# Increase in pension age will not proceed



## Brendan Burgess

In line with programme for government


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## Purple

That's very disappointing; the one thing we were doing to address the looming pensions crisis and they bottled it.


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## so-crates

I know it was in the programme for government but it is a retrograde step, putting off until tomorrow what needed to be done yesterday!


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## What the

Only one fix for this pension issue. Compulsory enrollment from the start. It would in a lot of cases make working to and beyond state pension age less of an issue. Trouble is it will take 25-30 years to see the full benefit and there will still the cohort who retire in the meantime that need to be tackled.


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## Slim

What is the likely  programme now for increasing the pension age?


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## Marco 1972

Assume anyone championing an increased retirement age has means/plans not to be needing to work till their late 60s, should be pushing for earlier retirement and shorter working weeks.  

Though we should have financial education in schools from an early age and even a savings scheme then....


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## Purple

Marco 1972 said:


> Assume anyone championing an increased retirement age has means/plans not to be needing to work till their late 60s


Why do you assume that? Many people enjoy working. In the last 10 years where I work everyone who has reached retirement age has chosen to continue to work,either full time or part time. We give all retirees the option or working part time. They can choose whatever hours suit them as long as they are regular hours. Sonme do as little as two mornings a week, some work full time. Nobody just retires fully.


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## misemoi

Agree, age should not be a final working limit.  Where people choose to continue working, they should be facilitated.  My FIL stayed on two days a week on retirement, as he lives alone it was a lifeline for him.  He is really missing it now as it ended during COVID.


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## NoRegretsCoyote

I agree we need to reduce age-related pension expenditure.

But the pension age is a very blunt instrument. 

People in physical professions reach their limits sooner than keyboard warriors like most of us, and indeed your average AAMer can work comfortably past 66.


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## Purple

NoRegretsCoyote said:


> I agree we need to reduce age-related pension expenditure.
> 
> But the pension age is a very blunt instrument.
> 
> People in physical professions reach their limits sooner than keyboard warriors like most of us, and indeed your average AAMer can work comfortably past 66.


Then take that into account when you are planning your future. Why should it be okay to make no provision for your future on the assumption that someone else will provide a pension for you? If you can't that's one thing but if you can and don't that's quite another.


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## NoRegretsCoyote

Purple said:


> Then take that into account when you are planning your future.



It's called social insurance. Relevant at individual and societal level.

There is very little to be gained from lots of old people below the poverty line.


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## Purple

NoRegretsCoyote said:


> It's called social insurance. Relevant at individual and societal level.


Insurance required people to pay for it. What happens with pension is that young people pay for those who are retired on the assumption that someone will be able to pay for them when they are old. The amount paid in social insurance comes nowhere close to covering the cost of the State pensions. The people who say "I paid social insurance so I paid for my pension" are ignorant or stupid or both. State employees aren't the only ones getting pensions they didn't pay for. 


NoRegretsCoyote said:


> There is very little to be gained from lots of old people below the poverty line.


 Sure, but as a cohort they are the richest in the country with the highest disposable income, the highest net wealth, the lowest debt and are the least likely to live in poverty. Children are 4 times more likely to live in poverty. That doesn't seem right to me.


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## NoRegretsCoyote

Purple said:


> The amount paid in social insurance comes nowhere close to covering the cost of the State pensions.



Please support this statement with numbers or withdraw it.



Purple said:


> Sure, but as a cohort they are the richest in the country with the highest disposable income.....nd are the least likely to live in poverty



This is just wrong. Median household income for a retired household is €27k, an employed household is €56k. At-work households have a very slightly lower poverty rate (1.6%) than retired households (1.9%).


www.cso.ie for more details.


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## Sadim

Purple said:


> Why do you assume that? Many people enjoy working. In the last 10 years where I work everyone who has reached retirement age has chosen to continue to work,either full time or part time. We give all retirees the option or working part time. They can choose whatever hours suit them as long as they are regular hours. Sonme do as little as two mornings a week, some work full time. Nobody just retires fully.


That is an excellent idea and you are to be congratulated for that. I often thought compulsory retirement was unfair but it was also unfair to expect people in their 60s to continue at a frantic pace as they did in their 40s/50s. It is exactly that type of flexibility that is required.


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## Purple

NoRegretsCoyote said:


> Please support this statement with numbers or withdraw it.


 see here
A single person on €45,000 a year with no kids pays an average of €34.62 a week in PRSI. That pays for illness benefit, widow(er)s pensions and lots of other things. Therefore it's reasonable to say that less than €25 a week goes towards a pension.
If you work for 40 years and retire at 65 the cost of funding a €13,000 a year (€250 a week) pension is €168.80 a week.



NoRegretsCoyote said:


> This is just wrong. Median household income for a retired household is €27k, an employed household is €56k. At-work households have a very slightly lower poverty rate (1.6%) than retired households (1.9%).


From  this; _"Those under the age of 18 had a consistent poverty rate of 7.7% compared to the rate of 1.7% for people aged 65 or over."_
So I was wrong; it's 4.5 times higher for children.
This discusses the concentration of wealth amongst the privileged minority (older people).

You are confusing income and wealth. Gross income is meaningless. If I earn €100k a year but have 4 kids and a large mortgage I'll have a significantly lower net income than a retired couple next door with a combined income of €50k. We tax the hell out of income but hardly tax wealth at all. That's a long way from a meritocratic society.

By the way I'm heading for 50, high paid job, good level of equity etc so the status quo suits me but that doesn't make it right.


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## NoRegretsCoyote

Purple said:


> A single person on €45,000 a year with no kids pays an average of €34.62 a week in PRSI.



And what does their employer pay? Zero?



Purple said:


> You are confusing income and wealth.



I am not. I did not refute your claim that they have the highest net _wealth_, because of course they do. Note my careful use of ellipses when quoting you.

I refuted your claim that they have the highest _incomes_, which they do not.



Purple said:


> If I earn €100k a year but have 4 kids and a large mortgage I'll have a significantly lower net income than a retired couple next door with a combined income of €50k



You will have a lower _discretionary _income because you have more outgoings, but your _net _income will still be higher.


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## AAAContributor

Purple said:


> We tax the hell out of income but hardly tax wealth at all. That's a long way from a meritocratic society



I would say the progressive income tax is very meritocratic. If you are an individual who "merits" a high level of income, you will pay more income tax.

Thereafter, if you are a frugal boy or girl you are free to not consume your after-tax income (or procreate!) and you merit the savings (wealth) you can accumulate free from tax. Actually, that's not really the case, is it?

Stamp duty on Irish shares and property.

The government levy of 1% on investments in products sold by insurance firms.

No indexation factors on investments post-2003 so that the government taxes nominal gains.

Invest in a UCITS fund? Take all the risk? The government will tax that gain that they took no risk on at 41%.

Your portfolio contains UCITS funds A & B. You sell A at a gain and B at a loss? The government will tax the gain but the loss is 100% for your account. You could make an overall portfolio loss and borne all the risk but still have to pay tax.

Want to invest long-term in a UCITS fund? 20yrs, 30yrs? Buy and hold? Nope. Not allowed. After 8 years - a deemed disposal kicks in. Don't have liquid funds to pay the tax due on an asset that only has a paper gain? You are forced to sell to come up with the cash to pay the tax on a paper gain.



Purple said:


> By the way I'm heading for 50, high paid job, good level of equity



Was your "good level of equity" built up through saving and frugality or was it unearned by buying property and assets at the right time and you got lucky?

Would an Irish wealth tax kick in above or below your "good level of equity"?


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## Purple

NoRegretsCoyote said:


> And what does their employer pay? Zero?


The employers contribution covers redundancies as well as the same other things that PRSI covers. If you read the link I posted they say that pensions need to be reduced by one third or PRSI increased. Without those changes there is a major shortfall. Do you seriously think that PSRI receipts cover the cost of the State pension? Do remember that you get it if you have made 10 years contributions.  



NoRegretsCoyote said:


> I am not. I did not refute your claim that they have the highest net _wealth_, because of course they do. Note my careful use of ellipses when quoting you.
> 
> I refuted your claim that they have the highest _incomes_, which they do not.
> 
> You will have a lower _discretionary _income because you have more outgoings, but your _net _income will still be higher.


Okay, so you accept that pensioners have the most cash, the lowest expenses and the most wealth and are at a much lower risk of living in poverty than young people. Great stuff. We are in agreement.


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## NoRegretsCoyote

Purple said:


> The employers contribution covers redundancies as well as the same other things that PRSI covers.



It covers redundancies dozens of times over.

I'm just interested in your claim that:



> The amount paid in social insurance comes nowhere close to covering the cost of the State pensions.



Can you back it up?

For me the question is something like: "Assuming there was an investment strategy, do total PRSI contributions (employer and employee) cover, in actuarial terms, social benefits paid out over the long term?"

PRSI was a tiny bit under €10bn in 2019, which is not a well publicised figure.


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## Purple

AAAContributor said:


> I would say the progressive income tax is very meritocratic. If you are an individual who "merits" a high level of income, you will pay more income tax.


 Really? So if I inherit a big house (that's where most wealth is in this country) from my parents I'll pay inheritance tax on some of it, unless I lived there for a few years before they popped their clogs in which case I'll pay nothing. Thereafter I'll pay nothing on that wealth but will pay some tax on the income I get from it if I invest it but less than I'd pay if it was earned income.


AAAContributor said:


> Thereafter, if you are a frugal boy or girl you are free to not consume your after-tax income and you merit the savings (wealth) you can accumulate free from tax. Actually, that's not really the case, is it?
> 
> Stamp duty on Irish shares and property.
> 
> The government levy of 1% on investments in products sold by insurance firms.
> 
> No indexation factors on investments post-2003 so that the government taxes nominal gains.
> 
> Invest in a UCITS fund? Take all the risk? The government will tax that gain that they took no risk on at 41%.
> 
> Your portfolio contains UCITS funds A & B. You sell A at a gain and B at a loss? The government will tax the gain but the loss is 100% for your account. You could make an overall portfolio loss and borne all the risk but still have to pay tax.
> 
> Want to invest long-term in a UCITS fund? 20yrs, 30yrs? Buy and hold? Nope. Not allowed. After 8 years - a deemed disposal kicks in. Don't have liquid funds to pay the tax due on an asset that only has a paper gain? You are forced to sell to come up with the cash to pay the tax on a paper gain.


A paper gain is a real gain that you choose not to cash in.
85% of all wealth in this country is in the main residential property and pensions. Neither are subject to any form of tax and even the populists, sorry socialist child killers aren't planning on taxing those.



AAAContributor said:


> Was your "good level of equity" built up through saving and frugality or was it unearned by buying property and assets at the right time and you got lucky?
> 
> Would an Irish wealth tax kick in above or below your "good level of equity"?


 As a newly qualified tradesman at 22 I read about EMU and the fact that interest rates would drop significantly I figured that there's be a property boom so I sold my car and bought an apartment. That got me on the property ladder. By 1998 I had an investment property and in 2008, after reading about the subprime market in the USA I thought there would be a property crash so I sold up. So it was a combination of luck and a little bit of foresight but it was almost completely unearned. The €100k a year I pay in income taxes sort of balanced things out.


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## Purple

NoRegretsCoyote said:


> It covers redundancies dozens of times over.
> 
> I'm just interested in your claim that:
> 
> 
> 
> Can you back it up?
> 
> For me the question is something like: "Assuming there was an investment strategy, do total PRSI contributions (employer and employee) cover, in actuarial terms, social benefits paid out over the long term?"
> 
> PRSI was a tiny bit under €10bn in 2019, which is not a well publicised figure.


Details here.


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## AAAContributor

Purple said:


> So if I inherit a big house (that's where most wealth is in this country)



It's not though, is it. Yes, there are a few "big" houses, but the median house in Ireland is of a more modest value.

I agree with you that most wealth is property, in the aggregate, but this is shelter we are talking about - the roof over your head. How does the individual on good wages with 4 kids that you spoke about monetise their house to pay a wealth tax on it?



Purple said:


> Thereafter I'll pay nothing on that wealth but will pay some tax on the income I get from it if I invest it but less than I'd pay if it was earned income.



I am not sure I fully understand what you mean by "if I invest it", but if you mean that you could rent it out, don't you have to reside there and use it as your main residence for a period of 6 years otherwise the dwelling house relief is clawed back? Even if you do rent it after 6 years, surely the equivalent amount of earned income is taxed less, no? If this person rents it out for €24k per annum (and it is their only income), they only have their personal tax credit to use against this income whereas someone earning the same amount through wages has a personal credit and PAYE credit and can make pension contributions on their wages thereby paying much less tax than the landlord. Also, this lucky recipient of property will have to live somewhere. They will have to pay tax on the rental income and so the net amount leftover will only allow them to rent a lesser place somewhere else.

Also, individuals availing of dwelling house relief are most likely in a dependent situation. They cannot have an interest in another property and this is a way for a disponer to make a provision for a dependent. Surely someone concerned at societal inequity like yourself would be generous here?

There have been instances of the dwelling house relief having been used as a tax planning tool and used aggressively but amendments have been brought in. If the dwelling house exemption was being abused and draining the country of tax revenues you can be sure it would be discontinued.

As for pensions, if there is such a quantum of wealth in them, then the government has levers to claw this back by reducing the pension fund threshold and means test future state pension entitlements against people's massive pension assets. There are no policies in place to do this - I wonder why? Could it be that the median private pension provision is actually quite modest?



Purple said:


> in 2008, after reading about the subprime market in the USA I thought there would be a property crash so I sold up. So it was a combination of luck and a little bit of foresight but it was almost completely unearned. The €100k a year I pay in income taxes sort of balanced things out.



Balanced what out? You paid tax didn't you on your property gain when you sold? Weren't the rates of stamp duty in 1998 when you bought even higher than they are today? There was nothing to balance out. You paid your dues. Paying chunky income tax today is not balancing anything out unless you didn't declare the gains on the property to Revenue.

So, you have divested your investment property assets and your current source of wealth accumulation is through income and you now want property taxed more and less income tax to be paid?

It makes sense now.


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## Purple

AAAContributor said:


> How does the individual on good wages with 4 kids that you spoke about monetise their house to pay a wealth tax on it?


The person with the 4 kids probably has a mortgage and isn't in the high wealth group.


AAAContributor said:


> I am not sure I fully understand what you mean by "if I invest it", but if you mean that you could rent it out, don't you have to reside there and use it as your main residence for a period of 6 years otherwise the dwelling house relief is clawed back?


 If I get an inheritance and sit on the money I'll just pay DIRT, if there is any due with low to negative interest rates. If I buy shares and make a profit I'll pay 33% CGT as opposed to a marginal tax rate of over 50%. If I invest in property I'll pay income tax on my income, and a proportion of my costs (which is crazy) and CGT on any capital gain. Still lower than the marginal income tax rate


.


AAAContributor said:


> As for pensions, if there is such a quantum of wealth in them, then the government has levers to claw this back by reducing the pension fund threshold and means test future state pension entitlements against people's massive pension assets. There are no policies in place to do this - I wonder why? Could it be that the median private pension provision is actually quite modest?


I'd say it has a lot to do with the fact that there would have to be an accurate valuation of DB pensions which would hit the people who run the departments and advise the ministers hardest. The Public Sector Unions would also exercise their veto over any such proposals. 



AAAContributor said:


> So, you have divested your investment property assets and your current source of wealth accumulation is through income and you now want property taxed more and less income tax to be paid?
> 
> It makes sense now.


 I think the tax band for the higher rate is way too low and the overall higher rate of all payroll taxes should be below 50% but no, I'm not advocating that I should pay a lower rate not as the country can't afford it. I'm pointing out that the State Pension age should be 68 because the current age and rate is unsustainable and an unfair burden on younger people. With the demographic changes we are facing the situation will get much worse. There has never been a better time to be retired and there probably never will be. With no real wage inflation for the last 20 years the split of wealth between labour and capital has become totally unbalanced. I own a house worth about a million Euro (with a big mortgage still on it) but I pay just under €100 a month in property tax. That's way too low. I can stuff money into my private pension because it's tax efficient and then draw a State pension I didn't pay for. That's wrong. I'd like to see a move towards taxing wealth retention rather than wealth creation.


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## Purple

NoRegretsCoyote said:


> PRSI was a tiny bit under €10bn in 2019, which is not a well publicised figure.


Just on that. My understanding is that's total social contributions and includes PRSI, USC and Pension Levies. I'm open to correction though. For the purposes of this discussion all contributions made by State employees need to be subtracted as they have their own unfunded pension liability.


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## AAAContributor

Purple said:


> If I get an inheritance and sit on the money I'll just pay DIRT



No you won't. You'll pay a lot more. If you sit on the money, the government/monetary authority is actively pursuing policies to reduce the amount of goods and services that this wealth buys.



Purple said:


> I'd like to see a move towards taxing wealth retention rather than wealth creation.



Governments everywhere pursue policies that target a level of inflation in order to discourage the wealth retention you speak of. This gets people spending and consuming. This spurs transactions and then those transactions are taxed.



Purple said:


> If I buy shares and make a profit I'll pay 33% CGT as opposed to a marginal tax rate of over 50%



But you are buying the shares with money that is already taxed and you are the one taking risk to boot - it makes sense that the share due to the party that already got a slice and that does not take any risk gets less. Most taxpayers are not paying much tax at the marginal rate. Also - you need to look at the position after social transfers. Once this is taken into account the system is much fairer.



Purple said:


> If I invest in property I'll pay income tax on my income, and a proportion of my costs (which is crazy) and CGT on any capital gain. Still lower than the marginal income tax rate



The money you invest in property is funded from after-tax income. It has already been taxed. If you borrow money to finance the investment you are taking a leveraged risk. It doesn't make any sense that tax rates in this situation would be as high as marginal rates.

I don't often agree with Michael Healy-Rae but he said in the Dail recently that "people think property lands at the feet of the landlord." This is what you are doing. You're assuming property (wealth) lands at the feet of the person. It hasn't - it has been through the tax sieve.



Purple said:


> I'm pointing out that the State Pension age should be 68 because the current age and rate is unsustainable and an unfair burden on younger people. With the demographic changes we are facing the situation will get much worse. There has never been a better time to be retired and there probably never will be.



I agree. We are living longer and the system does need a redesign of course. I do not see free travel in my future and pension levels falling in real terms, even if the age was to be increased.

The Irish system is not perfect but it is not as unfair as you think it is. The house that you want to pay more tax on - what on earth makes you think that the proceeds will be used prudently to correct unfairness in the system and not get siphoned off to improve the perks and benefits of the public sector that you despair against.

I have hi-jacked the thread and gone off topic. My apologies.


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## Purple

On a side note The State pays pension for GP's working in the private sector; they get an average of €200,000 a year income from their GMS (Medical card) patients with a top up of 10% directly into their pension fund. The average payment per patient is €240 a year but their payment per patient for the over 70's medical card is €640. (That on an average working week of under 30 hours) With our demographic changes that will become very lucrative for them. Why on earth is the State paying this?
Hospital Consultants have a pension fund worth €3.7 million and retire at 63. Gardai have a fund with €1.8 million and retire at 60. Source. 
Everyone should retire at 68.


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## Purple

AAAContributor said:


> No you won't. You'll pay a lot more. If you sit on the money, the government/monetary authority is actively pursuing policies to reduce the amount of goods and services that this wealth buys.


What policies?


AAAContributor said:


> Governments everywhere pursue policies that target a level of inflation in order to discourage the wealth retention you speak of. This gets people spending and consuming. This spurs transactions and then those transactions are taxed.


There's been no real inflation for a decade or more. That's at the heart of the problem.


AAAContributor said:


> But you are buying the shares with money that is already taxed


Not if it's an inheritance under the tax threshold. 


AAAContributor said:


> The money you invest in property is funded from after-tax income.


 see above.


AAAContributor said:


> The Irish system is not perfect but it is not as unfair as you think it is. The house that you want to pay more tax on - what on earth makes you think that the proceeds will be used prudently to correct unfairness in the system and not get siphoned off to improve the perks and benefits of the public sector that you despair against.


 I don't want to pay any tax but I see the necessity of doing so. 
Reform of the State sector is a different issue but the fact that the State wastes vast amounts of money doesn't justify an inequitable method of collecting that money from citizens.


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## Purple

AAAContributor said:


> I have hi-jacked the thread and gone off topic. My apologies.


You're in good company.


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## NoRegretsCoyote

Purple said:


> Just on that. My understanding is that's total social contributions and includes PRSI, USC and Pension Levies.




Nope, that's just PRSI.


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## AAAContributor

Purple said:


> There's been no real inflation for a decade or more. That's at the heart of the problem.



Really? Rents? Property prices? The things that actually matter? Sure, TVs and furniture might be a bit less. Great. Who do you think is stoking these increases? Government policy is. Negative equity and falling prices are no bueno as far as it is concerned.



Purple said:


> Not if it's an inheritance under the tax threshold.



We're all getting rich buying assets from inheritances. Right.

Sinn Fein are brain-washing you!


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## Purple

NoRegretsCoyote said:


> Nope, that's just PRSI.


Yep, just found it. The employers contribution is the lion's share. Given that it funds far more than pensions, and that the combined liability is €231 billion for non-government schemes and €113 billion for State employees I can't see that €10 billion plus the half a billion they get from the PRD (formerly the pension levy) cutting it.


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## Purple

AAAContributor said:


> We're all getting rich buying assets from inheritances. Right.


Where did I say that? I'm saying that assets such as houses have increased in value far faster than the rate of wage inflation and the net result is a concentration of wealth in capital and away from labour. That suits me but it's not good for society.



AAAContributor said:


> Sinn Fein are brain-washing you!


I wouldn't vote for the child killers if my life depended on it (which it might if they got into power). They are morally and economically bankrupt but their brand of destructive populism is gaining appeal with a disenfranchised younger generation and unless we want bombers and murderers from a foreign country pulling the strings in the Dail we had better start thinking about the people on the Deliveroo Bikes who, unless things change, will never have a house and probably never have a pension or even a proper job and stop telling them they are snowflakes who have it easy.


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## Purple

AAAContributor said:


> Really? Rents? Property prices? The things that actually matter?


Yes, asset price inflation causes both of those things. The people who own those assets are seeing their incomes go up. That's the issue; capital items are appreciating faster than labour is inflating (in the whole developed world).


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## AAAContributor

Purple said:


> capital items are appreciating faster



If we just take the 'capital item' of Irish property as an example, the market is dysfunctional but that can be solved by political will, not an outright wealth tax.

If the government gets its act together and releases the land it is sitting on in prime areas for housing and increases investment in apprenticeships in the construction trades, it is possible to get a handle on it. With the increase in supply you won't be long seeing prices levelling off and maybe falling in real terms. 

I'm sympatico with you on a lot of what you say and your heart is in the right place but I don't concur that a statutory wealth tax is the solution.

I want to be in a million euro house, paying €100,000 tax a year at your age, like you. I want to build wealth for my family and harness that dynamic of capital appreciation that you speak of as a means to bettering my situation.

You are at a nice station in life and thinking along the lines of "something must be done" and "would someone think of the children" and can afford to pay a slice of what you have now while pulling the ladder up from the rest of us by making the journey to wealth accumulation longer and harder.

You say, but it will only be above a decent threshold that a tax will kick in. For a wealth tax to make any meaningful difference, it will have to kick in at a very low level. €1mill + is a waste of time.

We need to counter the Sinn Fein narrative for sure. But how on earth do you ever expect a Deliveroo biker to have a house or pension. This is a job to get you started on your way, gain a bit of work experience or to provide a flexible income. More power to anyone making a living this way. It will never be possible to achieve the milestones you speak of through this route.


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## Purple

AAAContributor said:


> If the government gets its act together and releases the land it is sitting on in prime areas for housing and increases investment in apprenticeships in the construction trades, it is possible to get a handle on it. With the increase in supply you won't be long seeing prices levelling off and maybe falling in real terms.


No it won't. The problems within the construction sector run much deeper than that. The small number of entities that control the stock of building land, the structure of the industry amd entire process of building a house, the rubbish standard of the apprenticeship training etc. Nothing that the government can do will change anything much in the next 5-8 years from a labour constraint perspective. If car manufacturing had evolved at the same speed as construction we'd still be driving Model T's.



AAAContributor said:


> I'm sympatico with you on a lot of what you say and your heart is in the right place but I don't concur that a statutory wealth tax is the solution.
> 
> I want to be in a million euro house, paying €100,000 tax a year at your age, like you. I want to build wealth for my family and harness that dynamic of capital appreciation that you speak of as a means to bettering my situation.
> 
> You are at a nice station in life and thinking along the lines of "something must be done" and "would someone think of the children" and can afford to pay a slice of what you have now while pulling the ladder up from the rest of us by making the journey to wealth accumulation longer and harder.


 I don't want the government to raise the overall tax burden I just want a small shift away from taxing labour so much, you know, like every economist who looks at Ireland recommends, like the EU and Troika and IMF recommend. In the longer term I'd like to see significantly less tax collected after the State starts actually caring about it's citizens money and stops wasting so much of it. 
I want to provide for my family and make sure my children don't want for things but I want them to grow up in a safe and stable socially progressive and liberal society. That won't happen as long as we continue to concentrate wealth in the hands of older people.


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## NoRegretsCoyote

Purple said:


> Details here.



It shows unfunded social security benefits of €226 bn, but a lot of this will be means-tested pensions, so let's say €180bn for the state's contributory pension liability.

In 2019 PRSI was €9.8bn, and all contributory benefits excluding pensions such as illness benefit, unemployment, etc was €3.8bn. So there is €6bn being taken in every year that you could plausibly hypothecate for contributory pensions.

Using the standard multiple of 30 for an annuity we see that €180 bn would buy an annual income of €6bn. The inverse also applies.* Voila, PRSI contributions would cover contributory state pension liabilities if it was run as a funded scheme!*


Please don't bring public sector occupational pensions into it. This wasn't part of your original claim that PRSI doesn't cover the cost of pensions.


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## Purple

NoRegretsCoyote said:


> It shows unfunded social security benefits of €226 bn, but a lot of this will be means-tested pensions, so let's say €180bn for the state's contributory pension liability.
> 
> In 2019 PRSI was €9.8bn, and all contributory benefits excluding pensions such as illness benefit, unemployment, etc was €3.8bn. So there is €6bn being taken in every year that you could plausibly hypothecate for contributory pensions.
> 
> Using the standard multiple of 30 for an annuity we see that €180 bn would buy an annual income of €6bn. The inverse also applies.* Voila, PRSI contributions would cover contributory state pension liabilities if it was run as a funded scheme! *


 Read this. Funding of pensions is based on what the cost will be when the pension is paid. 
This points out that not increasing the pension age to 67 now will add a half a billion in costs to fund it and not increasing it to 68 in 2028 will add a further €1.5 billion per annum. 



NoRegretsCoyote said:


> Please don't bring public sector occupational pensions into it. This wasn't part of your original claim that PRSI doesn't cover the cost of pensions.


 So the PRSI that Public Servants pay shouldn't be factored in when looking at the funding of their own State pension, is that what you are saying? If their PRSI contributions go towards their own pensions (which I assume they assume is the case) then that total amount has to be removed from your €6 billion figure.
Your figure just about funds the State pension now, as long at you include a big chunk which is actually funding something else (Public Sector Pensions), but will be grossly inadequate in the near future as the proportion of the population which is retired increases. 

So, the vast majority of people do not fund their own State Pension, they might, using your very dubious figures, pay just enough to fund the cost current State Pension provisions. 

The solution is to increase the retirement age a bit and increase Social Insurance a bit or increase one of them significantly.


----------



## AAAContributor

Purple said:


> I want to provide for my family and make sure my children don't want for things but I want them to grow up in a safe and stable socially progressive and liberal society. That won't happen as long as we continue to concentrate wealth in the hands of older people.



You are not a Shinner but I don't understand how you are still buying the narrative that there is fundamental unfairness and that we don't live in a "safe and stable society." 

Ireland is a very good place to live (yes there are hard cases but we are talking in general here). The social safety net is a hell of a lot better than it is in somewhere like the United States and it is a credit to a relatively young country with no legacy of generational or colonial wealth. Socially-democratic Ireland is not the appropriate proving ground for a statutory wealth tax when anyone with a basic knowledge of the tax system already knows that wealth and transactions are plenty taxed. Yes there are pinch points such as property in the cities, but a wealth tax will do nothing to solve that if the problem is as intractable as you say it is. 

You are looking at headline rates of tax like the marginal income tax rate and comparing this to what looks like lower CGT, DIRT etc. Your analysis stops there and the conclusion is that it ain't right. But you are looking at things before social transfers take effect. 

Go on citizensinformation.ie. See the range of tax credits and benefits available to people. Take this recent AAM post that I commented on:





__





						Pay increase - how to maximise pension?
					

Age: 33 Spouse’s/Partner's age: 33  Annual gross income from employment or profession: Husband is currently on 41K, proposed new salary €52,383 Annual gross income of spouse: In receipt of Carers Allowance, €217.50 per week - €11,310 P/A  Monthly take-home pay: Husband - €3133.95, my carers...



					askaboutmoney.com
				




Here is a married couple earning €63k per annum through their labour. 
They pay €4,420 in taxes. 
That's a tax rate on their labour of 7%. 
Outside of that calculation the family also receives DCA of €3,714 per annum. 
Net that against the taxes and their tax rate is now down to 1%. 
If you then add Carer's respite grant which has gone up in the recent budget into the equation you are now into a negative tax rate. 

How is wealth being concentrated in the hands of older people? That's a natural function of time. Older people have accumulated more than younger. It was always thus. It's a lifetime of earning mainly. 

Even if you do bring in wealth tax, that dynamic of the older generation having more than the younger will not change. This picture you present of older folk hoarding wealth is laughable. 

Open your eyes - wealth transfers are going on all over the place but they are private financial matters that nobody shouts from the rooftops. Parents giving sites to children. The bank of mum and dad stepping in to help children with deposits. Even those parents with no material assets to give are giving of their time to help mind grandkids and save their children childcare costs. In time, a person of your means will also do the same for your kids. Those penny-pinching older people that are hoarding wealth? They will depart their mortal coil in time - the wealth goes back into the system and gets spent and taxed eventually. 

The system looks very fair to me. It's a great country.


----------



## Purple

AAAContributor said:


> You are not a Shinner but I don't understand how you are still buying the narrative that there is fundamental unfairness and that we don't live in a "safe and stable society."
> 
> Ireland is a very good place to live (yes there are hard cases but we are talking in general here). The social safety net is a hell of a lot better than it is in somewhere like the United States and it is a credit to a relatively young country with no legacy of generational or colonial wealth. Socially-democratic Ireland is not the appropriate proving ground for a statutory wealth tax when anyone with a basic knowledge of the tax system already knows that wealth and transactions are plenty taxed. Yes there are pinch points such as property in the cities, but a wealth tax will do nothing to solve that if the problem is as intractable as you say it is.
> 
> You are looking at headline rates of tax like the marginal income tax rate and comparing this to what looks like lower CGT, DIRT etc. Your analysis stops there and the conclusion is that it ain't right. But you are looking at things before social transfers take effect.
> 
> Go on citizensinformation.ie. See the range of tax credits and benefits available to people. Take this recent AAM post that I commented on:
> 
> 
> 
> 
> 
> __
> 
> 
> 
> 
> 
> Pay increase - how to maximise pension?
> 
> 
> Age: 33 Spouse’s/Partner's age: 33  Annual gross income from employment or profession: Husband is currently on 41K, proposed new salary €52,383 Annual gross income of spouse: In receipt of Carers Allowance, €217.50 per week - €11,310 P/A  Monthly take-home pay: Husband - €3133.95, my carers...
> 
> 
> 
> askaboutmoney.com
> 
> 
> 
> 
> 
> Here is a married couple earning €63k per annum through their labour.
> They pay €4,420 in taxes.
> That's a tax rate on their labour of 7%.
> Outside of that calculation the family also receives DCA of €3,714 per annum.
> Net that against the taxes and their tax rate is now down to 1%.
> If you then add Carer's respite grant which has gone up in the recent budget into the equation you are now into a negative tax rate.
> 
> How is wealth being concentrated in the hands of older people? That's a natural function of time. Older people have accumulated more than younger. It was always thus. It's a lifetime of earning mainly.
> 
> Even if you do bring in wealth tax, that dynamic of the older generation having more than the younger will not change. This picture you present of older folk hoarding wealth is laughable.
> 
> Open your eyes - wealth transfers are going on all over the place but they are private financial matters that nobody shouts from the rooftops. Parents giving sites to children. The bank of mum and dad stepping in to help children with deposits. Even those parents with no material assets to give are giving of their time to help mind grandkids and save their children childcare costs. In time, a person of your means will also do the same for your kids. Those penny-pinching older people that are hoarding wealth? They will depart their mortal coil in time - the wealth goes back into the system and gets spent and taxed eventually.
> 
> The system looks very fair to me. It's a great country.


The social transfer is coming from working people and going to other working people and those who think they are working class but are in fact parts of the welfare class. Those who have wealth in the form of capital assets have almost nothing taken as part of that social transfer. The welfare system creates a massive disincentive to work hard and do well. We are taking over 50% of the marginal income of people on relatively modest incomes and giving it back to them and those on lower incomes, less what amounts to a massive administration cost in the form of the 6000 people employed in the DSP.  
Parents giving to their children is part of the problem in that due to the concentration of wealth in capital assets inherited wealth will become a bigger and bigger factor in the coming years. 

Yes, older people have always accumulated assets but inflation has always eroded it. There's been no inflation for decades. We are just going around in circles now.


----------



## Purple

Page 6 of this report from KPMG outlines the problem.
The shortfall they talk about is predicated on the assumption that the retirement age increases to 68.


----------



## NoRegretsCoyote

Purple said:


> So the PRSI that Public Servants pay shouldn't be factored in when looking at the funding of their own State pension, is that what you are saying? If their PRSI contributions go towards their own pensions (which I assume they assume is the case) then that total amount has to be removed from your €6 billion figure.



Public servants recruited since 1995 pay Class A PRSI and receive a contributory state pension. Their occupational DB pension is calculated as a value of final salary and then the contributory state pension is subtracted from it. This is what is known as "integration".

Otherwise you don't seem to know the policy or the numbers at all so I'm out.


----------



## Marco 1972

So if l am reading you right, the 1 ÷80,  times no of years,  times salary = pension ...  but then the OAP is deducted from that,,,

Does that still apply for cost neutral scenarios?


----------



## Purple

NoRegretsCoyote said:


> Public servants recruited since 1995 pay Class A PRSI and receive a contributory state pension. Their occupational DB pension is calculated as a value of final salary and then the contributory state pension is subtracted from it. This is what is known as "integration".
> 
> Otherwise you don't seem to know the policy or the numbers at all so I'm out.


I've linked to numerous sources which support my point and you've done a few back of the fag-packet calculations and I don't know the numbers? Yea, right.
Look at the CSO link I posted and look at the KPMG report I linked and you'll see that they treat State Employees as a different group when calculating the State Pension funding shortfall. 
Just because you think something should be true that doesn't make it so.


----------



## NoRegretsCoyote

Purple said:


> and I don't know the numbers?



You didn't seem to know that employers PRSI existed.


----------



## Purple

NoRegretsCoyote said:


> You didn't seem to know that employers PRSI existed.


Ah I did. You've failed to address any of the facts. Instead you've pulled figures out of the air and made nebulous attacks on me.

Do you think your back of the fag packet figures are correct and the 200 page KPMG report which was done on behalf of the Department of Social Protection to investigate the issue that you don't seem to think exists is wrong?


----------



## NoRegretsCoyote

@Purple 

The social insurance system is pay as you go. The KPMG actuaries point out (correctly) that outgoings will exceed incomings in future even with the legislated-for increase in pension age, all on a PAYG basis. This is fine.

My point is that if you _invested _half of today's PRSI take every year you would just about fund the contributory state pension bill. Investment over the long term can be safely assumed to generate a positive return.


----------



## Purple

NoRegretsCoyote said:


> @Purple
> 
> The social insurance system is pay as you go. The KPMG actuaries point out (correctly) that outgoings will exceed incomings in future even with the legislated-for increase in pension age, all on a PAYG basis. This is fine.
> 
> My point is that if you _invested _half of today's PRSI take every year you would just about fund the contributory state pension bill. Investment over the long term can be safely assumed to generate a positive return.


Yes, we are all aware that the social insurance system is pay as you go. You're "point" would require at least an additional €5 billion to be raised each year to fund current liabilities, that pay as you go system, while investing the extra €5 billion. The pay as you go system is that we are dealing with so, as I've said from the start, people are paying PRSI to fund the existing pension liability rather than their own pension, a future liability which will be far larger than the current liability, so they are not paying anywhere near enough to fund their own pension.

Your point seems to be that if we stopped paying half the pensions now and used what we saved to fund future liabilities then there'd be enough money, as long as the projected changes in the dependency ratio and increases in life expectancy don't happen, as long at the future liability remains the same at it is now (even though it won't).
Is that what you are saying?


----------



## NoRegretsCoyote

@Purple 

More or less. Except that the demographic changes wouldn't be as big an issue, because of pre-funding.


----------



## Purple

NoRegretsCoyote said:


> @Purple
> 
> More or less. Except that the demographic changes wouldn't be as big an issue, because of pre-funding.


Okay, so then it's fair to say that currently people aren't paying enough to fund their own pension which is the point I was making. 

I agree that if we change the funding model and increase contributions significantly, your suggestion is a 50% increase, then we would be paying enough. 

That is of course predicated on increasing the pension are to 67 and then 68 as was the plan before the government bottled it under populist pressure from the Child Killers and the fact that State Employees were not being treated the same.


----------



## KOW

The current funding of pensions certainly not sustainable in the long term.

The vast majority of workers do not want to work past 65. Yes many want the choice for a variety of reasons but certainly do not want it mandatory.

Most jobs are difficult to maintain at say 67yrs of age. Forget about the blocklayer or paddy the plasterer.
Do you want your mammy cleaning the toilets in the ilac centre at 67. Your father at the check out in Lidl at 66. Hairdresser cutting hair all day on their feet at 67. The vast majority of jobs out there would prove difficult for anyone in their mid to late sixties.

Purple regarding the shinners I would agree that Financial policies are pie in the sky. Thats why I could not vote for them. That said there TD,s are voted in like any other party. Its called a democracy. Regarding your reference to "child Killers" please name these child killers you refer to. Actually amazed moderators have not removed your comments.

The whole area around pensions is hugely complex and while we can model off other countries our demographic and population will determine how we proceed in the future.

Education is a key to the future. Most of our young people leaving secondary school or college might 
have learnt about the the angle of the dangle........ Yet they have no grasp of the most basic financial issues that concern them now or into the future. Pension investments mortgages etc. They cant even work out what their take home pay would be if they secured a job.

Tiocfaith ar la  (pension age 85)


----------



## JamesN

The government should have brought in a measure to discontinue the accrual of pre 2013 (year of Single Scheme introduction) inflated public service pensions for public servants and move them to the single scheme for the rest of their careers. They could have let them keep their benefits to date but say from now on you will be subject to the single scheme benefits.


----------



## WolfeTone

Its an interesting discussion. Certainly the funding issue is important and cannot be wished away. But also the the entire concept of a pension, providing a sufficient moderate lifestyle in retirement as working people enter into their latter years needs to be focused on, otherwise what is the point in saving for retirement if it means having to work longer?
I do fear, that once the genie is out of the bottle and the retirement age is increased to 67, then those 20 somethings starting out out will probably be facing into a retirement age of 70+.
This is particularly relevant where the mortality differentials in different socio-economic groupings is concerned. With those in the most deprived areas , working labour intensive or low-skilled jobs, having lower life-expectancy. I think in Britain there was a proposal to raise retirement age to 70, but was quickly binned when it was discovered that age 70 is in excess of the life expectancy of some of the most impoverished areas of Britain.

So is the resolution to move the retirement age to a later date, or to look at other ways of funding? My preference would be to look at other ways of funding. I cant say for certain, but my impression is that little has been done to explore more efficient ways of redistributing the cost. I think the age limit is a blunt instrument, and moving the age limit is a blunt response to a blunt instrument.

It has been mentioned in the course of this discussion that some people prefer to keep working. Part-time or full-time. Perhaps an option to defer the receipt of their State pension would be option? A carrot could be that they no longer contribute from their earnings, making their continued employment more attractive while simultaneously reducing the cost of the pension. Of if they continue to contribute, then their pension will be that little bit higher when they do decide to call it a day?

Another way, perhaps controversially, is knowing that while people are living longer that it also correlates with increasing levels of nursing for longer periods of time as peoples mental and physical faculties begin to deteriorate. Speaking from personal experience (I'm sure others can testify also), having watched an elderly relative live through a healthy and fulfilling retirement, there came a point when nursing, food, light, heat, and company, were the only things of real substance in this persons life. Is there a case to be made, when you add the allowances and the pension, that some or all the pension is diverted to the cost of healthcare? Is this not a more efficient use of resources rather than allowing the pension build up as some tidy inheritance pot?


----------



## WolfeTone

I should add, there appears to be a train of thought that says if the value of social insurance contributions towards State pension equals _x plus interest, _that therefore the value of State pensions provided for should not exceed this amount. 
While the PRSI contributions of working people are the primary resource for funding State pensions, they are by no means the exclusive resource for funding pensions. As we all know, wealth is generated in many ways and the State tends to find ways to extract a portion of that wealth to fund public and social services including State pensions.
 A simple example would be where a company pays 12.5% CT of say, €10m.  
There is nothing to stop the government diverting all, or a portion of this income to support State pensions. Add all the other income streams that the State has and there are many avenues for the State to support the funding of State pensions.
And of course, there is always borrowing. Not borrowing for the sake of borrowing, but one of the advantages of living in a developed, politically stable, economy, is the ability to borrow at cheaper rates than would otherwise be possible in other economies. While this is borrowing from the future to pay for the present, it should also be minded that it is this present that sustains our ability to borrow into the future. In other words, as long as the economy is producing wealth that is valued over and above what the value of what its borrowings are, long-term, then the pension deficit is not the 'time-bomb' that it is often perceived to be.


----------



## Purple

KOW said:


> Regarding your reference to "child Killers" please name these child killers you refer to. Actually amazed moderators have not removed your comments.


The parts is run from the UK by members of the IRA. The IRA murdered children. The public leadership of Sinn Fein regard those people as friends, colleagues and "good republicans" and are willing to break Covid19 restrictions to go to their funerals. Therefore I consider the term accurate.


----------



## Purple

WolfeTone said:


> I should add, there appears to be a train of thought that says if the value of social insurance contributions towards State pension equals _x plus interest, _that therefore the value of State pensions provided for should not exceed this amount.
> While the PRSI contributions of working people are the primary resource for funding State pensions, they are by no means the exclusive resource for funding pensions. As we all know, wealth is generated in many ways and the State tends to find ways to extract a portion of that wealth to fund public and social services including State pensions.


The number of people drawing the State Pension will triple over the next 35 years. That's a fair bit of extra resources to extract, especially considering the many other resources that older people consume, health services being the main one. Those over 65 already consume over a third of all healthcare spending. In 35 years there will be twice as many of them per head of population.


----------



## Leo

KOW said:


> Regarding your reference to "child Killers" please name these child killers you refer to. Actually amazed moderators have not removed your comments.



No posting guideline has been offended.


----------



## WolfeTone

Purple said:


> The number of people drawing the State Pension will triple over the next 35 years. That's a fair bit of extra resources to extract,



Yes, but it is not happening in a vacuum. The overall population increase, including the working population, is set to rise significantly also in that period.



Purple said:


> Those over 65 already consume over a third of all healthcare spending. In 35 years there will be twice as many of them per head of population.



Yes, and the those aged 80 or over will be the fastest growing grouping of that age group. Which returns me to my point above., 80yrs + is also the age level where deterioration of physical and mental faculties begin to signficantly increase. And in that context, would there not be scope to divert pension payments to healthcare costs where it is needed, considering, other consumption of other resources supported by the pension - travel, clothing, leisure, etc will have significantly dropped? Just a thought, thats all.


----------



## KOW

Yes the can was certainly kicked down the road this budget. 
Forget about the shinners Purple. I canvassed for the local FF man and policy for the election was no increase in pension age. Something that came up on the door step over and over again.
Yes just raising the retirement age is a blunt instrument.
We live in a welfare state.
 Would we end up exchanging one social welfare payment with another? Those who have no savings or have chosen to live a certain life style. People in poor health. People with a disability. All will be entitled to some sort of payment.
Would changes encourage people to not save or provide for themselves in old age.
Not picking out any career but just as a couple of examples. A member of the gardai pension would cost 1.8million for a private sector worker. A super in the gardai who might have salary of  around 110k would have a pension of 55k and take home a tax free lump of 165k at age 60. There are well over 300k state employees now. The real ticking timebomb.
This in my opinion is where the problem lies.
At some stage down the road I think there will have to be the same basic pension  for every worker and if one wants a better pension you pay for it. 

Currently the whole system is a mess. One example a lower paid worker getting relief for contributing to his/her pension @20% while a higher earner gets 40% relief. Who struggles more to try and provide for themselves for the future? Why not 30% relief for every worker trying to do the right thing.

Hate to be starting out its depressing.


----------



## KOW

Leo said:


> No posting guideline has been offended.


Not even a new thread. Title All Shinners are child killers.


----------



## mtk

KOW said:


> Not picking out any career but just as a couple of examples. A member of the gardai pension would cost 1.8million for a private sector worker. A super in the gardai who might have salary of around 110k would have a pension of 55k and take home a tax free lump of 165k at age 60. There are well over 300k state employees now. The real ticking timebomb.



Tend to agree the OAP  is not the issue as these are micky mouse (compared to other wealthy EU countries) . There are well over 300k state employees  as mentioned above with I might add future pension in payment linked to increases in previous grade.


----------



## WolfeTone

KOW said:


> A member of the gardai pension would cost 1.8million for a private sector worker.



Excuse my ignorance, but I'm always a bit perplexed as to how these figures are arrived at? 
I doubt if most Gardaí coming to retirement age would have even earned €1.8m throughout a 30yr career, let alone accumulated a pension worth as much. 



KOW said:


> A super in the gardai who might have salary of around 110k would have a pension of 55k and take home a tax free lump of 165k at age 60. There are well over 300k state employees now. The real ticking timebomb.



Aha, I see what you did there! 

There are 40-50 Garda Superintendents throughout whole country, but why not infer that their pension entitlements are comparable to the other 295,950 public servants? Clever


----------



## Leo

WolfeTone said:


> Excuse my ignorance, but I'm always a bit perplexed as to how these figures are arrived at?
> I doubt if most Gardaí coming to retirement age would have even earned €1.8m throughout a 30yr career, let alone accumulated a pension worth as much.



See here, or more detail [broken link removed]. 30 years service entitles them to 50% of final pensionable salary plus gratuity of 1.5 times final pensionable salary. How much they earned along the way has no bearing on this.


----------



## WolfeTone

Leo said:


> See here, or more detail [broken link removed]. 30 years service entitles them to 50% of final pensionable salary plus gratuity of 1.5 times final pensionable salary. How much they earned along the way has no bearing on this.



Yeh, I get all that. But where did the €1.8m figure come from earlier? 
If a Garda retires on €60000 salary, they get €30k pa plus one-off lump sum of €90000. 
How is €1.8m calculated from that?


----------



## Early Riser

Leo said:


> See here, or more detail [broken link removed]. 30 years service entitles them to 50% of final pensionable salary plus gratuity of 1.5 times final pensionable salary. How much they earned along the way has no bearing on this.



 Just to note - if the Garda is post 1995 the 50% of salary is inclusive of State Pension. Also, as a uniformed, fast-accrual grade, a garda pension is an outlier.


----------



## KOW

WolfeTone said:


> Yeh, I get all that. But where did the €1.8m figure come from earlier?
> If a Garda retires on €60000 salary, they get €30k pa plus one-off lump sum of €90000.
> How is €1.8m calculated from that?


I posted the 1.8 figure. Totally wrong. If I had a pot of  say 800k and I am private sector worker. I take 200k tax free and am left with 600k say @4% giving me a pension of 24k PA. So in reality lower grade Garda has a pension pot worth somewhere in the region of 800-1m if that makes sense. Remember a lot of public workers can then take up work and build up stamps to claim partial state pension. This is not having a go at public service. 
My wife retires after 40yrs next year a clerical officer. I would think that this grade is most common in public service. She will get a lump sum 38kX1.5=57k. Pension of 19k pa. I certainly dont think this is a huge pension especially when there is no OAP. Somebody who never bothered to work will get 12k pa and medical card.
Any changes and there has to be changes needs to encourage and reward work.


----------



## WolfeTone

KOW said:


> If I had a pot of say 800k and I am private sector worker



Sorry if I'm coming across stupid, but where does this €800k pot come from? 
Have you contributed this amount yourself over 40yr career?


----------



## Early Riser

KOW said:


> My wife retires after 40yrs next year a clerical officer. I would think that this grade is most common in public service. She will get a lump sum 38kX1.5=57k. Pension of 19k pa.



And a post-1995 equivalent of your wife would get an occupational pension of €6k, plus entitlement to the State pension.


----------



## Sarenco

WolfeTone said:


> But where did the €1.8m figure come from earlier?


That's what an annuity that provides an equivalent pension benefit would cost a private sector worker.








						Public-sector pensions worth millions, new figures show
					

Enda Kenny’s pension pot would cost a private sector worker €5.2 million




					www.irishtimes.com


----------



## NoRegretsCoyote

@Sarenco 

But a public sector worker has no discretion over how to invest this notional "pot", can't bequeath it to his children, and is at risk of having a levy placed on his pension in payment if the government falls on hard times.

None of this applies to a private sector worker with an ARF.

These notional value comparisons just aren't valid.


Assume an annuity multiple of 30 and you are aged 65. Which is more valuable:
1) €50k pa for life
2) €1.5m and the option to do with it whatever you please.


Clearly 2) is more valuable as it gives you much more flexibility.


----------



## WolfeTone

Sarenco said:


> That's what an annuity that provides an equivalent pension benefit would cost a private sector worker.
> 
> 
> 
> 
> 
> 
> 
> 
> Public-sector pensions worth millions, new figures show
> 
> 
> Enda Kenny’s pension pot would cost a private sector worker €5.2 million
> 
> 
> 
> 
> www.irishtimes.com



Thanks, but I have always shied away from pension discussions because I also got lost in lexicon.
I've never heard anyone explain these things in Ladybird language.

From what I'm understanding, in order to have a pension like Endas of €325,000 pa, it will cost me €5.2m?
Is that correct or what am I missing?

Perhaps I need to head to the Pensions section on this site?


----------



## Sarenco

NoRegretsCoyote said:


> But a public sector worker has no discretion over how to invest this notional "pot", can't bequeath it to his children, and is at risk of having a levy placed on his pension in payment if the government falls on hard times.


Well, you can't bequeath annuity benefits either.

And I think we know from the last recession that private pensions are not immune from Government confiscation.


NoRegretsCoyote said:


> €50k pa for life


Is that €50k index linked, with a 50% benefit going to my (materially younger) spouse on my demise?

If so, I would bite your hand off for that deal for €1.5m.

If only I had €1.5m...


----------



## Sarenco

WolfeTone said:


> From what I'm understanding, in order to have a pension like Endas of €325,000 pa, it will cost me €5.2m?


Yes, an annuity bought from a life company that provides a comparable benefit would cost something of that order.


----------



## WolfeTone

Sarenco said:


> Yes, an annuity bought from a life company that provides a comparable benefit would cost something of that order.



Ok thanks, I have to say Im still baffled. 
Why would anyone fork out €5.2m only to get a pension of €325,000pa? 
Where is the benefit? 
It will take 16yrs to draw down this fund - could be dead in 10! 
And at the ripe age of say 80, maybe some faculties on the wane, or deteriorated altogether, what would I do with all this money that I couldn't have put to better use during my working life, or early retirement years?


----------



## Sarenco

WolfeTone said:


> It will take 16yrs to draw down this fund - could be dead in 10!


You could.  Or you could live to 107.

Or your spouse (who is entitled to 50% of the pension when you die) could live for a further 30 years after you pass away.

Of inflation could take off again...


----------



## WolfeTone

Sarenco said:


> You could.  Or you could live to 107.
> 
> Or your spouse (who is entitled to 50% of the pension when you die) could live for a further 30 years after you pass away.
> 
> Of inflation could take off again...



Yes of course, any number of things could happen.


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## Purple

Public Sector pensions are  unsustainable under the current funding model. That's been well publicised for years. 
My point is that the State Pension liability for all pensions, paid to both public and private sector employees, are unsustainable under the current funding model. That is based on the fact that the number of retirees per head of population will double, at least, over the next 30 years.


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