explain the need for a pension age extension...

Stovepipe

So we can solve the banking crisis by creating NAMA out of thin air and raping the public purse yet we can't provision for our retirees despite getting extra unforseen billions in corporate taxes and returns from NAMA? Are there any competent economists working for the State, at all?

kowloon

I think they may end up going back on this. Life expectancy has increased, but so has productivity and at some point we might have trouble inventing new jobs to soak up the man-hours. We can't magic up something for everyone to do for 40 hours a week, particularly as resources aren't infinitely scalable and AI stands to replace many jobs. Unless we want to create a minority employed class it makes sense to reduce the retirement age to spread the work. We've also seen people steadily enter employment later; the vast majority of jobs don't require third level.

Nijmegen

Stovepipe wrote: »

So we can solve the banking crisis by creating NAMA out of thin air and raping the public purse yet we can't provision for our retirees despite getting extra unforseen billions in corporate taxes and returns from NAMA? Are there any competent economists working for the State, at all?

NAMA is on track to make a €4bn profit... https://www.rte.ie/news/business/2019/0530/1052550-nama-annual-report/

And yeah, the state is running a €1.5bn surplus today. The issue is that you’re talking about making long term guaranteed financial commitments with no guarantee about future revenues except to say there will be fewer people working for each on a pension. The prudent thing to do is make changes now.

hmmm

kowloon wrote: »

I think they may end up going back on this. Life expectancy has increased, but so has productivity and at some point we might have trouble inventing new jobs to soak up the man-hours.

If we get to that point we can go back on it. In the meantime, the projections are that we can't fund pensions unless we massively tax our children when they start working.

Our children will have in my view the absolute right to then ask us "why didn't you save some money to pay for your own pensions?"

kowloon

hmmm wrote: »

If we get to that point we can go back on it. In the meantime, the projections are that we can't fund pensions unless we massively tax our children when they start working.

Our children will have in my view the absolute right to then ask us "why didn't you save some money to pay for your own pensions?"

It's not something I expected to be immediate, but I do think people being born now might not have to worry about working to 70.

Stovepipe

...and you can say, we did, but the Govt kept raiding the funds to pay for their mistakes or hitting you with cunning taxes, such as DIRT or never-ending pension levies or youth training levies or hitting your income with USC, so you lost the fat in your paycheck that enabled you to put money away in the first place.
The thing that people forget is that money paid out in a pension is not lost money; it doesnt go up in a puff of smoke and cease to exist because it goes back into circulation anyway and gets taxed with VAT and Excise duty when you buy stuff. The Govt gets it back in due course. As for statistics, we are currently consuming our over 65s at about 7000 a year and U-65s at about 23000 a year and we are giving birth to replacements at about 60,000 a year (CSO) so the balance is still on our side. We need to come up with a pension pot scheme that is protected from Govt theft.

Mr. teddywinkles

Nijmegen wrote: »

And in continuation of your point, while TDs do have gold plated pensions compared to the rest of us on DC pensions (or nothing but the state pension), stripping every TD who ever lived of their current or future pension would save a fraction of the problem. The entire spend on the entire Oireachtas, printers and all, is €134m per year.

If you decide you don't want to be the only democracy in the world without a parliament, the cost of pensions last year was €9.98m. There's some really juicy pensions in there to hit, and hit hard. Do so and you will save at max €9.98m.

The cost of reversing the current pension age increase is €500m per year on those who are currently/imminently about to retire. That cost balloons as more and more people retire.

€500m less €10m is €490m. Where would you like to get the rest from, now and into the future?

Stripping them of there gold plated pension might do fook all financially but give them a dose of reality at least.

Stovepipe

they would say that losing their jobs every four years is reality enough.

Topgear on Dave

Stovepipe wrote: »

We need to come up with a pension pot scheme that is protected from Govt theft.

I cannot see it happening.

All election promises from all parties are for more spending, they arent going to just leave a large pot of PRSI money to pay pensions in 40 years time.

Even my private pension, a small defined contribution one (fairly similar to a savings account really) can be dipped in to by the taxman now if they see the need.

BattleCorp

Why are people jumping up and down shouting that our pensions system is unsustainable but not saying that our social welfare system is unsustainable???

They both come from the same pot of money don't they?

So if we don't have enough money in future to pay pensions, how will we pay social welfare?

Riskymove

Nijmegen wrote: »

Quite correct and edited with thanks.

They only get the €100k per year plus lump sum, not the €112k plus lump sum.

If their salary is €151k, then (if they have 40 years service) the pension would be around €75k not €100k

this would reduce for every year of service below 40

Sweet.Science

BattleCorp wrote: »

Why are people jumping up and down shouting that our pensions system is unsustainable but not saying that our social welfare system is unsustainable???

They both come from the same pot of money don't they?

So if we don't have enough money in future to pay pensions, how will we pay social welfare?

It will be fun when we are all are on jobseekers benefit in our 70s.

BattleCorp

Sweet.Science wrote: »

It will be fun when we are all are on jobseekers benefit in our 70s.

On your 65th Birthday you will be handed a glass of whiskey and a pistol and be told to do the decent thing. And then into the compost heap with you for 'recycling'.

Nijmegen

Riskymove wrote: »

If their salary is €151k, then (if they have 40 years service) the pension would be around €75k not €100k

this would reduce for every year of service below 40

So, definitely some back and forth on this one... A person on pre-95 can actually collect the state pension in addition to their public service pension. So I think where we're landing is from my incorrect statement to that the person will receive a pension of about €87k per year plus their lump sum assuming a full public service career, which I believe is common enough among entrants of the 80s/90s vintage.

Even when we erode it to that, it's damn tasty versus a person on the same salary scale who will top out in work at that money and then retire on career average.

kowloon

BattleCorp wrote: »

Why are people jumping up and down shouting that our pensions system is unsustainable but not saying that our social welfare system is unsustainable???

I see more threads about the dole, and welfare in general, than about pensions.

tdf7187

hmmm wrote: »

Just wondering, do you ever take a moment to consider all the people working on pension policy worldwide, and all the economists working on this problem, and all the difficult changes that governments are introducing, and think for just one second that perhaps this is not "astonishingly simple?"

Pension expenditure in 2016 was 3.8% of GDP - in 2060 it will be 6.3%. So your plan to maintain pensions at a consistent level of GDP simply requires us to cut pensions in half - good luck with that.

https://ec.europa.eu/info/sites/info/files/economy-finance/final_country_fiche_ie.pdf

I predict that in 2060 pension expenditure will not be 6.3% of GDP. I'm fully confident on this. It could be higher or lower, but I simply do not trust predictions that claim unwarranted accuracy that is fully unjustified by elementary statistical theory, and frankly, plain commonsense.

Incidentally, are the conomists you speak of the same people that, almost without exception, entirely failed to predict the financial crisis of 2008/2009?

Riskymove

Nijmegen wrote: »

So, definitely some back and forth on this one... A person on pre-95 can actually collect the state pension in addition to their public service pension.

there is no doubt that highly paid public servants have very good pensions, once they have sufficient years service behind them

however, there are very few public servants pre-1995 that paid Class A PRSI (Gardaí maybe I think) but certainly not the vast majority of public servant grades pre-1995 so I think your statement of "pre-95 can actually collect the state pension in addition to" is misleading

VinLieger

BattleCorp wrote: »

Why are people jumping up and down shouting that our pensions system is unsustainable but not saying that our social welfare system is unsustainable???

They both come from the same pot of money don't they?

So if we don't have enough money in future to pay pensions, how will we pay social welfare?

Because its the pensions that will be what use up all the money, social welfare is completely sustainable at current projected levels however the current state pension scheme is not.

Also the full cost of whats coming down the line will affect more than just social welfare, budgets will have to be slashed for every single government department and agency to make up the shortfall if we dont do anything

Nijmegen

Interesting fact check on the notion from some that the demographic changes are a myth: https://www.irishtimes.com/news/politics/election-fact-check-is-the-pensions-timebomb-a-myth-1.4154136

(tl;dr - the demographic time bomb is not a myth)

blanch152

Nijmegen wrote: »

Quite correct and edited with thanks.

They only get the €100k per year plus lump sum, not the €112k plus lump sum.



Oh right yeah, the figures on sufficiency from the CSO are scaremongering... For the purpose of, erm, what? Ah who wants to listen to experts anyway, as Michael Gove is fond of saying.

Wrong again.

They only get half salary, not three-quarters salary.

The maximum pension allowed under revenue rules is three-quarters salary. However, if a tax-free lump sum is paid, that is reduced. In the case of public servants, a lump sum of up to 1.5 times salary means that the maximum pension is half salary.

That is the second basic fact about public service pensions that you got wrong.

Idbatterim

How in gods name has the narrative swings to bloody pensioners again here. 65 now , is not the same as 65 even ten or twenty years ago. Vast sums needed for the health black hole. Housing , infrastructure, to service debt , mental health fun funding is abysmally low. other areas it could be infinitely better spent on and it comes back to politicians wanting to buy off pensioners at the expense of a generation, with many locked out of home ownership ? It’s really pathetic and in bad taste !

When the economy’s slows , but you still have to continue funding the black hole of health and the most recent black hole of social housing , where the hell will the money come from , for all of their mad spending splurge plans? When the **** hits the fan next time. I hope we can just keep the imf around permanently!

Nijmegen

blanch152 wrote: »

Wrong again.

They only get half salary, not three-quarters salary.

The maximum pension allowed under revenue rules is three-quarters salary. However, if a tax-free lump sum is paid, that is reduced. In the case of public servants, a lump sum of up to 1.5 times salary means that the maximum pension is half salary.

That is the second basic fact about public service pensions that you got wrong.

Totally cool, so in another post you'll see I am taking my education from those better in the know! The DB pension is still very tasty and still very much more than a new entrant will get versus their colleague, which I suppose was more core point when I inflated the figures. And sorry for my ignorance - I'm living in the world most of us do, where we pay into a PRSA and hope the fund doesn't collapse in value right when we're due to retire due to some recession. A €112k guaranteed pension, a €75k guaranteed pension, either would make me a millionaire in terms of the assets needed to be held in a pension pot to fund it!

Really interesting thread here with some proper calculations - what is the maximum pension you could obtain defined contribution if you maxed your contributions from age 35, to the maximum allowed (ie, basing contributions off a €115k income, the limit for tax efficient contributions).

A €1.8m fund.

If you want a guaranteed income from that - ie, an annuity similar to a public service defined benefit pension - with a lump sum, you'd get €4,508 per month plus the state pension, so €5,584 per month or €67,008 per year plus a lump sum of €400,600 in cash.

Now, that lump sum is greater than the public servants 1.5x - in the case of a €150k pre-95 role, €225,000 - but the €67k per year funded by your private pension pot and the state pension is still lower than the range of €75k - €87k for a pre-95'er on that pay scale if they get the state pension, which some will do.

So irrespective of anything, these public servants are millionaires in terms of the value of their pension (even ones earning significantly less than €150k final salary). Pretty amazing.

tjhook

BarryD2 wrote: »

I've no objection in principle to this logic as long as it's applied equitably and fairly across all sectors of society including public servants & politicians themselves.

What has people's ire up is that they strongly suspect there's one rule for one group and another for the rest.. That will not wash.

I agree. If you look at the actuarial report, "An Analysis of the Taxation Supports for Private Pension Provision in Ireland",
"Any reform in the tax-based incentive for private pension saving would need to be reflected in a similar reform of public sector pensions and the division of their cost between the worker and the state."

But I predict the Government (of whatever flavour) will adopt the bits of advice that makes their own lives easier, and protect one sector at the expense of the other!

I'd also wonder if we're in the same boat as the other European countries. Our population has been growing by 30% in 20 years (1990-2010 and 2000-2020). This is a greater increase than in Europe generally. There must be a large increase in tax payers here, and I assume there will continue to be, unless a block is put on immigration. And I can't see that happening. Presumably this doesn't fully meet the cost of expected pensioners, but surely it goes a long way towards it? At least puts us in a far better position than other countries?

Anyway if unpalatable changes are needed, they are needed, but it has to be borne by all.

KyussB

Nijmegen wrote: »

Interesting fact check on the notion from some that the demographic changes are a myth: https://www.irishtimes.com/news/politics/election-fact-check-is-the-pensions-timebomb-a-myth-1.4154136

(tl;dr - the demographic time bomb is not a myth)

The article answers the question about whether demographics will change, and funding within the structure of the pension fund - it claims to but doesn't answer whether there will be a 'pensions timebomb' - because the pot of available money to pay for pensions, comes from the entirety of public finances, not just the pension fund.

Taking the entirety of public finances into account, most if not all of the funding needed will come from GDP growth and the government maintaining its proportion of GDP - and any that isn't is easily absorbed by government finances, especially given that Ireland is currently benefiting from an unusually small pension burden, in international standards.

Nijmegen

tjhook wrote: »

I agree. If you look at the actuarial report, "An Analysis of the Taxation Supports for Private Pension Provision in Ireland",
"Any reform in the tax-based incentive for private pension saving would need to be reflected in a similar reform of public sector pensions and the division of their cost between the worker and the state."

But I predict the Government (of whatever flavour) will adopt the bits of advice that makes their own lives easier, and protect one sector at the expense of the other!

I'd also wonder if we're in the same boat as the other European countries. Our population has been growing by 30% in 20 years (1980-2010 and 1990-2020). This is a greater increase than in Europe generally. There must be a large increase in tax payers here, and I assume there will continue to be, unless a block is put on immigration. And I can't see that happening. Presumably this doesn't fully meet the cost of expected pensioners, but surely it goes a long way towards it? At least puts us in a far better position than other countries?

Anyway if unpalatable changes are needed, they are needed, but it has to be borne by all.

Well just in this thread there's been a whole bunch of links posted to various surveys. The tl;dr is that a population boom is a double edged sword. So in 2035, people reaching 65 will have been born in 1970 and entered the workforce in the late 1980s and early 1990s. The rate of workers to pensioners will have halved by 2035. Look further down the tracks to people born in 1980, they came of age during a period of massive economic growth and so emigration ended (we became a net immigration nation) and they were embedded enough that not too many emigrated come 2008 (relative to the number of younger people who would have; though indications are many of them have returned). So your baby boom becomes a retirement boom.

We are having fewer children than we did in 1960 or 1970 or even 1980 and 1990. So the wage / jobs / immigration growth doesn't keep up in relative terms. The only outside thing that might save us is if robot factories (etc...) drive productivity so high that we can support society with fewer workers, but that is not a guarantee you can hang your comfortable retirement on.

As to equality in load sharing, sure during the recession the most senior civil servants got themselves a sweetheart deal versus their lower paid compatriots because they were the ones tasked with writing the policies the Ministers needed implemented. There's sweetheart deals within sweetheart deals. "Austerity" for the public service was not 1 mandatory job loss, rather sweet early retirement gigs. For example from October 2009 (incentivised retirement schemes continued past 2009):

Civil servants had until last Friday to apply for early retirement under a deal announced by Brian Lenihan in the April emergency Budget. It is expected that more than 1,000 departures will be sanctioned under the Incentivised Scheme for Early Retirement.

Staff aged 50 and over were allowed to retire from the public service without reduction of the pension entitlements they would eventually draw down.

The deal was improved still further by an offer of 10pc upfront on the lump sum -- which would usually be payable on normal retirement of 60 or 65. The remainder of the lump sum -- equivalent to one and a half times' salary -- will also eventually be paid "subject to current tax law".

So basically they got sweetheart deals and screwed the people coming in behind them. But I can see a situation where the current crop of "new entrants" post recession will get enough clout to get back some of what they lost.

In any event, any defined benefit pension scheme is untenable in this day and age. The government should do what almost all large private sector organizations do any pay a contribution to a PRSA.

tjhook

Nijmegen wrote: »

We are having fewer children than we did in 1960 or 1970 or even 1980 and 1990. So the wage / jobs / immigration growth doesn't keep up in relative terms.

this is the bit I'm not sure about. If the population continues to grow at 30% every 20 years, it is 30% of an increasing number that includes the "baby booms".

It may be that the population will cease growing or greatly slow down. But I haven't seen that explained anywhere. E.g. in recent years, immigration has outpaced births by almost 3:1. Is immigration expected to slow down or stop?

We have had a lot of immigration in recent years, and I would expect this topic to be one of the areas where we can point and say "Immigration has definite advantages for us all".

Riskymove

Staff aged 50 and over were allowed to retire from the public service without reduction of the pension entitlements they would eventually draw down.

again this is worded a bit misleadingly

the terms of the pension scheme at such that you can retire early with a penalty to your pension, i.e. you might get 50% or 80% of your entitlements depending on when you go

The scheme referenced was aiming to be a kind of early retirement scheme to get people to go. so while they would not get the penalty it was still only based on years actually served

so for example someone leaving at 50 with 30 years service would be 10 years short of a full pension entitlement etc.

Nijmegen

Riskymove wrote: »

again this is worded a bit misleadingly

the terms of the pension scheme at such that you can retire early with a penalty to your pension, i.e. you might get 50% or 80% of your entitlements depending on when you go

The scheme referenced was aiming to be a kind of early retirement scheme to get people to go. so while they would not get the penalty it was still only based on years actually served

so for example someone leaving at 50 with 30 years service would be 10 years short of a full pension entitlement etc.

I thought that was quite clear in the article, and you are entirely correct. It was still a sweet, sweet deal and I read an article from 2012 by which time 7,772 public servants had applied to take up the offer. The number of public servants at that time total was around 288,000 so nearly 2.6% of the entire public service took the deal. I don't think / can't find any published figures on what % of eligible (ie, over 50) employees took it up so we'll have to guess at that, but people aren't stupid and will take a good deal in numbers when presented.

If, for example, you were a grade VII administrative officer in a VEC (to pull an available 2007 salary scale you can still download) at the top of your scale (€63,987) with 30 of 40 years service at aged 50, you could retire on a €24k per year pension, take 10% of your now €72k lump sum (€7.2k) be sure of the rest coming to you in future and getting the old age pension at 65 (or maybe 66 at this rate...) and lets assume you stopped working at 30 years continuous service giving you a reduced rate, putting you on an additional €11,606 per year; so €35.6k of a pension then in old age.

Plenty of folks who took the deal had a spouse in work or maybe took up another line of work themselves when the economy allowed (and bearing in mind early retirement continued right into the economic upturn.) And there are early retirement schemes still in play.

Back to the original point of "all in it together", I think it's fair to say that defined benefit public servants - with or without early retirement - are not in it with the rest of us. And their pensions like the state pension, for all the cribbing about pension levys (and pointed out earlier, try pay for this in defined contribution plan and it's a lot more expensive than the PL), is paid out of day to day taxation and as more of them retire along with the general population there will be a massive state and public service pension bill to account for.

It also points to how politicians choose to deal with this problem. In the wake of the crisis it was to incentivise with as much of a sweet deal as possible the public servants to go quietly. Now we see with the pension age, even the parties not just committing to roll the age back are talking about "bridging payments", which is basically the same thing, and push the can down the road 10 or 15 more years till the problem is so outsized it'll take drastic measures that will hurt current workers and pensioners harder than needed.

Brendan Bendar

One thing any sensible person knows when dealing with issues like this.

You can’t put the toothpaste back into the tube.

Irrespective of how the economy performs, these guys won’t take any fiscal pain.

Ask the teachers
Ask the nurses
Ask the Polis
Ask the Pols.


Wise up folk

Stovepipe

I asked my in-house teacher, also known as my wife, what the hit on her pay was. Eu9000 off her salary per annum, at her position of the scale and she's an old-pension candidate but that hit on the wage packet meant that the hoped for early retirement is gone, as is the same case for many of her peers. Promotion freeze, pay freeze also in the mix. I went through a nine-year pay freeze in the former State airline and my DB pension was frozen and took a 20% hit. Add USC and the other levies to the misery. That's why I asked the original question about pensions.