# Implications of SF in government for private /occupational pensions



## Sarenco (11 Feb 2020)

The Sinn Fein manifesto included a proposal to reduce the standard fund threshold from €2m to €1.2m.

The Greens proposal is to limit tax relief on pension contributions once sufficient funds have been accumulated to provide a pension of €48k pa (ballpark €1.2m).


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## Brendan Burgess (12 Feb 2020)

Sarenco said:


> The Sinn Fein manifesto included a proposal to reduce the standard fund threshold from €2m to €1.2m.



What will be the implications of that for public servants? 

Brendan


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## NoRegretsCoyote (12 Feb 2020)

Brendan Burgess said:


> What will be the implications of that for public servants?
> 
> Brendan



I think there is some equivalent provision for the PS

Currently it tends to only hit very senior public servants: medical consultants, secretaries general, cabinet ministers with a lot of service and the like.

Dropping it to €1.2 would pull in a lot more people


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## aristotle (12 Feb 2020)

€1.2m in 30-40 years time might not be very big.
Seems these polices limit how successful you can be financially.


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## Sarenco (12 Feb 2020)

Legislation provides a methodology for determining the capitalized value of public sector pension entitlements for the purposes of the SFT.



NoRegretsCoyote said:


> Dropping it to €1.2 would pull in a lot more people


Absolutely.


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## Zenith63 (12 Feb 2020)

aristotle said:


> €1.2m in 30-40 years time might not be very big.
> Seems these polices limit how successful you can be financially.


Guess it depends on what you see as the purpose of tax relief on pension contributions.  If the purpose is to help you be financially successful, then just lowering income tax would be better for you and the economy (you'd have more disposable income that you could get out and spend right now).  Assuming the purpose is only to encourage you to build up a sufficient pension provision so you will not be a burden on the state and other tax payers, then it makes sense to limit the tax relief to the point that you will have enough to survive without being a burden, but little more than that.

To your first point, €1.2m/€48k will be worth half that in 40 years, if the next 40 are similar to the last 40 in-terms of inflation.  So you'd be looking at getting (in today's money) €13k state pension and €24k personal pension assuming you max out your fund, so €37k per annum.  And I assume €74k for a couple.  If you're living in a big house, few holidays a year and all that then this might not be enough, but that kind of income is more than comfortable in my view, unless I'm missing something?

With the average pension pot at retirement being around €112k (source), with presumably many being much higher than that and plenty much lower (a median figure here would be interesting to see!), I think the focus of this tax incentive should be on getting these people who are ending up with <€100k pension pots saving more, not helping those with €1m get to €2m.  And I say this as somebody who is fortunate enough to likely be affected by the proposed changes.


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## Steven Barrett (12 Feb 2020)

Sarenco said:


> The Sinn Fein manifesto included a proposal to reduce the standard fund threshold from €2m to €1.2m.
> 
> The Greens proposal is to limit tax relief on pension contributions once sufficient funds have been accumulated to provide a pension of €48k pa (ballpark €1.2m).



Based on the capitalisation tables, €1.2m will provide a pension of €46,154. 

That's what you get when a socialist party is voted in. You do alright when you earn the average wage but if you succeed and earn good money, you'll be taxed to the hilt. Given the top tax rate is already 52% (55% if self employed and earn over €100k), increasing taxation further will act as a disincentive and reduce competitiveness in the market. We will also see the top talent leave the country. It is already happening in the medical profession. And seeing as health was one of the big issues in the election, what are SF going to do if they can't keep the best doctors in the country because they are taxed so much? If you want the top talent, you have to pay them. 

Steven
www.bluewaterfp.ie


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## Conan (12 Feb 2020)

If ML was in Beaumont Hospital requiring a transplant, would she prefer the surgeon to be just out of College (modestly paid) or a very experienced surgeon with lots of cases behind him/her, the best in their field and earning €500,000. I know which I would prefer.


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## Zenith63 (12 Feb 2020)

SBarrett said:


> You do alright when you earn the average wage but if you succeed and earn good money, you'll be taxed to the hilt. Given the top tax rate is already 52% (55% if self employed and earn over €100k), increasing taxation further will act as a disincentive and reduce competitiveness in the market. We will also see the top talent leave the country. It is already happening in the medical profession.



I was curious about this, in-case anybody else was as well, below is a table from the OECD showing the average tax wedge for a single person earning 250% of the average wage in each country (so €116k in Ireland).  Unfortunatley 250% is as high as I could find figures for, I'm guessing you're talking about €200k+?

Belgium 61.93%
Sweden 57.74%
Italy 56.89%
France 55.88%
Finland 53.52%
Greece 52.52%
Portugal 49.95%
Slovenia 49.7%
Austria 49.24%
Germany 49.16%
Czech Rep 46.65%
Luxembourg 46.76%
*Ireland 46.52%*
Denmark 46.27%
Netherlands 45.96%
Norway 45.31%
Slovak Rep 45.25%
Hungary 45.04%
Latvia 43.15%
*OECD Average 42.89%*
Spain 42.32%
Iceland 41.29%
UK 41.2%
Estonia 41.17%
Poland 39.27%
Australia 38.2%
Israel 38.13%
US 36.28%
Canada 35.82%
Switzerland 31.03%


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## odyssey06 (12 Feb 2020)

It's hard to read too much into those figures without assessing what you get in return in terms of benefits.
e.g. medical insurance, disability insurance cover levels, occupational pension requirements v state pensions


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## Steven Barrett (12 Feb 2020)

Thanks for that. 

You then have to compare what you get for your taxes then. We are constantly asked to look at what they get in France (I don't know why, they have a population of over 13 times Ireland's) but they pay way more in tax than we do. Would we be happier to pay so much more tax, and less take home pay for better services that will take decades to put in place? Would a succession of govts be given the time to put them in place? I very much doubt it. 

I have a friend who has always voted SF and he's delighted with the election. I keep telling him I'll come back and ask him is he happy when he sees the decrease in his take home pay. Everyone wants better services as long as they don't have to pay for it.


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## NoRegretsCoyote (12 Feb 2020)

@Zenith63 

Bear in mind this is the *average *rate, not the *marginal *rate.

Marginal rates are what matter for incentives.


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## Itchy (12 Feb 2020)

Brendan Burgess said:


> What will be the implications of that for public servants?
> 
> Brendan



20 times pension plus 1.5 times Salary lump sum gives the Revenue valuation. €1.2m would be a PS salary of €104k with full service I.e. a pension of 52k.


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## Sarenco (12 Feb 2020)

It’s probably worth noting that the lifetime pension allowance north of the border is set at around €1.2m (although it is index-linked).

Presumably they also need to attract hospital consultants, etc.


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## NoRegretsCoyote (12 Feb 2020)

Itchy said:


> 20 times pension plus 1.5 times Salary lump sum gives the Revenue valuation. €1.2m would be a PS salary of €104k with full service I.e. a pension of 52k.



In 2018 the 90th percentile for full-time PS workers was €77k. Source.

I think you would have no more than 1% on >€104k, although you will definitely have a higher share retiring on that amount.


Table 9.4 Distribution of annual gross earnings Public Sector Permanent Full-time Employees aged 25-59Percentile201520162017201810th€28,282€28,204€27,629€28,11320th€34,180€33,897€33,979€34,86130th€38,319€37,497€37,724€38,73140th€42,933€42,258€42,251€42,68150th€47,934€46,445€47,306€47,71360th€53,007€51,578€52,189€53,38870th€57,971€56,496€58,185€58,90680th€64,048€62,163€64,143€65,98090th€72,662€71,086€73,867€77,134


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## ashambles (12 Feb 2020)

That 20 times pension was based on typical annuity rates when they were setting the 2m threshold. Annuities were 4-5% then but less than 2% now.

To readjust the threshold they should use current annuity rates. (I suspect this at least partly why the threshold hasn't been adjusted)

Any adjustment using current annuity rates would be problematical for public servants. Someone on a 40k pension could be assessed as having a 2m notional fund.

At 1.2m and a 2% annuity, you'd be looking at public servants with hitting the threshold at more average pensions.


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## Sarenco (12 Feb 2020)

ashambles said:


> That 20 times pension was based on typical annuity rates when they were setting the 2m threshold


The fixed-valuation factor of 20:1 only relates to pre-2014 service.  

Age-related factors for post-2014 service range from 37:1 for those who retire at 50 (or under) to 22:1 for those that retire at 70 (or over). The factor at 60 is 30:1 and at 65 is 26:1.

But the main point is that reducing the SFT from €2m to €1.2m would impact a very significant number of public sector employees.


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## NoRegretsCoyote (12 Feb 2020)

Sarenco said:


> Age-related factors for post-2014 service range from 37:1 for those who retire at 50 (or under) to 22:1 for those that retire at 70 (or over). The factor at 60 is 30:1 and at 65 is 26:1.



Where can one find these factors?


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## ashambles (12 Feb 2020)

Sarenco said:


> The fixed-valuation factor of 20:1 only relates to pre-2014 service.


True but pre-2014 is the majority of existing public employees and almost all public employees who'll be retiring in the next 10-20 years.

Reducing the threshold is a potential problem for everyone - changing the multiplier to match current annuity rates would be a similar sized problem on top for public servants.

Obviously the way around it is to not match annuity rates. Handily they can count on the general public and most TDs not being able to understand basic maths.


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## Sarenco (12 Feb 2020)

NoRegretsCoyote said:


> Where can one find these factors?


Schedule 23B TCA


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## Sarenco (12 Feb 2020)

ashambles said:


> True but pre-2014 is the majority of existing public employees and almost all public employees who'll be retiring in the next 10-20 years.


Not sure I follow.  A public sector employee that retires 20 years from now would have 25 years of post-2014 service.


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## Gordon Gekko (12 Feb 2020)

Unfortunately this is what happens when enough idiots join the coterie of scumbags who already vote for Sinn Fein/IRA. These guys will wreck the country with their nonsense, nevermind the criminality. Anyone who voted for them should hang their head in shame.


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## Sarenco (12 Feb 2020)

Zenith63 said:


> With the average pension pot at retirement being around €112k


I'm not sure how accurate that figure is but bear in mind that a lot of people will have more than one pension pot at retirement.

But you're right - reducing the SFT from €2m to €1.2m will have zero impact on the vast, vast majority of people. 

That's not to say I would welcome the reduction!


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## fistophobia (12 Feb 2020)

For people with wealth, how does one protect the nest?
If theres a 1% tax on wealth, how can they measure off-market assets.
Example, I have cars, jewellery, cash, shares in Cargill, music memorobilia etc.
Its all very subjective.


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## Allpartied (12 Feb 2020)

Gordon Gekko said:


> Unfortunately this is what happens when enough idiots join the coterie of scumbags who already vote for Sinn Fein/IRA. These guys will wreck the country with their nonsense, nevermind the criminality. Anyone who voted for them should hang their head in shame.


Wreck the economy?  
Are you 10 years old or younger?


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## ATC110 (12 Feb 2020)

Brendan Burgess said:


> What will be the implications of that for public servants?
> 
> Brendan



Significant, provided the pension pot required to provide their DB superannuation is accurately calculated


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