The truly shocking cost of State pensions

Sarenco said:
All assumptions used in the calculations are explicitly set out in the article. What do you think is missing exactly?
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Any and all mention of the different PS pension strands, there are 4.

He seems oblivious to the fact that the people retiring now on full service are those who were hired before 1995.

He hasn't, not once, mentioned the significant changes in the pensions (hence the 4 strands above) scheme that have been introduced.

As I said, it's no wonder he didn't put his name to it.
 
Just to give you an example. A PS hired since 2014 and who is on a much lower starting salary then his predecessor and who is, for example, 25, will have to work until he he 68 - before being entitled to any pension.

He will be paying a full Class A stamp - for a State Contributory pension - which will be integrated into his final pension entitlement of 50% final salary.

That salary will be the average salary of his 43 year service, not his final one.

If he retires on a salary of 60k, then his entitlement will be a pension of 30k, this will be made up of the rate of the SCP - today it is 12,131.60 and the balance is his "occupational" pension.

He will be making his contributions to the occupational part, he will be making PRSI contributions for the SCP.

He will also be retiring at the same age as a private citizen with no pension provision.
 
ppmeath said:
Any and all mention of the different PS pension strands, there are 4.
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What difference does that make?

The article simply calculates the actuarial value a pension paid today to the average civil servant who retires at 60 with 40 years of service.

The fact that future pensioners may not get such fantastic pensions has no impact of the accrued value of pensions payable today.
 
It makes plenty of difference.

Pre 1995 made no personal pension contributions and no Class A contributions.

Post 1995 do make a personal pension contribution (PPC) 5% and they make a Class A PRSI contribution and the employer also makes a contribution.

That is not factored in.

Post 2014 now contribute are are known are "referable" amounts every year towards their pensions and they make the Class A contribution as does the employer.

I have no issue with him calculating the value, but he says:

"would have to put €65,400"

Without mentioning that the PS employee is making contributions and he gives the retirement age as 65, when new PS workers can't retire until they are 68.
 
ppmeath said:
new PS workers can't retire until they are 68.
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New PS workers are not retiring today. The article relates to the cost of pensions that are payable today.

The effectiveness, or otherwise, of recent efforts to contain the future cost of PS pensions is a completely different discussion.

The comparison with the amount that a private sector worker would have to contribute to a fund to achieve a similar pension also relates to the accrued value of a PS pension that is payable today.
 
Sarenco said:
New PS workers are not retiring today. The article relates to the cost of pensions that are payable today.

The effectiveness, or otherwise, of recent efforts to contain the future cost of PS pensions is a completely different discussion.

The comparison with the amount that a private sector worker would have to contribute to a fund to achieve a similar pension also relates to the accrued value of a PS pension that is payable today.
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Yes, because those retiring today on a full pension are those who joined pre 1995. The article says "Start providing" and then:

"A person who aspired towards an annual pension of €100,000 when they reached 65, and started providing for it at 25, would have to put €65,400 into their pension fund every year"

Those in the PS from 2014 at age 25 will have to work 43 years - until they are 68, not 65.

They will make 43 years of contributions to both their pension, the State Contributory (which is part of their final pension) and the lump sum.

They are not getting it for nothing.

Then the article says:

"If a young person aspired towards a pension of €24,000 per year, which is just below the average for retired civil servants last year, "

If the average pension was 24k, then the average retirement salary was 50k, not 100k. Because the entitlement is 50% final salary.
 
ppmeath said:
It makes plenty of difference.

Pre 1995 made no personal pension contributions and no Class A contributions.
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Just to correct a myth - most PS always, always paid 6.5% pension contributions.

Pre 1995 they didn't pay full-rate PRSI.

Post 1995 all PS pay full-rate PRSI.

[Yes, some PS, not many, did not and do not make a pension cont]

A typical teacher has always, always, paid 6.5% pension cont - let me be absolutely clear on that.
 
ppmeath said:
If the average pension was 24k, then the average retirement salary was 50k, not 100k. Because the entitlement is 50% final salary.
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Massive assumption there that every retiree had full service - which is very unlikely. Entitlement to 50% is after full service.
 
Protocol said:
Just to correct a myth - most PS always, always paid 6.5% pension contributions.

Pre 1995 they didn't pay full-rate PRSI.

Post 1995 all PS pay full-rate PRSI.

[Yes, some PS, not many, did not and do not make a pension cont]

A typical teacher has always, always, paid 6.5% pension cont - let me be absolutely clear on that.
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Pre 1995 Civil Servants, never made Personal Pension Contributions.
http://www.cspensions.gov.ie/faq1.asp#4


"4. Do I pay contributions for these benefits?

There is no personal contribution towards their own personal pension for officers who pay modified PRSI.

Officers pay contributions of 1½% of pay for spouses’ and children’s pension benefits. For job-sharers and work-sharers, contributions are calculated on a pro rata basis."
 
orka said:
Massive assumption there that every retiree had full service - which is very unlikely. Entitlement to 50% is after full service.
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That is what the assumption is in the article:


"The pension paid to the average civil servant who retires at 60 with 40 years "
 
ppmeath said:
That is what the assumption is in the article:


"The pension paid to the average civil servant who retires at 60 with 40 years "
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Yes - that's for the 'assumptions' part of the article - how much would it cost for a 25 yr old aspiring to a 24K pension etc. The 'actual of 24K' is for retirees last year - you can't draw any conclusions about service (and therefore final salary) of actual retirees from that single piece of data.
 
True enough. But if we are to compare like with like, then there has to be a reference to the 25 year old who joined the PS today - comparing it with people retiring now is pointless. Horse, bolted and all that.
 
ppmeath

Civil service is 10% of PS, so most PS always made 6.55 pension conts.

I did point out that some PS, e.g. the civil service, did not pay the 6.5%.


30,000 approx civil service

300,000 approx wider PS.
 
Sarenco said:
All assumptions used in the calculations are explicitly set out in the article. What do you think is missing exactly?
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It's not sufficient to supply assumptions before writing an article like this. The assumptions must be reasonable and the calculations accurate. The assumptions are not reasonable in my opinion and the calculations are on data the anonymous actuary gleaned from the pensions website but not made public. The more I look at the article the more farcical I think it is.

Pensions could make millionaires of civil servants (but won't in most cases)
 
Páid said:
The assumptions must be reasonable and the calculations accurate.
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  1. You haven't told us what you think is unreasonable about the assumptions. Civil service pensions are index linked and a surviving spouse in general receives a half pension.
  2. You haven't told us what calculations you think are inaccurate. So far you have just distorted what is actually said in the article.
  3. What non-public data are you referencing? Current annuity rates?
  4. You haven't explained why you think the article is farcical or why you think the value of an average civil servant pension is not worth €1 million+.
 
ppmeath said:
But if we are to compare like with like, then there has to be a reference to the 25 year old who joined the PS today - comparing it with people retiring now is pointless.
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Why? The article is talking about the value of pensions payable today - and will remain payable for a very long time to come.

It is certainly not pointless to highlight the huge cost of these pensions in the context of budgetary projections, on-going negotiations with public sector unions, etc.
 
1. This assumption is unreasonable - "The calculation, as with all calculations in this report, presumes the retiree is male, married, that the spouse gets half the pension if the retiree dies, that the spouse is three years younger than the retiree, and that the pension increases with inflation, though with a cap of 5 per cent in any one year." What about all the females? What about the single people? What about those that contribute for more than 40 years?

2. The only thing distorted are what the author purports to be "projections" without taking into account pre & post 95 pensions, the embargo, etc.

3. "Working with the calculator on the website of the Pensions Authority, the actuary got figures for how much people would have to put aside each year if they aspired to have pensions such as the ones mentioned above, when they reached ages 60 and 65. Again the lump sums would be additional." - This data has not been made public and therefore cannot be scrutinised.

4. See 1, 2 and 3.

The real reason* for the article is to have the private sector up in arms against the civil service in advance of any pay restoration claims






* - Assumption - may or may not be true.
 
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