Why have the gov not tackled Pensions

fliball123

Hi All.

This may be an idea to save some cash. but we are scrapping the bottom of the barrel with regard to savings and generating cash for the exquecker.

We are passed the point of diminishing returns for tax take
The gov are committed (or should be committed) for honouring the CPA
The gov are committed to no more cuts in the dole

So where are we going to find the cash over the next few years.

So now that we see the bounderies..Why the hell dont they tax people on pensions that are under the age of 68? I mean surely this money should be taxed. I see bertie and biffo on more than 150k a year for fecking up the country ..Now I know they cannot be got at after they have got their money but surely we could tax this at a very hi % such as 75%. I think anyone who has retired before 68 should have a tax on their pension payments

Mr. Presentable

Be careful what you wish for - you will probably be old one day too.

Riskymove

Pensions are taxed just like income

in addition, PS pensioners currently pay a levy on their pension on a sliding scale - Bertie and co would be at the top

partyatmygaff

I propose a 100% tax rate on everyone but me to sort out our deficit.

fliball123

Riskymove wrote: »

Pensions are taxed just like income

in addition, PS pensioners currently pay a levy on their pension on a sliding scale - Bertie and co would be at the top

How much is a person drawing a pension taxed on the amount paid to them?

Riskymove

fliball123 wrote: »

How much is a person drawing a pension taxed on the amount paid to them?

sorry I am not sure I follow that...but

...a pension is just like income, if your pension is over the tax thresholds you pay income tax

The PS levy is in addition to that

swordofislam

You pay tax on your pension as you draw it down.
You don't pay tax on the money as you set it aside.

Lame it is lame it makes no sense. Why defer the tax revenue.
LAME!

Geuze

PS workers are paying a substantial pension levy on top of their normal pension contributions.

Existing PS pensioners (including the retired politicians) pay a PRD, or Pensions Related Deduction. However, it could be increased.

Geuze

Public Service Pensions

The Government has decided that a reduction in the cost of public service pensions of €100m,
or 4% in overall terms, is necessary in 2011. The reduction will apply to existing beneficiaries
of public service pensions; this group includes former Presidents, other former office holders
and retired members of the judiciary.

To protect those on low pensions, the first €12,000 of public service pension will be entirely
exempt: all public service pensions which are equal to or less than this amount will not be
reduced. Annual public service pensions above this level will be reduced in accordance with
the following rates and bands:

Annual Public Service Pension€
Reduction rate%

First 12,000 0%
Between 12,001 and 24,000 6%
Between 24,001 and 60,000 9%
Balance above 60,001 12%

The following table illustrates the effect of the reduction on different levels of public service
pensions:

Pension before reduction €
Annual reduction €
Annual reduction %

12,000 0 0%
15,000 180 1.2%
25,000 810 3.2%
30,000 1,260 4.2%
40,000 2,160 5.4%
80,000 6,360 8.0%
This measure will not involve any change in public service pension terms. All public service
pensions will be calculated in accordance with those terms and the reduction applied to the
pension calculated in the normal way. In line with the Croke Park Agreement, there is no
change in the method of determining pension increases for serving public servants and

existing pensioners.

thebman

swordofislam wrote: »

You pay tax on your pension as you draw it down.
You don't pay tax on the money as you set it aside.

Lame it is lame it makes no sense. Why defer the tax revenue.
LAME!

You defer it to encourage people to put money in now to avoid tax now. This encourages people to put in now and reduces over dependence on the state pension.

At least that is the theory, I think people pay into it now hoping or on the assumption that the tax they pay out when drawing it down now will be less than the tax they pay now on their income if they didn't put it into a pension fund.

Head The Wall

Geuze wrote: »

PS workers are paying a substantial pension levy on top of their normal pension contributions.

Existing PS pensioners (including the retired politicians) pay a PRD, or Pensions Related Deduction. However, it could be increased.

You may class the levy as substantial compared to what they previously paid but it's still doesn't cover the real costs.

It has been shown that to receive a comparable pension in the private sector one would need to make a pension contribution of 30% of wages. Govt needs to either get PS staff to pay more, reduce their pension entitlements or let them get their own pensions on the private market.

irishh_bob

Head The Wall wrote: »

You may class the levy as substantial compared to what they previously paid but it's still doesn't cover the real costs.

It has been shown that to receive a comparable pension in the private sector one would need to make a pension contribution of 30% of wages. Govt needs to either get PS staff to pay more, reduce their pension entitlements or let them get their own pensions on the private market.

according to eddie hobbs , in the case of the garda pension , a private sector worker would need to put aside 48%

nesf

Head The Wall wrote: »

You may class the levy as substantial compared to what they previously paid but it's still doesn't cover the real costs.

It has been shown that to receive a comparable pension in the private sector one would need to make a pension contribution of 30% of wages. Govt needs to either get PS staff to pay more, reduce their pension entitlements or let them get their own pensions on the private market.

There have already been changes to PS pensions for new entrants. What the Government (and the previous one) aren't doing is changing the terms for current PS workers. It's a nasty one though since many, many people went into relatively modestly paying PS jobs with one of their main reasons being the good pension at the end of it.

hmmm

Pensions are a very dangerous area to go fiddling with. I think PS pensions are outrageous, but it's still not acceptable to make swinging changes at short notice.

Pensions are a 30/40 year commitment and people need to know with reasonable certainty what lies in their future when they are saving for their retirement. A government that makes changes in pensions for short term expediency causes all sorts of long term problems - e.g. the pension levy, while small, has cast a pall over all pension saving as many people fear that the government may seize their pensions some time in the future.

BrianD3

Head The Wall wrote: »

It has been shown that to receive a comparable pension in the private sector one would need to make a pension contribution of 30% of wages.

Shown by whom?

30% of an average PS salary lodged in a deposit account every year for 40 years would be far more than an average PS pension value.

If someone was on 35k and got increments and promotions to 74k over 40 years they'd have saved 654k but under current arrangements their pension would be approx 486k assuming average life expectancy. And only a minority of public servants will every attain a salary of 74k.

If private sector pension fund managers are so useless and greedy that their products perform worse than a savings account and a person would need to put 30% of salary in for the above pension, whose fault is that.

irishh_bob

BrianD3 wrote: »

Shown by whom?

30% of an average PS salary lodged in a deposit account every year for 40 years would be far more than an average PS pension value.

If someone was on 35k and got increments and promotions to 74k over 40 years they'd have saved 654k but under current arrangements their pension would be approx 486k assuming average life expectancy. And only a minority of public servants will every attain a salary of 74k.

If private sector pension fund managers are so useless and greedy that their products perform worse than a savings account and a person would need to put 30% of salary in for the above pension, whose fault is that.

while a lot of fund managers are as useless as tits on a turkey , pensions in the private sector are at the mercy of equity and bond markets

BrianD3

irishh_bob wrote: »

while a lot of fund managers are as useless as tits on a turkey , pensions in the private sector are at the mercy of equity and bond markets

So avoid "investing" in pension funds and bond and equity markets then. Save money into a bank account for 40 years. Inflation will occur but the money will also earn interest.

Most public servants (Gardai are an exception) need to pay into their pension for 40 years for a full pension. The other poster is claiming that this contribution needs to be 30% of salary to cover the cost of a PS pension - a claim I find laughable.

irishh_bob

BrianD3 wrote: »

So avoid "investing" in pension funds and bond and equity markets then. Save money into a bank account for 40 years. Inflation will occur but the money will also earn interest.

Most public servants (Gardai are an exception) need to pay into their pension for 40 years for a full pension. The other poster is claiming that this contribution needs to be 30% of salary to cover the cost of a PS pension - a claim I find laughable.

doesnt mean it isnt true

Paulzx

irishh_bob wrote: »

doesnt mean it isnt true

Seeing as your quoting Eddie Hobbs it must definetly be true.

Sure he's never got anything wrong when giving financial advice before...cough..splutter....ahem

BrianD3

irishh_bob wrote: »

doesnt mean it isnt true

Is that the best you can do for a rebuttal. I've already provided the figures for a public servant finishing on 74k which as I said is a salary that most will not attain at any time in their career.

FWIW I've been googling to see where this 30% figure comes from and didn't find it. I did find this though
http://www.finfacts.com/irelandbusinessnews/publish/article_1012294.shtml

The Benchmarking Body found that the pensions of the public service groups examined are significantly more valuable than those of private sector groups and that the superior value of public service pensions should be quantified at 12%

To repeat, if a person needs to pay 30% of salary into a pension fund for 40 years for the fund to have the same value as a PS pension for a worker at a similar salary level then either:

a) the 30% figure is wrong and has been pulled out of someone's arse
or
b) funded pension schemes perform very, very poorly. Whose fault is that.

If a) then it doesn't surprise me. I've come across plenty of biased and incorrect horsesh*t on PS pensions on this website and in the media eg people conveniently "forgetting" that public servants don't get the COAP as well as their PS pension, assuming unrealistic life expectancy after retirement and so on.

Welease

BrianD3 wrote: »

Is that the best you can do for a rebuttal. I've already provided the figures for a public servant finishing on 74k which as I said is a salary that most will not attain at any time in their career.

FWIW I've been googling to see where this 30% figure comes from and didn't find it. I did find this though
http://www.finfacts.com/irelandbusinessnews/publish/article_1012294.shtml


To repeat, if a person needs to pay 30% of salary into a pension fund for 40 years for the fund to have the same value as a PS pension for a worker at a similar salary level then either:

a) the 30% figure is wrong and has been pulled out of someone's arse
or
b) funded pension schemes perform very, very poorly. Whose fault is that.

If a) then it doesn't surprise me. I've come across plenty of biased and incorrect horsesh*t on PS pensions on this website and in the media eg people conveniently "forgetting" that public servants don't get the COAP as well as their PS pension, assuming unrealistic life expectancy after retirement and so on.

I would assume it comes from the Pension Insecurity in Ireland report.
http://www.tara.tcd.ie/bitstream/2262/36146/1/moloney%2008-09.pdf

"Failure to adopt the fair value paradigm has advantaged some at the expense of others. Applying a discount rate that allows for a high level of investment risk to an income stream that has a government guarantee places too low a value on the income stream. This produces material errors in the context of pensions, where discounting is over periods of fifty years and more. For instance, in the recent benchmarking of public sector remuneration to that of the private sector (Report of the Public Service Benchmarking Body (2007)), the cost to the employer of the civil service pension was estimated as about 20% of salary (with the higher discount rate applied to private sector schemes) but that figure increases to 30% of salary if the more appropriate riskless rate is applied (p. 227). The former figure was adopted in the benchmarking exercise rather than the figure closer to fair value, so public sector remuneration is underestimated.10 Again, many public sector workers have the option to buy notional years of service for their pension computation and these notional years are sold at a price considerably lower than fair value, with no benefit-in-kind liability."

ixtlan

Welease wrote: »

For instance, in the recent benchmarking of public sector remuneration to that of the private sector (Report of the Public Service Benchmarking Body (2007)), the cost to the employer of the civil service pension was estimated as about 20% of salary (with the higher discount rate applied to private sector schemes) but that figure increases to 30% of salary if the more appropriate riskless rate is applied (p. 227).

So to paraphrase...

If a private sector pension was placed in highest risk investments, and everything worked out, a 20% salary deduction would provide a public sector level pension. In recent times things have not worked out for many people retiring.

If the private sector worker wanted to be certain of the final outcome, then they would need to choose riskless investments, and hence would need to give more of their salary. 30%.

I don't like to beat up on public servants but it does bother me that many of them just don't understand how pensions work as they simply don't need to choose different risk levels for their pension investments.

Ix.

BrianD3

ixtlan wrote: »

If the private sector worker wanted to be certain of the final outcome, then they would need to choose riskless investments, and hence would need to give more of their salary. 30%.

I've already provided an example of someone on an incremental scale of 35-74k saving 30% of their salary into a bank account for 40 years and ending up with a total of 654k not including either inflation or interest.

If this individual was a public servant they'd have a pension cost of 486k (1.5x final salary + 15(0.5x final salary - COAP)) where 15 is an estimate of average life expectancy after retirement at 65.

Not an expert on funded pensions - so explain to me how a person would need to save 654k into a pension to fund a 486k pension.

The paper by Moloney and Whelan states that the security of pension entitlements of those in private sector employment is "below that of investment grade debt (so the pension promise if tradeable would have junk status)"

So if the pension industry is investing in "junk" maybe that explains it. Is it the fault of pubic servants if the private sector pension industry is greedy and incompetent? Is it the fault of public servants that private sector workers are "investing" in pensions that are now worth less than they paid into them (not just in real terms but also in nominal terms) rather than saving into a bank account for 40 years.

nesf

BrianD3 wrote: »

I've already provided an example of someone on an incremental scale of 35-74k saving 30% of their salary into a bank account for 40 years and ending up with a total of 654k not including either inflation or interest.

If this individual was a public servant they'd have a pension cost of 486k (1.5x final salary + 15(0.5x final salary - COAP)) where 15 is an estimate of average life expectancy after retirement at 65.

Not an expert on funded pensions - so explain to me how a person would need to save 654k into a pension to fund a 486k pension.

The paper by Moloney and Whelan states that the security of pension entitlements of those in private sector employment is "below that of investment grade debt (so the pension promise if tradeable would have junk status)"

So if the pension industry is investing in "junk" maybe that explains it. Is it the fault of pubic servants if the private sector pension industry is greedy and incompetent? Is it the fault of public servants that private sector workers are "investing" in pensions that are now worth less than they paid into them (not just in real terms but also in nominal terms) rather than saving into a bank account for 40 years.

Almost no one will be able to put aside 30% of salary from day one in the job once you take into account trying to pay down a mortgage in the early years.

Edit: You're also making the mistake of a euro put aside at 25 will be worth a euro at 65 after 40 years of inflation. Seriously, you just cannot calculate pensions this way!

BrianD3

nesf wrote: »

Almost no one will be able to put aside 30% of salary from day one in the job once you take into account trying to pay down a mortgage in the early years.

So the 30% requirement is not over 40 years then? Has Moloney's paper stated this?

If not, it sounds like someone has "forgotten" to mention/take account of the important fact that most PS full pensions are a 40 year commitment.

BTW I have been putting aside at least 50% of net salary since day 1 of my first job after university. Not sure how much that is in terms of gross, obviously less than 50% but still a good percentage.

You're also making the mistake of a euro put aside at 25 will be worth a euro at 65 after 40 years of inflation. Seriously, you just cannot calculate pensions this way!

Well at the moment, net deposit interest rates are ahead of the HCPI and CPI while the markets are volatile. Me speculating that interest rates will match inflation over the next 40 years is no more of a mistake than pension fund managers telling people that they can match/beat inflation over the next 40 years based on (cherrypicked) past data.

Welease

BrianD3 wrote: »

I've already provided an example of someone on an incremental scale of 35-74k saving 30% of their salary into a bank account for 40 years and ending up with a total of 654k not including either inflation or interest.

If this individual was a public servant they'd have a pension cost of 486k (1.5x final salary + 15(0.5x final salary - COAP)) where 15 is an estimate of average life expectancy after retirement at 65.

Not an expert on funded pensions - so explain to me how a person would need to save 654k into a pension to fund a 486k pension.

The paper by Moloney and Whelan states that the security of pension entitlements of those in private sector employment is "below that of investment grade debt (so the pension promise if tradeable would have junk status)"

So if the pension industry is investing in "junk" maybe that explains it. Is it the fault of pubic servants if the private sector pension industry is greedy and incompetent? Is it the fault of public servants that private sector workers are "investing" in pensions that are now worth less than they paid into them (not just in real terms but also in nominal terms) rather than saving into a bank account for 40 years.

Can you show your actual calculations please?

I'm guessing (respectfully) that they are way off... anyone who is now on a salary scale of 35-74K was being paid a fraction of that 40 years ago when they started. As a result their pension payments would have been miniscule compared to today's payments (ignoring the fact that no pension levy existed for the first 35+ years of that 40 year cycle).

Average Industrial wage in Ireland in 1973 was 1,599.. it is now 37.4K
http://www.irisheconomy.ie/index.php/2009/05/01/negative-equity-in-ireland/#comment-6563

srsly78

Yeah BrianD3 is not taking some basic stuff into account. Maths isn't so simple when discount factors etc are taken into account.

BrianD3

Welease wrote: »

Can you show your actual calculations please?

I'm guessing (respectfully) that they are way off... anyone who is now on a salary scale of 35-74K was being paid a fraction of that 40 years ago when they started. As a result their pension payments would have been miniscule compared to today's payments (ignoring the fact that no pension levy existed for the first 35+ years of that 40 year cycle).

Average Industrial wage in Ireland in 1973 was 1,599.. it is now 37.4K
http://www.irisheconomy.ie/index.php/2009/05/01/negative-equity-in-ireland/#comment-6563

I'm not talking about people retiring at any particular point in time and also I'm not talking about how much public servants contribute to their pension now or previously.

I'm talking about the claim that someone would need to put 30% of their salary into a pension fund to fund a PS pension at a particular salary level

Using the average industrial wage figures, if 1599 -> 37.4k in 38 years that represents annual wage inflation of just over 8.6% compounded. What was general inflation in that time? What were deposit rates in that time? How did pension funds perform in that time?

1599 in 1973
1736 in 1974
1885 in 1975
etc.
etc.
37,400 in 2011

Similarly 30% of 1599 invested @ 8.6% in 1973 would be ~11k now.

BTW if you want to bring up past contributions and compare them with current benefits - how much was PRSI in 1973? How much is the COAP now? We often hear wailing about public servants earning more as pensioners than they did when they were working yet the same can easily happen to a retired private sector worker. It means that inflation is occuring, pensions are index linked and/or people are living for a good number of years post retirement.

Curly Judge

BrianD3 wrote: »

So avoid "investing" in pension funds and bond and equity markets then. Save money into a bank account for 40 years. Inflation will occur but the money will also earn interest.

Most public servants (Gardai are an exception) need to pay into their pension for 40 years for a full pension. The other poster is claiming that this contribution needs to be 30% of salary to cover the cost of a PS pension - a claim I find laughable.

I'm sure you do find it laughable!
And we poor mugs in the private sector just love being the butt of your little joke!
As your pension is paid out of day to day government spending you better hope that your leftie friends don't get their way burning bond holders and having European lending cut off or you could find yourself eating grass for breakfast.

BrianD3

Curly Judge wrote: »

I'm sure you do find it laughable!
And we poor mugs in the private sector just love being the butt of your little joke!
As your pension is paid out of day to day government spending you better hope that your leftie friends don't get their way burning bond holders and having European lending cut off or you could find yourself eating grass for breakfast.

Well done. And I never said I was public servant. What I did say was i've been saving at least 50% of my net salary into a bank account for several years. My savings interest has roughly kept pace with inflation in that time.

Maybe you'd suggest I should be penalised for that because someone else's "pension" which consisted of investment property and bank shares has been wiped out.

Welease

BrianD3 wrote: »

I'm not talking about people retiring at any particular point in time and also I'm not talking about how much public servants contribute to their pension now or previously.

I'm talking about the claim that someone would need to put 30% of their salary into a pension fund to fund a PS pension at a particular salary level

Using the average industrial wage figures, if 1599 -> 37.4k in 38 years that represents annual wage inflation of just over 8.6% compounded. What was general inflation in that time? What were deposit rates in that time? How did pension funds perform in that time?

1599 in 1973
1736 in 1974
1885 in 1975
etc.
etc.
37,400 in 2011

Similarly 30% of 1599 invested @ 8.6% in 1973 would be ~11k now.

BTW if you want to bring up past contributions and compare them with current benefits - how much was PRSI in 1973? How much is the COAP now? We often hear wailing about public servants earning more as pensioners than they did when they were working yet the same can easily happen to a retired private sector worker. It means that inflation is occuring, pensions are index linked and/or people are living for a good number of years post retirement.

But if you are claiming to have provided an example of someone saving 654K whereas the real cost you estimate is 456K or whatever, then you should provide the calculations used to support your assertion that the figure of 30% (or any figure) is incorrect..

PS pension are not invested.. its a pay as you go scheme.. so any calculation involving interest or investment averages would also be incorrect.

BrianD3 wrote: »

I've already provided an example of someone on an incremental scale of 35-74k saving 30% of their salary into a bank account for 40 years and ending up with a total of 654k not including either inflation or interest.

If this individual was a public servant they'd have a pension cost of 486k (1.5x final salary + 15(0.5x final salary - COAP)) where 15 is an estimate of average life expectancy after retirement at 65.

Not an expert on funded pensions - so explain to me how a person would need to save 654k into a pension to fund a 486k pension.

BrianD3

Welease wrote: »

But if you are claiming to have provided an example of someone saving 675K whereas the real cost you estimate is 480K or whatever, then you should provide the calculations used to support your assertion that the figure of 30% (or any figure) is incorrect..

It's a very easy calculation. I allowed an average increment of 1k per year. increments would often be a bit more than that but then people aren't earning increments all the time for 40 years and can spend years without an increment or promotion.
year 1: 35k
year 2: 36k
year 3: 37k
etc.
etc.
year 40: 74k

Work out 30% of each year and add them up.

Now work out a PS pension based on final salary of 74k.
lump sum of 1.5 times 74k = 111k
pension of 25k for 15 years = 375k

And I deliberately picked a final salary of over 70k rather than current average PS salary of about 45-50k to counteract the argument (usually presented without any evidence whatsoever) that the average PS finishing salary is way higher than the average PS salary.

Welease

BrianD3 wrote: »

It's a very easy calculation. I allowed an average increment of 1k per year. increments would often be a bit more than that but then people aren't earning increments all the time for 40 years and can spend years without an increment or promotion.
year 1: 35k
year 2: 36k
year 3: 37k
etc.
etc.
year 40: 74k

Work out 30% of each year and add them up.

Now work out a PS pension based on final salary of 74k.
lump sum of 1.5 times 74k = 111k
pension of 25k for 15 years = 375k

And I deliberately picked a final salary of over 70k rather than current average PS salary of about 45-50k to counteract the argument (usually presented without any evidence whatsoever) that the average PS finishing salary is way higher than the average PS salary.

But then those figures have no basis in reality, hence why they are being questioned.. There has never been as far as I am aware in the history of this state, a PS worker who after 40 years is only earning twice their starting salary (from 40 years ago.).

If you took a more realistic base, and used the average industrial wages scale with the employee moving from bottom increment scale to the top (which would mimic reality over 40 years even with no promotions) then as per the figures previously linked they would have gone from 1.5K in 1973 to 74K in 2013.. 50 times their original wage (obviously very rough calcs.. but there to show the flaw in your salary scaling)..

Even if you just follow the average industrial salary scale, they would have gone from 1.5K to 37.5K (25 times their original salary)..

If you then look at their pension payments... You are adding up about 10K for the first year 35K salary (as part of your 600K+ saving)..
The reality is they would only have paid in 500 (30% of 1500).. In fact it would have taken them 15-20 years of payments to account for what you have calculated as their first year payment..

Curly Judge

BrianD3 wrote: »

It's a very easy calculation. I allowed an average increment of 1k per year. increments would often be a bit more than that but then people aren't earning increments all the time for 40 years and can spend years without an increment or promotion.
year 1: 35k
year 2: 36k
year 3: 37k
etc.
etc.
year 40: 74k

Work out 30% of each year and add them up.

Now work out a PS pension based on final salary of 74k.
lump sum of 1.5 times 74k = 111k
pension of 25k for 15 years = 375k

And I deliberately picked a final salary of over 70k rather than current average PS salary of about 45-50k to counteract the argument (usually presented without any evidence whatsoever) that the average PS finishing salary is way higher than the average PS salary.

Public servants were earning 35k per year 40 years ago?
Do tell?

BrianD3

Welease wrote: »

But then those figures have no basis in reality, hence why they are being questioned.. There has never been as far as I am aware in the history of this state, a PS worker who after 40 years is only earning twice their starting salary (from 40 years ago.).

If you took a more realistic base, and used the average industrial wages scale with the employee moving from bottom increment scale to the top (which would mimic reality over 40 years even with no promotions) then as per the figures previously linked they would have gone from 1.5K in 1973 to 74K in 2013.. 50 times their original wage (obviously very rough calcs.. but there to show the flaw in your salary scaling)..

Even if you just follow the average industrial salary scale, they would have gone from 1.5K to 37.5K (25 times their original salary)..

Where did you get those figures. Avg industrial wage figures that I can find are ~2k in 1973 and ~31k in 2009. Maybe you mixed up punts and euros.
http://www.finfacts.ie/Private/bestprice/guinnessindex.htm

Someone on that scale who paid in 30% per year would have paid in ~125k

A public servant finishing on 31k now gets a lump sum of 46.5k and a pension of 3.5k. If he lives 15 years then yes, he has paid more in than he gets out.

Now, would you like to work out how much a private sector worker on that scale paid in PRSI and more importantly how much he would have needed to pay to get the current COAP for 15 years if he retired now.

Welease

BrianD3 wrote: »

Where did you get those figures. Avg industrial wage figures that I can find are ~2k in 1973 and ~31k in 2009. Maybe you mixed up punts and euros.
http://www.finfacts.ie/Private/bestprice/guinnessindex.htm

Your is manufacturing industial average wage, not average industrial wage.. That could be the difference.. Mine was just taken from the link provided previously, so I cannot vouch for it being 100% correct, but as both are amounts are ballpark they seem to be usable for comparison purposes.

BrianD3 wrote: »

Someone on that scale who paid in 30% per year would have paid in ~125k

Ok (not going to work it out), but lets run with that..

BrianD3 wrote: »

A public servant finishing on 31k now gets a lump sum of 46.5k and a pension of 3.5k. If he lives 15 years then yes, he has paid more in than he gets out.

But you dont know that.. Throwing a figure out like 31K is ok to demonstrate that your previously calcs (going from 35K to 70K in 40 years was unlikely) were incorrect.. But using the average industrial wage alone does not mean that PS pay is ahead/behind or equal to the average industial wage..

In order to make a catagorical statement like yours you need to use the actual pay bands for an employee going back to 1973, and then average in the expected run rates for promotions etc., benchmarks, increments etc.
Only then it is possible to state that a PS employee has paid in less or more than their final pensionable amount. Painful yes, but thats why simplistic calculations in these cases are always doomed to failure, and why pension planning for the future is not a simple as some people believe.

BrianD3 wrote: »

Now, would you like to work out how much a private sector worker on that scale paid in PRSI and more importantly how much he would have needed to pay to get the current COAP for 15 years if he retired now.

In a word No These thread have been done to death a hundred times over the years, and neither side has ever moved an inch in their beliefs, nor in most cases do they intend to
I was just pointing out where the 30% you requested came from, and that your initial calculation (and subsequent) calculations would lead to a flawed result for the reasons explained. I have no wish to engage in the actual thread as so far there is nothing that hasn't been covered a thousand times before (respectfully)

ardmacha

But then those figures have no basis in reality, hence why they are being questioned.. There has never been as far as I am aware in the history of this state, a PS worker who after 40 years is only earning twice their starting salary (from 40 years ago.).

Firstly this is largely irrelevant. Leaving aside the economic cycle pensions increase as salaries do which reflects the general economy and the governments ability to pay them.

Secondly this is historic thinking, along the line of property will always go up, that has wrecked this country. In the Eurozone, inflation will be very moderate and the growth rate of a mature country will be fairly moderate too, so this rapid change in values will not take place.

This doesn't affect the public pension system much. But the private pension racket, which has often failed to offer returns even keeping pace with general inflation, has it up its game in the future.

Indeed it might have been better if the government had offered more pensions to everyone, taking in contributions and using them to build toll roads or plant forests that would provide a return.

Welease

ardmacha wrote: »

Firstly this is largely irrelevant. Leaving aside the economic cycle pensions increase as salaries do which reflects the general economy and the governments ability to pay them.

Secondly this is historic thinking, along the line of property will always go up, that has wrecked this country. In the Eurozone, inflation will be very moderate and the growth rate of a mature country will be fairly moderate too, so this rapid change in values will not take place.

This doesn't affect the public pension system much. But the private pension racket, which has often failed to offer returns even keeping pace with general inflation, has it up its game in the future.

Indeed it might have been better if the government had offered more pensions to everyone, taking in contributions and using them to build toll roads or plant forests that would provide a return.

Its not irrelevant if the basis of BrianD3's arguement is based on figures which do not and have not existed in the real world..

I am not offerring opinion or a position on this.. I am merely stating the fact that there his figures cannot be used a state a "factual" position becuase those figures have no factual basis.

If you can show me a PS employee who has moved from 35K to 70K salary of the course of 40 years (which is what he based his pension contributions on) then I will gladly respond.. If not, then it is entirely relevant.

BrianD3

Welease wrote: »

But you dont know that.. Throwing a figure out like 31K is ok to demonstrate that your previously calcs (going from 35K to 70K in 40 years was unlikely) were incorrect.. But using the average industrial wage alone does not mean that PS pay is ahead/behind or equal to the average industial wage..

Re: the 35-74k, I was thinking of the present and future not the past. Can you say for sure that a PS on the first point of a hypothetical 35-74k scale now will be on >74k in 40 years? It is likely that they will be but OTOH it could be a long time before any public servant gets a pay rise which isn't an increment. In the short to medium term, pay cuts are more likely.

The avg industral wage is relevant for comparison purposes because we know how much a PS on the avg ind wage today will get in a pension. We also know how much the avg ind wage was from 1973 to date so can work out what 30% per year adds up to.

As you say we don't have PS scales or other data going back 40 years so can only speculate about what they were then. It's possible that avg ind wage inflation has outstripped PS pay inflation or vice versa.

Welease

BrianD3 wrote: »

Re: the 35-74k, I was thinking of the present and future not the past. Can you say for sure that a PS on the first point of a hypothetical 35-74k scale now will be on >74k in 40 years? It is likely that they will be but OTOH it could be a long time before any public servant gets a pay rise which isn't an increment. In the short to medium term, pay cuts are more likely.

Exactly.. therefore it is folly to suggest that anyone can put a specific figure on the cost and payout of a pension when they cannot possess the fundamental figures required to make such a statement

BrianD3 wrote: »

The avg industral wage is relevant for comparison purposes because we know how much a PS on the avg ind wage today will get in a pension. We also know how much the avg ind wage was from 1973 to date so can work out what 30% per year adds up to.

(Sorry misreasd initially).. Yes we can.. but nobody did that in the previous posts when figures of 600K+ were being quote which is why I responded The initial salary posts of 35K were skewing any possible reasonable calculations based on average earnings for 1973.

BrianD3 wrote: »

As you say we don't have PS scales or other data going back 40 years so can only speculate about what they were then. It's possible that avg ind wage inflation has outstripped PS pay inflation or vice versa.

I have a feeling some of that data is available, or that someone has produced it here before.. but yes.. all calculations being thrown about in these thread makes a lot of assumptions, and history has shown that those assumptions tend to have a strong bias depending on the belief of the poster .. Certainty can only be realistically claimed when a poster has shown that they have made an effort to find the real data and used the correct formula for calculations..

I am yet to see a post that comes anywhere close


Anyway I will leave the thread now.. I think you understand the point I was making about the calculation.. I expect the usual Pro PS and Anti PS pension lobbysists to start picking out pieces that suit their own arguements, and I am not going down that route again.. Regards .

ixtlan

ardmacha wrote: »

Firstly this is largely irrelevant. Leaving aside the economic cycle pensions increase as salaries do which reflects the general economy and the governments ability to pay them.

Secondly this is historic thinking, along the line of property will always go up, that has wrecked this country. In the Eurozone, inflation will be very moderate and the growth rate of a mature country will be fairly moderate too, so this rapid change in values will not take place.

This doesn't affect the public pension system much. But the private pension racket, which has often failed to offer returns even keeping pace with general inflation, has it up its game in the future.

Hmmm... this suggests that there is a private pension system versus a public pension system... as if those in the private sector could choose the public pension system. Actually there is no public pension system. It uses current expenditure to fund it's liabilities. It does not invest past savings to cover them. While it's true that the current income from PS pensions does exceed the current outgoings, and I've heard union representatives stating that this showed it worked just fine, any sane economist will tell you that you must take into account future liabilities, otherwise you are building a pyramid scheme.

If you believe what you just typed, that inflation and growth will be moderate we are heading for an extreme PS pension shortfall, since the current system is based on the assumption of massive growth to fund future liabilities.

I know these arguments often descend into PS bashing, but I'm trying not to do that. I honestly feel that PS people simply do not understand how pensions work, because they don't have to learn to understand the terms that private sector workers do. Inflation, risk strategies, future liabilities. I'm sure that sounds condescending so sorry.

I don't say that your pension entitlements are unreasonable, just that we would love to have them, and just as I'm sure it annoys you to have people say you are getting too much, I hope you can understand that those in the private sector are annoyed to be told that clearly we are doing something wrong if we can't get the same pension from the same contributions.

I also must add that it's something of a fallacy to say that private pension funds have been "wiped out". They have taken a severe hit, and people are not getting what they expected, but you'll find in most cases that what people will get is more than what they could have got by putting the money on deposit as you suggested. Frankly, I confess it's a little insulting to say that we should be putting money on deposit.

Ix.

srsly78

People that say "put the money in deposit account instead" fail to take tax relief on pension and DIRT into account.

ixtlan

srsly78 wrote: »

People that say "put the money in deposit account instead" fail to take tax relief on pension and DIRT into account.

Well to be fair to those arguing this... what they suggest I assume is still putting the money into pension schemes, but into cash and bonds, rather than stocks.

However... it's worth noting that even bonds in terms of government bonds have been hit, and cash deposits may well have been invested in senior bank bonds and those have been hit too (in the sense that pension investors had to dump them already).

Speaking generally, over periods of decades, even with the recent turmoil, stocks outperform cash and bonds. What has killed many pension pots is

a/ Overreliance on specific locations and sectors, ie people with high percentages of savings in Irish bank stocks.

b/ No policy to gradually move pension savings from stocks into cash over say the last 10 years prior to retirement.

These failures on the part of Irish financial advisors are probably worthy of some form of investigation.

Ix.

Villa05

Why have the gov not tackled Pensions?
Because they are the biggest benificary of same and don't even need to be at retirement age to benefit

- Simpletons