Auto enrollment pensions

Geuze

https://www.boards.ie/discussion/comment/123995480#Comment_123995480

PS pensions in payment were cut during the financial crisis. It was called the PSPR.

This is as well as the two pay cuts (sometimes three, sometimes four) applied to working public servants.

littlefeet

https://www.boards.ie/discussion/comment/123995998#Comment_123995998

It's more than that, though it might even have an effect on the housing issues, because it will change the attitude of seeing a house as a pension, plus engage a culture of long-term planning about the future.

plodder

https://www.boards.ie/discussion/comment/123995480#Comment_123995480

If we ever see a financial crisis again, it'd be much more likely that the government would just add 1-2% on income tax and re-introduce the levy on private sector pension pots.

The income tax hike would make more sense than levying private sector pension pots. Though, presumably a FEMPI 2.0 would come into play as well. What was particularly unfair about the private pension levy is that it's the one measure that actually reduced the future retirement income of private sector workers, unlike the public sector where benefits were preserved.

plodder

https://www.boards.ie/discussion/comment/123995605#Comment_123995605

It depends what you are comparing with. Yes, the post 2013 entry public sector pension will be worse than earlier cohorts, but it will still be significantly better than private sector defined contribution pensions regardless of when they started. In your example the PS worker on a salary of 60K will end up with around 30K of a pension, which is not that bad at 50% of pre-retirement income. But, I think it highlights the reliance that both many public sector and the vast majority of private sector retirees will have on the contributory state pension. Any attempt to make it "means tested" or clawed back in any way, will be strongly resisted.

Dodge

It’s not 30k though. It’s the state pension (that they’ve paid the same prsi as everyone else)

And then their occupational pension. The previous groups would get their 17k or so here as it was based on final salary, but the single scheme is based on average earnings throughout their career so far less

The lump sum is still a great benefit of course. I don’t begrudge any worker here though.

plodder

From what I can glean, the post 2013 public sector single pension scheme is:

• defined benefit (big advantage over defined contribution now that people are living longer and avoids market risks)
  
• based on what you actually earned rather than just final salary, but crucially, contributions are index linked when it comes to calculate pension benefits
  
• seems to be split into two components. One that "takes account" of the state contributory pension so tops that up by a smaller amount. And a second piece that applies to income above the level of the state pension which attracts a higher payment. This makes the occupational pension look less generous for lower earners because more of their income is coming from the state pension.

All the above is as good or better than any private sector DC scheme imo.

Bottom line I'd say most private sector workers would be better off on a scheme like that than what they are on (or will be on with auto-enrollment). But, it would be interesting to see some examples worked through. This isn't to begrudge the public sector by the way. Just a reality check for people saying the post 2013 scheme is no good.

The public sector worker earning 60K will be on a total retirement income over 30K (assuming full time with 40 years service) afaict, plus lump sum and doubtless other benefits.

littlefeet

Is there any chance that any of you who want to discuss public service pensions could start a new thread?

littlefeet

Not that there haven't been a million posts on public service pensions already.

littlefeet

And has anyone got anything to add to a thread about My Future Fund that does not involve a comparison to a public service pension?

What about a few points comparing private company pensions or private personal pensions to the My Future fund?

Red Silurian

Got an email from HR this morning, apparently the AE pension will be deducted from net earnings while the scheme they have is deducted from gross. They are also offering 2% employer contributions as opposed to the 3% from AE but depending on income levels the 2% on gross could be worth more than the 3% on net

As far as I can tell, all this on paper makes the companies own scheme better than auto-enrolment, or am I missing something?

littlefeet

https://www.boards.ie/discussion/comment/123997353#Comment_123997353

Write back to HR and ask for a compression and estimate the final person for both schemes. They are supposed to give you something like that yearly anyway.

Dodge

https://www.boards.ie/discussion/comment/123997174#Comment_123997174

Apologies for bringing the thread off topic, but just to wrap it up. No one said the scheme was “no good”. It’s just not great.

Anyone back to auto enrolment which isn’t nearly as good, and isn’t designed to be as good.

hold my beer

https://www.boards.ie/discussion/comment/123997406#Comment_123997406

Do you mean a comparison, and final position? Employers do not have to give you that yearly. It would be a pain in the hole to do for all employees.

noodler

https://www.boards.ie/discussion/comment/123997353#Comment_123997353

Sure AE is only a 1.5% employer contribution for now (though will get to 6% in time).

It is all calculated on the gross though? At least everything I've read says that

Dublin Calling

https://www.boards.ie/discussion/comment/123998260#Comment_123998260

They are required to for members of the SPSPS (public sector), but in reality is it is only issued on request by most employers and can take months to get.

Dublin Calling

https://www.boards.ie/discussion/comment/123998283#Comment_123998283

Correct, AE is calculated from Revenues definition of Gross Pay. This creates an interesting anomaly when compared to normal pensions.

Viscount Aggro

A lot of workers will see this as another tax.

All they will see is, less nett pay and disposable income each month.

Think about all the people who pay 20 - 30% of their salary on rent, and are already struggling with bills.

And dont be suggesting, such people should upskill, or find a better paying job.

noodler

https://www.boards.ie/discussion/comment/123998416#Comment_123998416

Tough, really.

Investment isn't free

Red Silurian

https://www.boards.ie/discussion/comment/123998416#Comment_123998416

It's going to be very tough for the lower paid for sure, somebody on 20k (the lowest entry point for auto-enrolment) already pays €700 between PRSI and USC combined and will now be down an extra €300 - or about €25 a month.

That €300 will be €700 in their future lives mind so the deal isn't too bad really

littlefeet

https://www.boards.ie/discussion/comment/123998342#Comment_123998342

I know someone with a private pension provided by their employer, and they get a yearly statement with projections about their pension.

BlueSkyDreams

https://www.boards.ie/discussion/comment/123998416#Comment_123998416

They will be thankful for it when they retire.

eightieschewbaccy

https://www.boards.ie/discussion/comment/123998716#Comment_123998716

That's pretty standard standard in private companies generally. Don't think I've been anywhere that didn't have a pension plan.

littlefeet

https://www.boards.ie/discussion/comment/123998775#Comment_123998775

The MFF should be doing the same; maybe it will be, because that would allow participants to see the long-term and plan for the future.

For a lower-paid worker, it might take money out of the economy, as it could lower discretionary spending.

plodder

I imagine this scheme will provide instantaneous online access to current values, with projection tools to give some idea of what the value might be in the future. Any decent private pension already does this, and with the scale of this operation it should be able to also.

AndrewJRenko

https://www.boards.ie/discussion/comment/123997353#Comment_123997353

When you say 'deducted from net earnings', are you saying that the employee doesn't get tax relief on AE pension contributions? Surely this would be a HUGE disadvantage?

Dublin Calling

https://www.boards.ie/discussion/comment/123999019#Comment_123999019

It works like an SSIA, because, well someone thought everyone knows how an SSIA works!

hold my beer

https://www.boards.ie/discussion/comment/123999019#Comment_123999019

Correct. It's why a lot of employees are better off in a company pension instead, particularly high rate earners.

blackwhite

https://www.boards.ie/discussion/comment/123999019#Comment_123999019

There is no tax relief on MyFutureFund contributions - instead there is a state “top-up” of 1/3 of the individual’s contribution that goes directly into the pension fund.

For a 20% marginal rate taxpayer, an ordinary DC pension gives an effective state contribution of 25% by way of tax relief ((1-20%)/20%)

When you factor in an employer contribution being based on gross deductions instead of net, then it makes most employer-sponsored DC schemes more attractive even for standard rate tax payers.

plodder

Some companies setting up inferior pension schemes with employer contributions as small as 1% to get around the auto-enrollment requirements.

Sneaky. Though it's not hard to understand the employer concern. It is a significant additional cost. I know for comparison, when a company already has a scheme and they take on a new employee, they can immediately account for the "fully loaded" cost including pensions and even adjust salary to fit the budget. This is something completely new.

https://www.independent.ie/irish-news/rush-to-clamp-down-on-firms-attempting-to-undermine-my-future-fund-auto-enrolment-pension/a342605453.html

Red Silurian

https://www.boards.ie/discussion/comment/124003697#Comment_124003697

Surely if 1% is being offered on a company pension plan a worker can give the 2 fingers to it and go with the auto enrollment plan to get the 1.5% plus the 0.5% govt boost

For lower income workers AE might work out better so why would you go with your companies scheme if they're only offering 1%?

I think a workplace would need to offer 2% contributions at a very minimum (1.5% plus 0.5%) to attract people away from auto enrollment