# Pay cut to join civil service. Current private pension 205k.



## colin79ie (2 Sep 2021)

Hi,
I have been in the private sector up until now but have recently applied for a civil service position. 
My current salary is 90k and I pay 15% into our pension (10 from me + 5 from employer)

The civil service position is 'ap' grade, think 69-85k .

My current group pension value is 205k.

Given that I'm 42, would it be madness to consider the civil service position and it's current pension arrangements or am I reading into the negatives too much?

The pay cut would mean also be cutting the private pension and losing the 5% employer contribution.


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## Protocol (2 Sep 2021)

The PS pension scheme for recent entrants is the Single PS pension scheme, see here:



			Single Public Service Pension Scheme
		


What are the negatives about the PS pensions?


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## PGF2016 (2 Sep 2021)

colin79ie said:


> The pay cut would mean also be cutting the private pension and losing the 5% employer contribution.


Does the state, in effect, not contribute much more than 5% of salary to your pension?  How much would you have to contribute to get a similar pension in the private sector?


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## NoRegretsCoyote (2 Sep 2021)

colin79ie said:


> The pay cut would mean also be cutting the private pension and losing the 5% employer contribution.


How so? Your pension fund will stay as it is and likely grow over time. You can still contribute to it if in civil service employment.


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## colin79ie (2 Sep 2021)

I guess what I'm trying to determine is that if I was successful in getting the job, would I be worse or better off pension wise, than if I continued in my current job and with the private pension, or would I still need to be putting substantial amounts in to the private one to get the same pension when I retire, given my age starting in the ps?

The pay cut is something else to be considered later. The main reason for applying is work life balance. Current role involves a lot of travel , up to 150 days/year. The position applied for would mean being home every night.

I had planned on paying as much as I could into the private one with the hope of retiring a bit early.

I guess the 'negatives' I read about were to do with new Vs old ps pensions etc.


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## NoRegretsCoyote (3 Sep 2021)

colin79ie said:


> I guess what I'm trying to determine is that if I was successful in getting the job, would I be worse or better off pension wise, than if I continued in my current job and with the private pension, or would I still need to be putting substantial amounts in to the private one to get the same pension when I retire, given my age starting in the ps?


There is no simple answer. A few thoughts:


Performance of your existing pension fund is very hard to predict over the course of the next 40 years. It depends as well as to what your mix of equities and bonds is. It depends on your outgoings but at 42 with €205k contributing €13.5k a year I doubt you were on track to retire at 60;
Your PS pension will be very straightforward to work out. Basically a formula involving career-average earnings times how long you've worked;
The one advantage of a "mixed" approach like yours is that you will be able to resign from the PS at 60 and still access your private pension fund. You could draw down aggressively to bridge the gap until PS pension age which is linked to state contributory pension (66 now, but could rise);
You can always "top up" your private pension along the way and avail of tax relief. The explicit contributions in the PS Single Scheme will only be about 5% for you.  Someone in their 40s can contribute up to 25% and get full relief at their marginal rate so you have lots of headroom;
There is no "explicit" employer contribution in the PS. Even though you contribute a bit there is no fund either. So don't think of yourself as "losing" something here. There is a big notional employer contribution, you just don't see it. It's just a completely different way of contributing for and paying pensions.
Carefully work out the net and gross in your old and new job. There is something called an "additional superannuation contribution" which is basically a tax on public servants. Rates below for Single Scheme members which would shave off about 1.6% of your gross I think.




Member of the Single Scheme:
Amount of Remuneration Rate of Deduction
Up to €34,500 Exempt
Greater than €34,500 but not over €60,000 3.33%
Greater than €60,000 3.5%


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## RetirementPlan (13 Sep 2021)

Make sure you're comparing like with like. You may well be getting bonus, health insurance, disability insurance in your current position that you won't be getting in the public sector. 

That amount of travel would be a serious problem for many people as they get older, so you might want to thing about whether your current position is viable in the long term anyway. 

I touched on one issue about mixing public and private pensions in the 'should I recycle' thread in the Public Sector Pensions category. Feel free to contribute to that discussion too.


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## Salvadore (15 Sep 2021)

colin79ie said:


> The civil service position is 'ap' grade, think 69-85k





colin79ie said:


> Given that I'm 42, would it be madness to consider the civil service position and it's current pension arrangements or am I reading into the negatives too much?



Your civil service pension will be determined by the age at which you retire, the length of service at that time and your career progression in the interim.

As an AP, it will take about 10 years to move to the max of the pay scale. A full pension is payable at age 60 and requires 40 years’ service. (Less any Social welfare pension you’re entitled to).

A full pension pays 50% of salary. This reduces if retirement is sought earlier than age 60 and/or if there is less than 40 years service.

If, say, you put in 20 years and remain in the AP grade for all of this time, you would be entitled to half of the full pension i.e. 85k divided by 2 multiplied by 20 fortieths (approximately 21k).

If you were promoted to PO after say 10 years and stay on that grade for another 10 years, your pension would be career-averaged i.e. half of it would be based on the max of the PO salary and half on the max of AP grade. As you would still have only 20 years in total however, you would still only receive a pension of about a quarter of your salary. (Less any Social welfare pension you’re entitled to).

You could potentially stay until age 70 which would give you a max of 28 years service. This would of course bolster your pension entitlement.

Be aware that as a general service AP you are likely to move around over the course of your career and it is likely that you would be required to travel at some point.

While the CS may have a reputation for being a stress-free environment, this isn’t necessarily the case. For example, you could find yourself being assigned to area completely unrelated to your strengths, preferences or interest. Dealing with this can be very stressful.

Working within the wider public/political  system can also be soul destroying, if all to find you’re doing is answering parliamentary questions about what it is you’re doing.


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## NoRegretsCoyote (16 Sep 2021)

Salvadore said:


> If, say, you put in 20 years and remain in the AP grade for all of this time, you would be entitled to half of the full pension i.e. 85k divided by 2 multiplied by 20 fortieths (approximately 21k).


Not quite. He's only 42 now so if retiring at 62 he could only draw down the occupational pension at state pension retirement age (currently 66, but likely to rise by then).

Of course the advantage of having a private fund like the OP is that you can draw down aggressively if you retire from the civil service early until you are old enough for the occupational pension.


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## Salvadore (16 Sep 2021)

NoRegretsCoyote said:


> Not quite. He's only 42 now so if retiring at 62 he could only draw down the occupational pension at state pension retirement age


You’re quite right. It changed in 2013


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## kinnjohn (16 Sep 2021)

Salvadore said:


> Yes but he would be paid his civil service pension at that stage based on 20 years service.


the first thing colin79ie needs to know is the age he can retire at, hard to give correct advice until posters know retirement age,


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## Salvadore (16 Sep 2021)

kinnjohn said:


> Salvadore said:
> Yes but he would be paid his civil service pension at that stage based on 20 years service.


I was wrong on this point and deleted the post.

Those who entered the civil service after 2013 aren’t allowed to retire earlier.


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## AlbacoreA (21 Sep 2021)

What about buying back years to get the full PS pension.


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## RetirementPlan (21 Sep 2021)

AlbacoreA said:


> What about buying back years to get the full PS pension.


The rates for buying back extra years have gone up over the past 10-15 years or so, so any new contracts for buying years would be of questionable value, compared to the return that you would get if you put the same money into AVCs. 

You'd also want to consider the risk of having all or more of pension eggs in the Government pension basket. If a future Government defaulted or decided to take a dramatically different approach, those benefits might not get paid out.


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## AlbacoreA (21 Sep 2021)

I would have assumed (incorrectly perhaps) that a private pension would carry more risk, and the bang for buck would be less than the Public. Even with the increased cost of buying back years.


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## NoRegretsCoyote (21 Sep 2021)

At retirement the OP will probably have in some parts of their wealth in:


A state contributory pension
Civil service occupational pension
A house
Private pension fund
This is pretty well diversified. I would focus more on getting best expected return as there will never be too many eggs in one basket.


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## RetirementPlan (21 Sep 2021)

AlbacoreA said:


> I would have assumed (incorrectly perhaps) that a private pension would carry more risk, and the bang for buck would be less than the Public. Even with the increased cost of buying back years.


I was advised by two separate pension advisors, both with considerable expertise in public sector pensions, that the rates for new contracts for buying back years since about 2008 were not competitive, and you'd be better off in an AVC fund.


NoRegretsCoyote said:


> At retirement the OP will probably have in some parts of their wealth in:
> 
> 
> A state contributory pension
> ...


1 and 2 are coming from the same source, and subject to the same future risks. The question would be whether to add additional resources to 1/2 or 4. It may well depend on the relative scale of 1/2 vs 4.


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## time to plan (22 Sep 2021)

RetirementPlan said:


> I was advised by two separate pension advisors, both with considerable expertise in public sector pensions, that the rates for new contracts for buying back years since about 2008 were not competitive, and you'd be better off in an AVC fund.
> 
> 1 and 2 are coming from the same source, and subject to the same future risks. The question would be whether to add additional resources to 1/2 or 4. It may well depend on the relative scale of 1/2 vs 4.


I would disagree that 1 and 2 are subject to the same future risks. There are similar risks relating to pressures on public expenditure, but they are to a large extent independent risks. For example, the state could choose to change the state contributory pension, without touching the civil service occupational pension entitlements for existing scheme members.


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## NoRegretsCoyote (22 Sep 2021)

time to plan said:


> I would disagree that 1 and 2 are subject to the same future risks. There are similar risks relating to pressures on public expenditure, but they are to a large extent independent risks. For example, the state could choose to change the state contributory pension, without touching the civil service occupational pension entitlements for existing scheme members.


Agreed, to some extent they are independent.

For example the state contributory pension could fall but your occupational civil service pension would top up the difference.

Bear in mind that state pensions were not cut in the bad years 2008-2013. But public service occupational pensions were all subject to a levy (effectively a cut).


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## time to plan (22 Sep 2021)

NoRegretsCoyote said:


> Agreed, to some extent they are independent.
> 
> For example the state contributory pension could fall but your occupational civil service pension would top up the difference.
> 
> Bear in mind that state pensions were not cut in the bad years 2008-2013. But public service occupational pensions were all subject to a levy (effectively a cut).


But on 1 January 2014, the State Pension (Transition) for 65 year olds was abolished.


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## NoRegretsCoyote (22 Sep 2021)

time to plan said:


> But on 1 January 2014, the State Pension (Transition) for 65 year olds was abolished.


And was replaced by a benefit payment for 65 year olds that doesn't oblige them to seek employment  

Yes, it's about €50 a week less than a full pension but over the course of a lifetime it's not that much.


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## time to plan (22 Sep 2021)

NoRegretsCoyote said:


> And was replaced by a benefit payment for 65 year olds that doesn't oblige them to seek employment
> 
> Yes, it's about €50 a week less than a full pension but over the course of a lifetime it's not that much.


Was that introduced in Jan 2014?


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## colin79ie (27 Sep 2021)

Thanks everyone.

A couple of related questions 

Do you get the state (old age) pension on top of your public service pension? (Assuming enough prsi contributions)

What to do with the existing private pension if moving to the ps? Keep it ticking over by contributing something to it going forward?


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## NoRegretsCoyote (27 Sep 2021)

colin79ie said:


> What to do with the existing private pension if moving to the ps? Keep it ticking over by contributing something to it going forward?


There's some good advice on this thread.


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## NoRegretsCoyote (27 Sep 2021)

colin79ie said:


> Do you get the state (old age) pension on top of your public service pension? (Assuming enough prsi contributions)


They are integrated.

You should really read the guidance if you're contemplating a big decision like this.

It's the kind of initiative expected at AP grade


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## Salvadore (27 Sep 2021)

To put it simply, for those joining since 1995 your civil service pension entitlement is reduced by the amount of your state contributory pension.

The intention is that your combined pension entitlement would be the same (pro rata) as a previously serving civil servant who wouldn’t have paid full PRSI and therefore wouldn’t be entitled to the state pension.

The means by which this is calculated can be complicated however.


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## NoRegretsCoyote (27 Sep 2021)

Salvadore said:


> To put it simply, for those joining since 2013, your civil service pension entitlement is reduced by the amount of your state contributory pension.


That's the case for people joining since 1995.

For post-2013 entrants the main difference is a pension based on _career-average _rather than _final-value _salary. For a late entrant like the OP the difference shouldn't be massive.


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## Salvadore (27 Sep 2021)

NoRegretsCoyote said:


> That's the case for people joining since 1995.
> 
> For post-2013 entrants the main difference is a pension based on _career-average _rather than _final-value _salary. For a late entrant like the OP the difference shouldn't be massive.


Thanks NRC

I’ve amended the message


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## bleary (4 Oct 2021)

The civil service is good for many reasons, however, I would say anyone joining solely for the perks may be rudely awakened.

The pension for those joining is really not attractive in the way it used to be , many entrants will not have 40 years in the civil service as increasingly people are joining after their masters or doctorates and most likely having worked somewhere else for a number of years.
Your Pension won't be based on your final salary but instead on your career average .It is guaranteed though and that can be an important factor in decision making. 

The Contributory pension which would be on top of your private pension is included in the sum you are paid so lower paid civil servants will have need full service or close to that to receive any annual benefit from their pension besides their lump sum. 
You won't receive bonuses , staff incentives, health insurance etc that you might in private sector.

Saying that I have found training is good and the work itself to be interesting in comparison to private sector. The opportunities to move  and learn new roles and skills is something would not have been available in the private sector and I have worked with some brilliant people.

The leave is definitely better and there is at least an acknowledgement that there should be some work life balance although I don't think I have ever managed to keep the work from 9-5 and forget about it. I think that depends on the role and the person more than the job.

I think the changes to the pension have led to a change in the civil service, I notice a lot of people joining get very fed up after a short time if they aren't promoted partly because of the impact of the career averaging on the final pension grates on them. There is a lot of resentment built up.  There seems more movement and resignations which were pretty unusual some years ago seem more common.

We are probably going down the road of the UK where people do a few years out of college, leave and work for the private sector and contract back in again at a later stage.


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