

Yes they will but in the private sector it doesn't matter what your wage is when you retire, whatever is in your pension pot is just that (if your lucky enough to have one). You on the other hand are guaranteed 50% of your current salary when you retire no matter how little you have contributed to your pension!!!

So if your wages where 120,000 when you retire, that's 60,000 per year, let's say the standard pension doubles in the same period to keep everything equal, that means you are getting paid roughly 36,000 per year out of your pension, multiply this by 13 years and you are little short of 500,000 and that's not including the amount it will come up because it's index linked!! You will come no where near paying that amount of your 35 year period, not even close!

Not sure on the average PS salary for 1978 but here is a good link to show you the average PS salary's for the past 8 years, they have nearly doubled in size.

http://www.cso.ie/statistics/public_sector_earnings.htm

its all well and good quoting 120k salaries of the top earners, but i will NEVER reach that scale, nor will the average worker so theres no point quoting massive figures. why cant we simply work with a normal persons salary and see if its such a great deal.

also you do know that 50% of final salary includes the 12k odd of a state pension, the PS pension only makes up the difference.

grahamo

All this comparing pensions is totally irrelevent anyway, The OP claimed that the taxpayer, which includes public sector employees, pays for a public sector employees pension. Its been proved again on this thread (with real facts and figures, not figures pulled out of the air) that claim is WRONG! A public sector worker over his lifetime will easily cover the cost of his pension.
What will happen now is there will be a gap in posts for a while and someone will post makiing exactly the same claims all over again:rolleyes:
This thread is going round in circles!

grahamo

NewDubliner wrote: »

All of it? The State Pension, is it fully funded by the employee? I don't think so.

Don't some employers also contribute? Does this mean that they charge everyone more for goods and services?

And, if the employee tops up their pension or has a private pension plan, that depends on investments to beat inflation, who pays the cost of inflation-proofing the investments?

Employer PRSI rate is 10.75%. This also helps cover the cost of the state pension.
Its actually one of the lowest employer PRSI rates in Europe. Employers don't have it as bad as they make out;), And yes, we all pay the cost of inflation proofing these investments.
The folks complaining about their private pension funds falling in value should be having a go at their pension fund managers who are taking massive gambles with funds and also charging exorbitant commissions and management charges.

jimmmy

kceire wrote: »

its all well and good quoting 120k salaries of the top earners, but i will NEVER reach that scale, nor will the average worker so theres no point quoting massive figures. why cant we simply work with a normal persons salary and see if its such a great deal.

That is indeed what I was doing....going on the public sector average of 966 per week. Grahamo and other public servants were using a selected individual currently earning 39 grand odd ( which is considerably less than the public service average, but is still more than most people earn in the private sector ).

Never assume you will not reach 120k in the public service....a lot of people in the public service are on that, ( as made front page headline news in one of the broadsheets recently ) on depending on your qualifications. Do not forget public sector wages have nearly doubled in the past 8 years.http://www.cso.ie/statistics/public_sector_earnings.htm
You never know what earnings will be like in the future, in say 10 or 20 or 40 years time. I know some public servants now, who have holiday homes, huge guaranteed pensions, and a standard of living that dreamt of by very few people 20 years ago.

The Insider

kceire wrote: »

its all well and good quoting 120k salaries of the top earners, but i will NEVER reach that scale, nor will the average worker so theres no point quoting massive figures. why cant we simply work with a normal persons salary and see if its such a great deal.

also you do know that 50% of final salary includes the 12k odd of a state pension, the PS pension only makes up the difference.

grahamo wrote: »

A public sector worker over his lifetime will easily cover the cost of his pension.

Have you guys actually read my posts?

kceire when you retire in 35 years time the max wage in your scale WILL NOT be 49k it will be more likely to be around the 120k mark or more (as I have explained in my previous posts). You will be guaranteed 50% of this which is 60k, take away the state pension (lets say it has doubled in that same period) and you are left with 36k per year, multiply this by 13 and you get close to 500,000. That's why it is so lucrative as there is no way you would have built up this much in the 35 year period.

grahamo a public sector worker will not cover the cost of his pension, I think my previous posts have clearly shown this... so the question is who is going to make up the difference?

grahamo

The Insider wrote: »

Have you guys actually read my posts?

kceire when you retire in 35 years time the max wage in your scale WILL NOT be 49k it will be more likely to be around the 120k mark or more (as I have explained in my previous posts). You will be guaranteed 50% of this which is 60k, take away the state pension (lets say it has doubled in that same period) and you are left with 36k per year, multiply this by 13 and you get close to 500,000. That's why it is so lucrative as there is no way you would have built up this much in the 35 year period.

grahamo a public sector worker will not cover the cost of his pension, I think my previous posts have clearly shown this... so the question is who is going to make up the difference?

thats speculating. I notice you have tripled the salary but only doubled the state pension :rolleyes:

jimmmy

insiders assumption is not unreasonable, considering how people at work get pay increases, promotion etc ....after all, over the past 35 years most people ( who had jobs 35 years ago + are still working ) have found their wages have at least trebled. ( ithe increase rate insider used ).

The Insider

grahamo wrote: »

thats speculating. I notice you have tripled the salary but only doubled the state pension :rolleyes:

I would say its a fair assumption if you take into consideration the average wage 31 years ago was £3458

http://historical-debates.oireachtas.ie/D/0311/D.0311.197902060031.html

If you look at the increase in the wages in the Public Sector from 2000 - 2008 you will see they had nearly doubled

http://www.cso.ie/statistics/public_sector_earnings.htm

Saying a wage will treble in a time period 4.5 times longer is not unreasonable and in fact I would say it is being quite conservative.

The rate of state pension in all probability would not match the wages, but for arguments sake lets say it does, so we treble it and we get 36k, take that away from the 60k and you are left with 24k, multiply by 13 years and you get 312,000 and that's not including the lump sum or the index related increases over the 13 year period.

kceire's contribution would not come any where near this, so again I ask you where does the shortfall come from?

grahamo

The Insider wrote: »

I would say its a fair assumption if you take into consideration the average wage 31 years ago was £3458

http://historical-debates.oireachtas.ie/D/0311/D.0311.197902060031.html

If you look at the increase in the wages in the Public Sector from 2000 - 2008 you will see they had nearly doubled

http://www.cso.ie/statistics/public_sector_earnings.htm

Saying a wage will treble in a time period 4.5 times longer is not unreasonable and in fact I would say it is being quite conservative.

The rate of state pension in all probability would not match the wages, but for arguments sake lets say it does, so we treble it and we get 36k, take that away from the 60k and you are left with 24k, multiply by 13 years and you get 312,000 and that's not including the lump sum or the index related increases over the 13 year period.

kceire's contribution would not come any where near this, so again I ask you where does the shortfall come from?

How much interest do you think kceire would earn if he/she took their pension contributions and stuck them in a simple savings account for 35 years?
Also lets say the pensioner is married. State pension is then lifted above the 50% max of salary.
Pension then equals a big fat zero

gaeilgegrinds

Whatever about the pension arguement I've more of an issue with paying for dole for those who never bothered trying to find work who were capable. Those who lost jobs and are looking are in my eyes a completely different kettle of fish.

The Insider

grahamo wrote: »

How much interest do you think kceire would earn if he/she took their pension contributions and stuck them in a simple savings account for 35 years?

Average 3% over the full term compound interest, after 35 years on the principle of 3678 a year and you are looking at roughly 100k. Add that to the principle and you are still not getting no where near what you get back out of it. So the question remains (which you still haven't answered) how is the shortfall made up?

The Insider

And since you don't seem to believe my figures no matter what I say, have a read of this if you are bothered

http://www.independent.ie/national-news/garda-pension-worth-836411m-1664588.html

NewDubliner

The Insider wrote: »

And since you don't seem to believe my figures no matter what I say, have a read of this if you are bothered

http://www.independent.ie/national-news/garda-pension-worth-836411m-1664588.html

It's a brave person that relies on the 'Indo' as a source of accurate information. And true to form, the article fails to make comparisons with equally or more fortunate private-sector workers. So, it's very difficult to know the scale of the claimed inequality between public and private sector pensions, about which, there is not as much information published.

But, I see that the full pension of a Clerical Officer is much less than the State Pension which forms just part of a private sector worker's pension, aged over 80 with an adult dependent.

The Insider

NewDubliner wrote: »

It's a brave person that relies on the 'Indo' as a source of accurate information. And true to form, the article fails to make comparisons with equally or more fortunate private-sector workers. So, it's very difficult to know the scale of the claimed inequality between public and private sector pensions, about which, there is not as much information published.

But, I see that the full pension of a Clerical Officer is much less than the State Pension which forms just part of a private sector worker's pension, aged over 80 with an adult dependent.

If you read over my previous posts you would have seen that I used real figures numerous times to show the inequality between public and private.

This article is based on a report done by Rubicon Investment Consulting for the Pat Kenny radio show.

The clerical officer if he was retiring today on €39,568 after 40 years of service would get €19,784. However since he joined the civil service 40 years ago he would have paid very little towards this. If you are taking the fact that is a worker now with 40 years service ahead of him see my previous posts about wages raising in a 40 year period.

K-9

The Insider wrote: »

If you read over my previous posts you would have seen that I used real figures numerous times to show the inequality between public and private.

This article is based on a report done by Rubicon Investment Consulting for the Pat Kenny radio show.

The clerical officer if he was retiring today on €39,568 after 40 years of service would get €19,784. However since he joined the civil service 40 years ago he would have paid very little towards this. If you are taking the fact that is a worker now with 40 years service ahead of him see my previous posts about wages raising in a 40 year period.

That's a fair point, though I suppose the counter argument is, the Private Sector get the exact same pension by just paying PRSI. The same Civil Servant wouldn't have paid 6.5% PRSI, but all entrants after 95 do though!

Anyway, I would have had the view that the public service pension pre the levy was a good deal.

After the levy, they are paying on average about 18/19% for pension, between PRSI, the new levy and the preexisting deduction. Do people still think this isn't enough?

waitingforBB

so why not just stop the whole DB scheme? Its obviously unsustainable. Would take legislation, but then again the powers that be wouldnt buy into that as it would be subjectively damaging.

DB is crazy. If private and public sector have transparant schemes then we have a system where the country as a whole can work for a solution.

The calculations to this point have all been flawed. Take a situation now of a 40 year old in private sector earning 50K. And 40 year old in public sector earning same. taking an incremental salary increase (and pension payment increase of same) there is a huge inequity.

run the numbers, where is the inequiry? its vast...work it out

NewDubliner

K-9 wrote: »

That's a fair point, though I suppose the counter argument is, the Private Sector get the exact same pension by just paying PRSI. The same Civil Servant wouldn't have paid 6.5% PRSI, but all entrants after 95 do though!

Pre-1995 CS staff get paid less.