Originally Posted by n97 mini
You're absolutely right and this is really the crux of it. This scheme was supposed to save the exchequer money, but since the majority of those going were up for retirement soon anyway, it doesn't look as if anything will be saved.
In fact it might be the opposite, as 9,000 or so lump sums could amount a balloon payment we don't have the money for at the moment.
And co-incidentally there's talk of a mini budget this summer....
How can it not save the exchequer money?
Take the people with 38 years service - as you said they'd be retiring in 2 years time anyway - and getting a lump sum in 2 years time anyway.
Lets look at a rough example, my understanding may be patchy so feel free to correct me:
Say the worker is 58, has 38 years service, and is at the top of their scale on 60k.
If they leave today:
They get a lump sum of 95k and a pension of 31,667 (assuming they took a 10% paycut their pension is based on 38/80 of pre-cut final salary of 66,667?).
So the cost of that person in the next 5 years is:
95k + (31,667 x 5) = 253,333
If they stay on for the next 2 years:
2 years salary, followed by a lump sum of 90k (60k x 1.5), and a pension of 30k (60k x 40/80).
The cost over the next 5 years is:
90k + (2 x 60k) + (3 x 30k) = 300k
So that's 16% less over a 5 year time horizon, unless I missing something?
And bear in mind that there are plenty of people who as I said, are in their early 50s, with about 35 years service; running the same calculation as above, assuming a retirement at 40 years service, it suggests a cost of €233k over 5 years if they go now, compared to €390k if they stay. That's 40% less.