Single Public Service Pension Scheme - A Good Deal?

HIB

So, I'm trying to decide whether to accept a position in the civil service or not. One of the big benefits that's supposed to go with a public service job is the pension, but I'm not really sure the deal is that great. Maybe someone can help me unravel what it really means?

So, I'd be part of the new single public service pension scheme. From what I can make out, I'd get 0.58% of my gross wage, every year, towards my pension. That sum is then linked to consumer price index, and the yearly sums are added together to make the final pension sum. So, for an EO, on the current scale (27-43k) that amounts to about 9.5k in total (in todays money terms i.e. 160euro in year 1, 170 in year 2 etc. etc.), after 40 years service. If you add that to the state old age pension, that's about 21.5k per annum in total. I've seen on a few forum sites though that apparently you can't claim the state old age pension. Is that true? How can it be true if my pension is less than the old age pension?

So, I guess I'm asking, is this a good deal? Compared to what I'd achieve on a private scheme? Or is the age of the golden public pension gone. I should add...I'd be taking a pretty significant pay cut to enter the public service...so I'd really be doing it for the 'fringe benefits' only e.g. pension, early retirement possibility, job security.

tomfoolery60

That's a very good question actually. One major advantage is that under the scheme you've gotten a guaranteed annuity that's index linked, it is a lot less risk than a private scheme where you would have to bear risk regarding investment returns and also annuity rates should you purchase one. That's for sure a very significant benefit. But the question is if that's worth what you pay for it. To a certain extent that's a personal judgement.

I might be wrong but I think you would be entitled to the state pension as new entrants since the 90s or thereabouts pay normal PRSI.

HIB

tomfoolery60 wrote: »

That's a very good question actually. One major advantage is that under the scheme you've gotten a guaranteed annuity that's index linked, it is a lot less risk than a private scheme where you would have to bear risk regarding investment returns and also annuity rates should you purchase one. That's for sure a very significant benefit. But the question is if that's worth what you pay for it. To a certain extent that's a personal judgement.

I might be wrong but I think you would be entitled to the state pension as new entrants since the 90s or thereabouts pay normal PRSI.

Looks like it costs between 5-8% of my salary (depending on what point on the scale I'm at). So, with a typical company scheme where they'd match my contribution, it looks like I'd get roughly the same pension ..based on http://www.pensionsauthority.ie/en/Calculators/Pensions_Calculator/. Provided I get the old age pension.

wench

You do get the old age pension. The set up is known as a co-ordinated pension.
Not sure of the exact mechanics of the new scheme, but under the previous version, this is how it worked.

If you retired with the full 40 years from a salary of 50K, you would get 25K pension.

For anyone who joined after 1995, this would be made up of 12K OAP, and 13K from the scheme.
For those who started pre-95, they weren't paying full PRSI, so had no entitlement to the OAP, so their full 25K would come from the scheme.

tomfoolery60

Looking at the website it says the following re. the old age:

Integration
The Scheme is integrated with the social welfare State
Pension Contributory (SPC) in two ways:
(i) Pension accrual rates take account of the availability
of the SPC at retirement.
(ii) Pension contribution rates take account of the fact
that SPC benefits provide part of the retirement
income.



My understanding of that is that you are entitled to OAP (meeting normal criteria etc.) and that it is integrated by having lower contributions and also benefits.

tomfoolery60

HIB wrote: »

tomfoolery60 wrote: »

That's a very good question actually. One major advantage is that under the scheme you've gotten a guaranteed annuity that's index linked, it is a lot less risk than a private scheme where you would have to bear risk regarding investment returns and also annuity rates should you purchase one. That's for sure a very significant benefit. But the question is if that's worth what you pay for it. To a certain extent that's a personal judgement.

I might be wrong but I think you would be entitled to the state pension as new entrants since the 90s or thereabouts pay normal PRSI.

Looks like it costs between 5-8% of my salary (depending on what point on the scale I'm at). So, with a typical company scheme where they'd match my contribution, it looks like I'd get roughly the same pension ..based on http://www.pensionsauthority.ie/en/Calculators/Pensions_Calculator/. Provided I get the old age pension.

It's not really the same as one is almost risk free (assuming state is not bust) and the other is a projection over decades and subject to inflation risk at the end. Given the choice between the two the less risky is certainly what I would choose.