PS: Early retirement (29th Feb) vs Increments

n97 mini

Was talking to a couple of friends in the PS today. One is quite close to retirement (38 years), but isn't retiring as he still has 2+ years worth of increments to get. He says his pension will be higher in 2 years' time than it would be if he retired today (before the pension cut) due to increments.

Later on I heard a nurse on the radio saying basically the same thing. She had reached the top of her scale increments-wise, and said she would have stayed on if she had 2 or more years of increments left.

So it seems to me that the people retiring today are only those who have reached the top of their grade, and probably would have retired in 2 years anyway.

Thoughts?

woodoo

n97 mini wrote: »

Was talking to a couple of friends in the PS today. One is quite close to retirement (38 years), but isn't retiring as he still has 2+ years worth of increments to get. He says his pension will be higher in 2 years' time than it would be if he retired today (before the pension cut) due to increments.

Later on I heard a nurse on the radio saying basically the same thing. She had reached the top of her scale increments-wise, and said she would have stayed on if she had 2 or more years of increments left.

So it seems to me that the people retiring today are only those who have reached the top of their grade, and probably would have retired in 2 years anyway.

Thoughts?

If they worked there for the last 15, 20, 30, 40 years they will not be getting increments. They must have only joined up in the last 10 years or so.

Old stories like that are no good. Give us some verifiable info or link.

NinjaTruncs

woodoo wrote: »

If they worked there for the last 15, 20, 30, 40 years they will not be getting increments. They must have only joined up in the last 10 years or so.

Old stories like that are no good. Give us some verifiable info or link.

It could also be people who had been promoted and hadn't yet reached the top of their new payscale.

n97 mini

woodoo wrote: »

If they worked there for the last 15, 20, 30, 40 years they will not be getting increments. They must have only joined up in the last 10 years or so.

Old stories like that are no good. Give us some verifiable info or link.

As NinjaTruncs said, anyone who has been promoted in recent times is probably not at the top of their scale.

There are people in the PS that are talented and get promoted.

Paulzx

You'll probably find that by waiting two years and getting 40/80ths of the post paycut salary its more than 38/80ths of the pre paycut salary.


It's as simple as that.

The amount of people getting increments after 38 years service would be minimal. A late promotion in their career would be the only reason for it

barneystinson

n97 mini wrote: »

Was talking to a couple of friends in the PS today. One is quite close to retirement (38 years), but isn't retiring as he still has 2+ years worth of increments to get. He says his pension will be higher in 2 years' time than it would be if he retired today (before the pension cut) due to increments.

Later on I heard a nurse on the radio saying basically the same thing. She had reached the top of her scale increments-wise, and said she would have stayed on if she had 2 or more years of increments left.

So it seems to me that the people retiring today are only those who have reached the top of their grade, and probably would have retired in 2 years anyway.

Thoughts?

My first thought is that what you've said there is basic common sense on the part of the individuals concerned, I mean it's hardly "news" is it?! I mean you're unlikely to see people in their 40s or younger, with 20-30 years service, a mortgage to service and kids under their feet, deciding to take their chances on finding work in the private sector the way things are these days.

From what I've seen at first hand, most (if not all) of the people who've gone early have been at the top of their payscale and unlikely to get a promotion in the years remaining to them. But having said that I know of plenty of people who're leaving after 34 / 35 years, and are in their early 50s. But they are people who are mortgage-free empty nesters, and / or have a spouse with a good secure income.

barneystinson

n97 mini wrote: »

So it seems to me that the people retiring today are only those who have reached the top of their grade, and probably would have retired in 2 years anyway.

Oh yeah.

And surely it can only be a good thing that the people most incentivised to leave are those who haven't been promoted since promotion on merit rather than seniority became the norm in the last decade - surely some of the deadwood is in there.

n97 mini

barneystinson wrote: »

My first thought is that what you've said there is basic common sense on the part of the individuals concerned, I mean it's hardly "news" is it?! I mean you're unlikely to see people in their 40s or younger, with 20-30 years service, a mortgage to service and kids under their feet, deciding to take their chances on finding work in the private sector the way things are these days.

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....

barneystinson

n97 mini wrote: »

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.

Riskymove

n97 mini wrote: »

it doesn't look as if anything will be saved.

we save half or more of the salary until they would have retired.

You are also overlooking a fact that is often not taken onboard...that many people work beyond the date that they could retire on full service. Many people crunching the numbers on savings overlook this.

e.g. there are people with 40 years at 60 who work until they have to retire at 65

there was an example last night of a retiring Headmaster with 44 years service

There are probably a lot of PS who retired by yesterday who could have worked for up to 5 more years or so on full salary.

antoobrien

Are there any figures available as to how many
a) have retired
b) will be (temporarily) hired back

Godge

barneystinson wrote: »

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.

You actually underestimate the saving in this case. Because they are under 60, in order to claim the pension now, they have to take it as actuarilly reduced so while it might be initially based on 35/80, that will be reduced further by an actuarial factor to account for their younger age.

barneystinson

Godge wrote: »

You actually underestimate the saving in this case. Because they are under 60, in order to claim the pension now, they have to take it as actuarilly reduced so while it might be initially based on 35/80, that will be reduced further by an actuarial factor to account for their younger age.

I thought as part of the scheme that people between 50 and 60 don't have their pension actuarily adjusted? But anyway, my point was that I was taking a conservative view, and my figures showed a substantial saving, which if you're right would be even greater.

barneystinson

antoobrien wrote: »

Are there any figures available as to how many
a) have retired
b) will be (temporarily) hired back

Tried Google?

a) "Mr Howlin said the latest information across the public service indicated that 7,464 people had applied to retire in the first two months of this year. The sectoral breakdown was: health, 2,567; education, 2,058; Civil Service, 1,236; local authority, 931; defence, 362; Garda, 310." http://www.irishtimes.com/newspaper/ireland/2012/0229/1224312523098.html

b) Not many, relative to the 7,500 gone.

Riskymove

Godge wrote: »

You actually underestimate the saving in this case. Because they are under 60, in order to claim the pension now, they have to take it as actuarilly reduced so while it might be initially based on 35/80, that will be reduced further by an actuarial factor to account for their younger age.

actually it wont, that was the point of this scheme, noone would have taken it otherwise

Gumbo

Riskymove wrote: »

we save half or more of the salary until they would have retired.

You are also overlooking a fact that is often not taken onboard...that many people work beyond the date that they could retire on full service. Many people crunching the numbers on savings overlook this.

e.g. there are people with 40 years at 60 who work until they have to retire at 65

there was an example last night of a retiring Headmaster with 44 years service

There are probably a lot of PS who retired by yesterday who could have worked for up to 5 more years or so on full salary.

+1
My friends dad joined the ESB when is was 16, he is now in his mid 50's and still working on site every day for them.
He could easily work up 45 years or so of service.

Godge

barneystinson wrote: »

I thought as part of the scheme that people between 50 and 60 don't have their pension actuarily adjusted? But anyway, my point was that I was taking a conservative view, and my figures showed a substantial saving, which if you're right would be even greater.

No that was the health scheme a couple of years ago. That was closed off, all those retiring before 60 this month had actuarilly reduced pensions (unless they were teachers, guards, firemen, prison officers who can retire before 60)

Godge

Riskymove wrote: »

actually it wont, that was the point of this scheme, noone would have taken it otherwise

Wrong, very wrong, those civil servants under 60 who went yesterday will have their pensions actuarilly reduced. It is only those with an earlier retirement age (guards, prison officers at 50, teachers at 55) who won't have it reduced.

Riskymove

Godge wrote: »

No that was the health scheme a couple of years ago. That was closed off, all those retiring before 60 this month had actuarilly reduced pensions (unless they were teachers, guards, firemen, prison officers who can retire before 60)

It was part of the ISER scheme available across the PS, not just health, but yes, maybe you are right...it would explain why most of the people leaving yesterday had full service

n97 mini

barneystinson wrote: »

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.

No quite as simple as that. The people that left yesterday are still on the payroll but are no longer productive. And the possibility arises that they may have been critical and will need to be replaced with a new hire.

(Contrast to the private sector where when an employee leaves the company they are completely removed from the payroll)

If they had stayed on they would be productive (in theory) and would go out with a lower lump sum and a lower pension.

I would love to see that maths on this, but I wouldn't be surprised when all is said and done if it ended up costing the exchequer more money than it saved.

Godge

n97 mini wrote: »

(Contrast to the private sector where when an employee leaves the company they are completely removed from the payroll)

.

Not quite true. If an employee retires from Guinness, he gets a pension from Guinness and he is replaced so they are paying 1.75 salaries (I think their pensions are based on 60/80ths)

Kristopherus

Riskymove wrote: »

It was part of the ISER scheme available across the PS, not just health, but yes, maybe you are right...it would explain why most of the people leaving yesterday had full service

The ISER died at the end pf 2010. The vast majority of those who retired yesterday were/are over 60. Or are Gardai, Teachers etc, who have a lower retirement threshold.

barneystinson

n97 mini wrote: »

No quite as simple as that. The people that left yesterday are still on the payroll but are no longer productive. And the possibility arises that they may have been critical and will need to be replaced with a new hire.

(Contrast to the private sector where when an employee leaves the company they are completely removed from the payroll)

If they had stayed on they would be productive (in theory) and would go out with a lower lump sum and a lower pension.

I would love to see that maths on this, but I wouldn't be surprised when all is said and done if it ended up costing the exchequer more money than it saved.

I know it's not as simple as that (d'uh!), but we can only work with the figures we have - and what my figures illustrate is the fact that there is a substantial cash saving, and any targeted recruitment will be paid for out of this.

It's then up to the depts involved to improve efficiency into the future to manage with less staff, and where possible to move staff from areas where they're not needed to areas where there's understaffing.

Kristopherus

barneystinson wrote: »

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.

Your calculations are a little off.The max Lump Sum is 120/80 of finishing salary. The max pension a retiring PS can get is 50% of his/her finishing salary. In a saving scenario, you also have to factor in the nett amounts to the State. So USC & Tax will also make an extra saving.

Paulzx

Godge wrote: »

Riskymove wrote: »

actually it wont, that was the point of this scheme, noone would have taken it otherwise

Wrong, very wrong, those civil servants under 60 who went yesterday will have their pensions actuarilly reduced. It is only those with an earlier retirement age (guards, prison officers at 50, teachers at 55) who won't have it reduced.

The only people who have retired are people who have reached the minimum retirement age for their grade. This is not an early retirement scheme even though it has constantly been referred to as such.

Some have not reached 40 years service and will not receive a full pensuon because of this. They will hoeever be the minimum age. There is no need for acturial adjustments.

barneystinson

Kristopherus wrote: »

Your calculations are a little off.The max Lump Sum is 120/80 of finishing salary. The max pension a retiring PS can get is 50% of his/her finishing salary. In a saving scenario, you also have to factor in the nett amounts to the State. So USC & Tax will also make an extra saving.

Yes, but under this scheme isn't the lump sum and the pension calculated based on the pre-2010 payscale? - hence I used 66,667 (60k / 90%) as a rule of thumb figure for this.

66,667 x 120/80 x 38/40 = 95k
66,667 x 40/80 x 38/40 = 31,667

It's impossible to easily estimate the USC / Tax side of things into a simple calculation - they depend on the personal circumstances of the individuals. Consider a civil servant married to a farmer, who has a nice big loss 3 out of every 4 years, and effectively pays little or no tax...

barneystinson

Oh wait, I've done a bit of self-educating and I now see that pension is actuarily reduced for retiress between 50 and 60...! (Godge is on the ball )

So a 56 year old retiring on 38 years service will get a pension reduced to 81.6% of the rate if they were 60. And their lump sum will be 92.4% of the lump sum if they were 60.

The calculations will be based on their pre-2010 rate of pay, 66,667 rather than the 60k they are actually retiring on.

So a lump sum of 66,667 x 3/80 x 38 x 92.4% = 87,780
and a pension of 66,667 x 1/80 x 38 x 81.6% = 25,840

If they stay on for 4 years until they reach 60 they will receive:

A lump sum of 60k x 3/80 x 40 = 90k
and pension of 60k x 1/80 x 40 = 30k

But that assumes there isn't any further paycuts between now and then...

Godge

barneystinson wrote: »

Oh wait, I've done a bit of self-educating and I now see that pension is actuarily reduced for retiress between 50 and 60...! (Godge is on the ball )

So a 56 year old retiring on 38 years service will get a pension reduced to 81.6% of the rate if they were 60. And their lump sum will be 92.4% of the lump sum if they were 60.

The calculations will be based on their pre-2010 rate of pay, 66,667 rather than the 60k they are actually retiring on.

So a lump sum of 66,667 x 3/80 x 38 x 92.4% = 87,780
and a pension of 66,667 x 1/80 x 38 x 81.6% = 25,840

If they stay on for 4 years until they reach 60 they will receive:

A lump sum of 60k x 3/80 x 40 = 90k
and pension of 60k x 1/80 x 40 = 30k

But that assumes there isn't any further paycuts between now and then...

And those figures show why quite a few left before age 60.

If you were 56 and had been through cancer treatment, or had heart problems, diabetes or other chronic illness likely to reduce your life expectancy, would you take the 87.780 lump sum now (maybe pay off the rest of your mortgage) and the 25k pension or hold out for a 30k pension in four years time?

n97 mini

Godge wrote: »

Not quite true. If an employee retires from Guinness, he gets a pension from Guinness and he is replaced so they are paying 1.75 salaries (I think their pensions are based on 60/80ths)

Guinness/Diageo are not like typical private sector companies, and are very much in the (tiny) minority.

Godge

n97 mini wrote: »

Guinness/Diageo are not like typical private sector companies, and are very much in the (tiny) minority.

Aviva, Bank of Ireland, Allied Irish Banks, Construction Workers Pension Scheme, etc.

http://www.pensionsboard.ie/en/Publications/Annual_Report/The_Pensions_Board_Annual_Report_and_Acccounts_2010.pdf

According to the Pensions Board Report 1,013 defined benefit pension schemes with 222,000 members, that's more than a handful.

n97 mini

Out of a workforce of 1.7 million.

While there were about 1,100 defined benefit schemes in 2010, there were 75,000 defined contribution schemes.

DB is in the tiny minority. To say otherwise is like saying rural dwellers subsidise urban waste water schemes.

Godge

n97 mini wrote: »

Out of a workforce of 1.7 million.

While there were about 1,100 defined benefit schemes in 2010, there were 75,000 defined contribution schemes.

DB is in the tiny minority. To say otherwise is like saying rural dwellers subsidise urban waste water schemes.

Actually, looking back I didn't include the full figures.

568,488 in a defined benefit pension scheme of one kind or another.
266,909 in a defined contribution pension scheme of one kind or another.


568,488 of 1.7 million is about one third, hardly a tiny minority. Adding in the defined contribution brings you over 50%.

I am not sure that every pension scheme is registered with the Pensions Board, particularly PRSAs so there may be some more out there.

amen

assuming they took a 10% paycut their pension

but no Public/Civil Servant did despite what they say. They took a 10% pay cut from their NET salary in that they now pay a 10% contribution to their pension but their GROSS salary never changed. The Pension is calculated on their GROSS Salary.

n97 mini

Godge wrote: »

568,488 in a defined benefit pension scheme of one kind or another.

I presume you're counting in Public Sector now?

martian1980

n97 mini wrote: »

I presume you're counting in Public Sector now?

I presume your workforce figure of 1.7 million included people with no pension at all, aside from the state one. Hardly fair to include them when we're looking at the percentage of pension plans in the country

n97 mini

martian1980 wrote: »

I presume your workforce figure of 1.7 million included people with no pension at all, aside from the state one. Hardly fair to include them when we're looking at the percentage of pension plans in the country

I don't think it's unfair to look at the workforce as a whole when discussing pensions. Every worker will eventually be on a pension.

martian1980

n97 mini wrote: »

I don't think it's unfair to look at the workforce as a whole when discussing pensions. Every worker will eventually be on a pension.

I do, since the number of workers on DB versus DC schemes was what was being discussed

n97 mini

martian1980 wrote: »

I do, since the number of workers on DB versus DC schemes was what was being discussed

What was being discussed was increments vs early retirement in the PS.

Hotblack Desiato

amen wrote: »

but no Public/Civil Servant did despite what they say. They took a 10% pay cut from their NET salary in that they now pay a 10% contribution to their pension but their GROSS salary never changed. The Pension is calculated on their GROSS Salary.

Totally WRONG, you are referring onlt to the so-called 'pension levy' which was a disguised pay cut.
An actual pay cut between 7-14% (depending on salary) was applied on top of the pension levy later.

Geuze

Yes, all PS workers took a cut to gross wages, as well as paying a pension levy (PRD) on top of the normal pension contributions.

Geuze

http://www.cso.ie/en/media/csoie/releasespublications/documents/labourmarket/2009/qnhs_pensionprovisionQ409.pdf


CSO QNHS on pension coverage.

Riskymove

amen wrote: »

but no Public/Civil Servant did despite what they say. They took a 10% pay cut from their NET salary in that they now pay a 10% contribution to their pension but their GROSS salary never changed. The Pension is calculated on their GROSS Salary.

PS pensioners now pay a levy on their pension, so they will see a reduction in the pension

Geuze

Yes, pre-existing PS pensioners took a cut/levy called the PRD.

In my opinion, this levy needs to be increased.