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explain the need for a pension age extension...
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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.
If that was Ei you were duped.... most only took 10% I’m told.
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Describing pensions as a 'timebomb' is scaremongering. That doesn't mean there isn't an issue that has to be addressed.
That issue is the FACT that the population is aging, i.e. growing but not sufficient to replace the bias towards the younger age categories, and life expectancy has gone from 75 to 83 in 30 years.
And so it is also a matter of FACT, that it will cost MORE to keep the increasing number of longer living retirees at the SAME LEVEL of pension and senior benefits (over 70s medical cards) that those on the State pension have today. Its simple, unemotional, unavoidable maths.
This can be addressed in a few different ways. Either, we make financial provision to absorb the increase, (estimated at €3 billion more per year by 2030, €10 billion more per year by 2050 AT CURRENT VALUES) or we reduce entitlements; either by postponing the pension age, or reducing the level of the State contributory and non-contributory pension from its current rate.
The argument I heard from Sinn Féin this evening, that these people paid tax and PRSI for 40 odd years and have built up some sort of notional pension nest egg, while evocative and somewhat romantic, is of course total b0ll0x. The money these people paid in tax each year, was spent in those years. In the same way, the taxes of people working today go towards the State pensions of those retired TODAY. The whole point is, there will be a reduced ratio of those at work to those retired as this Century goes on. Thats the whole enchilada.
So, there it is. If its an important issue to you, vote for the party that supports the solution you like best, but be under no illusion, there is a problem, there is a cost to it one way or another, and there is no magic money tree to make it all go away.0 -
By 2030/2050, GDP will increase to the point that annual government revenue will have grown by a staggering amount more than €3/10 billion - so by the figures you cite there, it's a non-issue.0
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By 2030/2050, GDP will increase to the point that annual government revenue will have grown by a staggering amount more than €3/10 billion - so by the figures you cite there, it's a non-issue.
No doubt it will. And what does that mean? Inflation.
And what does inflation mean? Pressure to increase wages and social protection benefits, including Pensions, to keep pace with the cost of living.
If you read my post again, I highlighted the fact those estimated increases in provision are at today's values. When we get to 2030 or 2050 or 2100, the problem will still have arrived, pro-rata, and will still have to be dealt with.
What use a €5,000 per week pension if a litre of milk and a sliced pan costs 60 quid....0 -
GDP is growing a lot faster than the rate of inflation - if you subtract inflation from GDP growth, it's still a non-issue.
You'd need a stupidly high inflation rate for 1L milk and sliced pan to cost that much, even by 2100.
Even then - the figures you pulled out of your arse, have almost perfectly matched the inflation on the pension and the goods - meaning that even at those prices, there's no difference compared to pension payments and goods of today.0 -
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By 2030/2050, GDP will increase to the point that annual government revenue will have grown by a staggering amount more than €3/10 billion - so by the figures you cite there, it's a non-issue.
Ok. Well lucky if just the price of pensions are going up. However, at the same time the state pension is increasing so too will the government pay and pensions bill for public servants (one retires, one is hired, and then you presumably need to hire a few more to service the increased overall population); expansion in healthcare and education costs; infrastructure costs to support this grown economy....... etc etc etc.
The hand waving “it’ll all be fine” and “don’t mind the CSO, the academics and the reports” is not what I, personally, am comfortable to depend on for my old age security. You do you, tho.0 -
GDP is growing a lot faster than the rate of inflation - if you subtract inflation from GDP growth, it's still a non-issue.
Is it? Would you agree the current rate is exceptional? Are you confident that rate is durable and predictable for the next 50 years, with a plateauing and aging population?
If you really think we can trade our way out of a cost issue with worker to retiree ratio at 2:1, then I can't decide if you're naive or plain crazy.0 -
By 2030/2050, GDP will increase to the point that annual government revenue will have grown by a staggering amount more than €3/10 billion - so by the figures you cite there, it's a non-issue.
If anybody thinks that ongoing growth in incomes will be enough to cope with increasing costs of pension + healthcare + LT care due to ageing, they are delusional.
There will have to be one or more of the following:
an increase in PRSI rate
lower pension benefits
an increase in effective and official pension ages
a tightening of eligibility
more employment among people aged 16-660 -
There will have to be one or more of the following:
an increase in PRSI rate
lower pension benefits
an increase in effective and official pension ages
a tightening of eligibility
more employment among people aged 16-66
My bet is that rather than the burden being shared, great care will be taken to insulate those in the public sector, and those who have not already being making the sacrifices to save for their retirement. Those in the private sector who are currently putting savings aside will bear the brunt.
So that would mean:- Means test the state pension (with public sector pensions somehow being treated differently even for those whose calculations include the state pension)
- Further increase the pension age (but those already in the public sector exempt/bridged)
- Decreased tax relief on pension contributions for higher-rate tax payers (with public sector defined-benefit system left unaffected)
- Auto-enrolement, making it increasingly difficult to opt-out if you find the above unpalatable.
I feel a bit cynical typing that, but the second and third points are already looking likely, the fourth is being openly discussed (with me assuming opting out will be further disincentivised), and I think the first point just follows the trend where means testing is being seen as fairer than everybody taking a hit.0 -
My bet is that rather than the burden being shared, great care will be taken to insulate those in the public sector, and those who have not already being making the sacrifices to save for their retirement. Those in the private sector who are currently putting savings aside will bear the brunt.
So that would mean:- Means test the state pension (with public sector pensions somehow being treated differently even for those whose calculations include the state pension)
- Further increase the pension age (but those already in the public sector exempt/bridged)
- Decreased tax relief on pension contributions for higher-rate tax payers (with public sector defined-benefit system left unaffected)
- Auto-enrolement, making it increasingly difficult to opt-out if you find the above unpalatable.
I feel a bit cynical typing that, but the second and third points are already looking likely, the fourth is being openly discussed (with me assuming opting out will be further disincentivised), and I think the first point just follows the trend where means testing is being seen as fairer than everybody taking a hit.
I don't think you're wrong. You can see adjustments to the defined benefit pensions of public servants to account for any changes to their state pension alright. We basically did a load of this in the recession to ensure they could get out with their pre-pay cut pensions. Maybe the age thing for the pension would apply to them, too, but again with the type of early retirement incentive schemes we saw during the recession so they can effectively still get out at 65 or earlier.
The tax relief piece is a really easy one to see happening. It's already in manifestos for GE2020.
As it is, pension contribution tax relief are effectively capped at an income of €115,000 per year. As I mentioned upthread, if you had an income of €115k and maximised your pension contributions all the way from 35 to retirement, you'd get a pension pot of €1.8m - very impressive sounding, but in public service terms it would buy you an annuity (which is analogous to what a DB pension is, after all - a guaranteed income) of €54k per year before the state pension. A public service pension is half earnings, so €108k to get that kind of income if on final pension scheme (as most of them are, and as you'd eventually expect the new entrants post recession to strike their way somewhere back towards as time goes on and the economy goes all 1997-2007 again).
So you can see that tax relief getting cut, so you can only tax efficiently make your way to a smaller pot. The Green Party already has it in their manifesto that tax relief should be cut to funds that can only provide an income of €48k. They don't say if that's pre or post-state pension, and I'd bet it's not €48k in guaranteed annuity income but €48k in variable ARF income that goes out the window if the markets tank.
You can also see them raiding pension funds of a certain value again and again over time. Some form of DIRT on the gains of any fund over X value. Etc etc etc.0 -
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Pensioners are often asset rich and in particular are very likely to own their own home by the time they come to retirement age. They are entitled to free travel, medical card no matter their income - which may be substantial.
As they get older they are also the greatest recipients of healthcare and of home/nursing care which again is State funded. That has to be paid for somehow.
As the population changes the proportion of pensioners will massively increase compared to those currently in work.
Meanwhile young people are stuck with high rents, high childcare costs, many finding it difficult to impossible to save a deposit or buy a home.
When pensioners insist on the pension age remaining static they are simply passing on the cost to the next generation - already struggling - to fund them. The political parties should be ashamed of themselves for falling over themselves to placate them.
Old people used to be young, went through the same problems and issues that young people are going through now. There is no us and them, just people going through life one day at a time then finding out your 65.0 -
Old people used to be young, went through the same problems and issues that young people are going through now. There is no us and them, just people going through life one day at a time then finding out your 65.
Very true. Which is why as a younger person I'd like to be leveled with and told what I'm getting versus waiting for a lastminute.com solution to hit me out of nowhere.
It is odd that if I do happen to get my €1.8m pension pot I can also get a free TV license, in fairness.0 -
Again: GDP subtracted by inflation, is still growing revenue fast enough to vastly more-than-cover the figures that person posted.Ok. Well lucky if just the price of pensions are going up. However, at the same time the state pension is increasing so too will the government pay and pensions bill for public servants (one retires, one is hired, and then you presumably need to hire a few more to service the increased overall population); expansion in healthcare and education costs; infrastructure costs to support this grown economy....... etc etc etc.
The hand waving “it’ll all be fine” and “don’t mind the CSO, the academics and the reports” is not what I, personally, am comfortable to depend on for my old age security. You do you, tho.
You're interested in scaremongering, not in evaluating the facts.
Nothing I've said is in disagreement with the CSO either - as I haven't said the demographic shift won't happen - and the CSO does not engage in political advocacy on pensions.
The report you gave is laughably inaccurate, too - in 3 years it had to revise its GDP projections upwards a whopping 50%! In other words: In the space of 3 years all their previous projections were binned as worthless.
You probably believed the economists predicting no economic crisis in the runup to 2006/7 - and then those predicting a 'soft landing' - and then those predicting a 'quick recovery' from austerity - and the ones that have been predicting for years 'the markets will fix it any day now...' with the housing crisis.0 -
Have you ever looked at Real GDP growth before? (i.e. inflation adjusted) GDP growth is nearly always way above inflation. Even at a modest 2.7% real growth as opposed to todays figure - we still blow past the pension figures you put forward, by many multiples (and that is counting only governments share of GDP of course).Is it? Would you agree the current rate is exceptional? Are you confident that rate is durable and predictable for the next 50 years, with a plateauing and aging population?
If you really think we can trade our way out of a cost issue with worker to retiree ratio at 2:1, then I can't decide if you're naive or plain crazy.
Why does it seem like nobody bothers doing the math around here...
Nobody said anything about trade. With the figures you put forward, the rate of real growth and its effects on revenue, solve the problem 10 times over just by government maintaining its proportion of GDP...0 -
The pot of money available to pay for pensions, is not based on incomes, its based on the entirety of government finances.If anybody thinks that ongoing growth in incomes will be enough to cope with increasing costs of pension + healthcare + LT care due to ageing, they are delusional.
There will have to be one or more of the following:
an increase in PRSI rate
lower pension benefits
an increase in effective and official pension ages
a tightening of eligibility
more employment among people aged 16-66
People are pretending its limited to the structure of the pension funds i.e. incomes, to manufacture a false 'pensions crisis' - whereas they are completely sustainable financially, when you consider pensions a part of overall government finances - which they are...0 -
65 is definitely old enough to stay working full time..I wouldn't have an issue if there was legislation to allow someone to possibly work on an extra year ..but only if they requested to do so...yes we can all blame an aging population within the current workforce of Ireland.
But why not cut out the entitlements of all long term unemployed wasters..that never actually worked a day in their lives but still seem to have a much better quality of life than people like myself that were never unemployed and always pay more than our fare share in crippling taxes.. 32 years working and 15 more to go here on my side..I reckon as I will then be 65 I wont need any f..king politicians permission to retire oh sorry actually no they're going to say sorry keep working till you're 70 and we hope you'll be dead by then..
Nice island..great laws.. NOT
Constantly taking from the genuine worker to benefit the fraudsters and there on the increse..0 -
The pot of money available to pay for pensions, is not based on incomes, its based on the entirety of government finances.
People are pretending its limited to the structure of the pension funds i.e. incomes, to manufacture a false 'pensions crisis' - whereas they are completely sustainable financially, when you consider pensions a part of overall government finances - which they are...
KyussB: growth in GDP cannot 'fix' the issue of the increasing dependency ratio.
If we assume that:- Government spending on pensions remains at a fixed % of GDP
- The fraction of the population who are pensioners increases
Then it's a mathematical certainty the standard of living for pensioners will become worse over time relative to the rest of the population.
Their standard of living may increase in absolute terms if growth in GDP continues to blow the doors off (debatable!) but in relative terms, unless the Government spends more, it must get worse.0 -
I guess if you're correct KyussB, it's a bonus for everyone in the long run. If, however, all the folks talking up a pensions demographic issue in various countries, Ireland included, are correct but we have decided "arashure, be grand" then we are really in trouble. Personally I don't think your sums add up, but you can proceed to plan for your retirement one way and I'll plan for mine another!0
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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.
If you are looking at a pension payment of €75k per year for a public servant, you are looking at less than 0.1% of public servants.
The average public servant pension is somewhere around 12k per year.
If you really are interested in capping public service pensions, the answer is to cap pensionable pay at say €120k, meaning that maximum pension would be €60k. That would also allow public bodies to hire expensive specialist staff at higher rates of pay than currently as the top-up above €120k would be non-pensionable.0 -
Ireland's pension spending vs GDP is very low historically and compared to international averages - among the lowest in the world - so we absolutely shouldn't expect it to remain fixed.KyussB: growth in GDP cannot 'fix' the issue of the increasing dependency ratio.
If we assume that:- Government spending on pensions remains at a fixed % of GDP
- The fraction of the population who are pensioners increases
Then it's a mathematical certainty the standard of living for pensioners will become worse over time relative to the rest of the population.
Their standard of living may increase in absolute terms if growth in GDP continues to blow the doors off (debatable!) but in relative terms, unless the Government spends more, it must get worse.
Even then, with the figures that the poster gave earlier, then even keeping todays low fixed % of spending, the increase in real GDP still covers the increased pension spending...
You didn't do the math, did you? Claiming it's a mathematical certainty, even when you didn't crunch the numbers...0 -
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The same people going on about a mythical pension crisis are the same ones that go "shure, be grand" to the need to act on eliminating climate emissions rapidly.I guess if you're correct KyussB, it's a bonus for everyone in the long run. If, however, all the folks talking up a pensions demographic issue in various countries, Ireland included, are correct but we have decided "arashure, be grand" then we are really in trouble. Personally I don't think your sums add up, but you can proceed to plan for your retirement one way and I'll plan for mine another!
It's just political posturing. We have a NeoLiberal government that wants to further gut public spending, and wants to throw money at their buddies in the finance sector (where they'll parachute off into lucrative board positions after next week - as reward for the massive auto-enrollment subsidy) - and they're trying to spin a demographics blip (where the increased number of old vs young only last a short amount of time, as it's a generational blip) - into a fraud to further their ideological goals.
None of the people promoting the 'pensions crisis' do the bloody math on it - and they piss at anyone who does do the math.0 -
When did maths get shortened to math? It’s an irritating Americanism.0
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If you are looking at a pension payment of €75k per year for a public servant, you are looking at less than 0.1% of public servants.
The average public servant pension is somewhere around 12k per year.
If you really are interested in capping public service pensions, the answer is to cap pensionable pay at say €120k, meaning that maximum pension would be €60k. That would also allow public bodies to hire expensive specialist staff at higher rates of pay than currently as the top-up above €120k would be non-pensionable.
The cap should be in line with tax relief offered to everyone, but which is most notably taken up by private sector workers who don't have the now very unusual perk of a defined benefit pension and have to take their chances with market forces or get fleeced for an annuity.
Public sector pensions should be linked to that €115k cap on tax relief and the actual notional value of their DB fund in the real world, ie they should be building an even virtual fund that is used to purchase an annuity with very clear "contributions" made by the employer and the employee that are in line with the % tax reliefs available for normalos.
The €75k example off of a €150k salary is high (but it is not 0.1% I'd wager, if we went digging) but I suppose the point is that anyone on a salary of about €83,200 in the public sector is a millionaire when you look at their DB pension value if it had to be purchased as an annuity.0 -
The cap should be in line with tax relief offered to everyone, but which is most notably taken up by private sector workers who don't have the now very unusual perk of a defined benefit pension and have to take their chances with market forces or get fleeced for an annuity.
Public sector pensions should be linked to that €115k cap on tax relief and the actual notional value of their DB fund in the real world, ie they should be building an even virtual fund that is used to purchase an annuity with very clear "contributions" made by the employer and the employee that are in line with the % tax reliefs available for normalos.
The €75k example off of a €150k salary is high (but it is not 0.1% I'd wager, if we went digging) but I suppose the point is that anyone on a salary of about €83,200 in the public sector is a millionaire when you look at their DB pension value if it had to be purchased as an annuity.
Excellent and well presented post.
We need to tackle this PS pension issue if we don’t want to go down the river.
Can’t have punters riding off into the sunset for 25-30 years on gold plated wedges, country can’t square that circle.0 -
Brendan Bendar wrote: »Excellent and well presented post.
We need to tackle this PS pension issue if we don’t want to go down the river.
Can’t have punters riding off into the sunset for 25-30 years on gold plated wedges, country can’t square that circle.
Thanks.
It's also worth noting that if public service workers were contributing to a "notional" fund in line with tax relief and limits etc for everyone, their "fund" wouldn't be exposed to market forces etc.
The unions would go nuts, tho. Hiding the actual value of defined benefit public sector pensions is a key component of keeping them going.0 -
People are healthier and live longer.0
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