# State Pension Forecasting ....



## Codogly (27 Mar 2021)

Hi all,
It’s been said here many times in the past that we all anticipate that the state pension down the road is likely to look very different , either a smaller pension or changes to the qualification conditions based on the forecasted change in population profile.
My question for discussion : is there any case to be said for NOT starting an personal / occupational pension for fear that you will effectively end up disqualifying yourself from the new look state pension which might well be means tested.


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## Brendan Burgess (27 Mar 2021)

Unless there is radical reform, the state pension will have to be reduced or means tested. 

If you don't have a private pension, you will qualify for the state pension, but it might be reduced.  So you are probably better off with a private pension, whatever the outcome. 

Brendan


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## Codogly (27 Mar 2021)

My best guess is that the governments of the future know fine well they have two major issues :
1. Backlash from taxpayers ( what about all the prsi I paid ?)
2. The left argue that pensioners need a minimum pension to survive.

Example of possible solution the government will use :  Reduce  state pension to say 5k ... this way reducing the cost to the state and at the same time not actually disqualifying anybody who has paid their full prsi contributions.  But what about the fact that no pensioner could survive on 5k ? ... simply introduce a supplementary pension top-up which would of course be means tested ( top up could be as much as 7/8k ).  
The big looser in this scenario - middle income taxpayers who have all cut their cloth to measure and lived within their means and provided for their future only to have their rightful entitlements stolen from them in order to funds persons who have not provided for their future ( understandable some of these are very low income persons ... this is why we need compulsory pension contributions to ensure that everybody is contributing to the  solution )


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## NoRegretsCoyote (27 Mar 2021)

No.

Payment rates might fall in real terms but they will almost never means test the contributory state pension.

Almost never ≠ 0% chance.

But this is the absolute bedrock of the social insurance system.


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## galway_blow_in (27 Mar 2021)

Codogly said:


> My best guess is that the governments of the future know fine well they have two major issues :
> 1. Backlash from taxpayers ( what about all the prsi I paid ?)
> 2. The left argue that pensioners need a minimum pension to survive.
> 
> ...



middle ireland tax payer will be rinsed in order to placate the media , the political left ( which is now the majority from what i can see ) and the population which didnt invest in a private pension


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## time to plan (27 Mar 2021)

Codogly said:


> My best guess is that the governments of the future know fine well they have two major issues :
> 1. Backlash from taxpayers ( what about all the prsi I paid ?)
> 2. The left argue that pensioners need a minimum pension to survive.
> 
> ...


Arguing that pensioners need a minimum pension to survive seems pretty middle of the road to me. I’m trying to imagine how far off the political scale you have to be to consider that position an argument of ‘the political left’.


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## Codogly (27 Mar 2021)

The question I’m posing here is should middle income Ireland consider the merits of not paying twice for only one pension


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## galway_blow_in (27 Mar 2021)

time to plan said:


> Arguing that pensioners need a minimum pension to survive seems pretty middle of the road to me. I’m trying to imagine how far off the political scale you have to be to consider that position an argument of ‘the political left’.



depends on what is meant by " minimum pension "

250 per week is too generous IMO , its about 50% higher than in the UK


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## Codogly (27 Mar 2021)

I’d agree with Galway blow in ... thst would be a good starting point to reduce the state pension and start to make it affordable


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## time to plan (27 Mar 2021)

galway_blow_in said:


> depends on what is meant by " minimum pension "
> 
> 250 per week is too generous IMO , its about 50% higher than in the UK


 It’s 25% higher than the UK minimum income guarantee and that differential has only really materialised due to the fall in GBP since the 2016 EU referendum. Also take into consideration that the cost of living is higher in Ireland 

But how much do you think it should be?


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## time to plan (27 Mar 2021)

Codogly said:


> I’d agree with Galway blow in ... thst would be a good starting point to reduce the state pension and start to make it affordable


If affordability is what you’re looking for, then you could decrease it for the middle classes, which is effectively what the UK has done by having pension credit top ups to produce a minimum income guarantee.


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## Codogly (27 Mar 2021)

That’s exactly what I’m anticipating ...this my original question : should those of us currently paying into a private pension consider stopping , take the tax hit now and keep the net proceeds and qualify for the pension which we paid for with our prsi


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## Dave Vanian (27 Mar 2021)

Codogly said:


> The question I’m posing here is should middle income Ireland consider the merits of not paying twice for only one pension



It's one hell of a risk to take just because the State Pension _*might*_ become means tested in the future.  

Personally I'd say that it would be highly unlikely that they would do this in any of our lifetimes.  Bear in mind that all Public Servants who joined after 1995 are expecting the State Pension and have their occupational pension designed around this expectation.  Good luck to any government who tries it.  

Anyway, what would be your alternative?  If you save money outside of a pension your savings will still be means tested.  So what do you do instead - spend it all during your working life so that you'll be sure to have €248 per week (and no more than €248 per week) to live on in retirement?


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## Dave Vanian (27 Mar 2021)

Codogly said:


> That’s exactly what I’m anticipating ...this my original question : should those of us currently paying into a private pension consider stopping , take the tax hit now and keep the net proceeds and qualify for the pension which we paid for with our prsi



You'd have to spend the net proceeds.  If you keep it, i.e. save it, your savings will still work against you in a means test.


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## galway_blow_in (27 Mar 2021)

time to plan said:


> It’s 25% higher than the UK minimum income guarantee and that differential has only really materialised due to the fall in GBP since the 2016 EU referendum. Also take into consideration that the cost of living is higher in Ireland
> 
> But how much do you think it should be?



a couple here receive 500 euro per week between them , the same does not happen with a couple on the state pension in the UK ( X2 ) so the difference is more than 25% in many cases


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## time to plan (27 Mar 2021)

Codogly said:


> That’s exactly what I’m anticipating ...this my original question : should those of us currently paying into a private pension consider stopping , take the tax hit now and keep the net proceeds and qualify for the pension which we paid for with our prsi


I would say not on the basis that if you have to be poor to qualify for the maximum pension, it will not be a great standard of living.


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## noproblem (27 Mar 2021)

So what if GB pensioners earn less than Irish? If that's your methodology why aren't we comparing wages/salaries with them as well? Thankfully we have at least a free 26 counties that are free to make up their own minds.


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## Codogly (28 Mar 2021)

While it frustrates me that I’m paying a lot of prsi for a pension I’ll probably never get I do agree with the overall sentiment above that providing for a private pension remains the better option to try and ensure a decent future.


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## NoRegretsCoyote (28 Mar 2021)

Codogly said:


> I’m paying a lot of prsi


No you're not. Social insurance contributions as a share of salary in Ireland are among the lowest in the developed world.


Codogly said:


> For a pension I’ll probably never get


You will get a contributory state pension. It might not be as high in real terms as today but the thought that the state will fully default on old people, its most reliable voters, is ridiculous.


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## cremeegg (28 Mar 2021)

We are vaccinating old people who mostly stay at home, and not vaccinating young people who *must* go out to work in supermarkets, schools etc.

The death grip the old have on Irish society, that will not change anytime soon. The pension funding crisis will not be resolved at the expense of the old.


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## noproblem (28 Mar 2021)

The social ins the Irish taxpayer is charged at the moment  pays for social welfare, inc pensions, health, etc. I can see the pension report due out around June '21 coming back with a recommendation that pensions be taken out of this payment. This will reduce what people pay every week but a new payment will come into place for pensions into the future. What people have saved in paying into PRSI they will now pay into this new system @ a slightly higher rate than what they've saved in PRSI. It'll be a smooth enough transition with people probably feeling it's a good deal and not too high falluting to follow and understand. The Ex Revenue Chairwoman heading up this report understands exactly how it all works and I would expect something along those lines


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## galway_blow_in (28 Mar 2021)

cremeegg said:


> We are vaccinating old people who mostly stay at home, and not vaccinating young people who *must* go out to work in supermarkets, schools etc.
> 
> The death grip the old have on Irish society, that will not change anytime soon. The pension funding crisis will not be resolved at the expense of the old.



agree , the old are prioritised over the young at every turn in Ireland , reform of the state pension will be resisted at all costs , the likes of FF would hand the keys to the country over to China before cutting the Old age pension


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## jpd (28 Mar 2021)

Vote, vote, vote


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## Deiseblue (28 Mar 2021)

galway_blow_in said:


> agree , the old are prioritised over the young at every turn in Ireland , reform of the state pension will be resisted at all costs , the likes of FF would hand the keys to the country over to China before cutting the Old age pension


I'm in the lucky position of having an occupational pension and I've recently qualified for the full contributory State Old Age Pension.
Personally , although it would be a disappointment,  I would have no quibble with the concept of means testing thereby going a long way to protecting those who need the maximum OAP in order to barely survive.
Alternatively I'm willing to loosen my " death grip " on the State by volunteering to be young again !


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## noproblem (28 Mar 2021)

galway_blow_in said:


> agree , the old are prioritised over the young at every turn in Ireland , reform of the state pension will be resisted at all costs , the likes of FF would hand the keys to the country over to China before cutting the Old age pension


What do you suggest should be the amount paid to pensioners?


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## galway_blow_in (28 Mar 2021)

noproblem said:


> What do you suggest should be the amount paid to pensioners?



certainly no more than 200 per week


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## noproblem (28 Mar 2021)

galway_blow_in said:


> certainly no more than 200 per week


At least you answered the question and thank you for that. Very little to give old people today for what they did for everyone. I'd suggest no pensioner should get less than €300.00 per week, that should be a minimum to just live/survive.


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## time to plan (28 Mar 2021)

galway_blow_in said:


> a couple here receive 500 euro per week between them , the same does not happen with a couple on the state pension in the UK ( X2 ) so the difference is more than 25% in many cases





NoRegretsCoyote said:


> No you're not. Social insurance contributions as a share of salary in Ireland are among the lowest in the developed world.
> 
> You will get a contributory state pension. It might not be as high in real terms as today but the thought that the state will fully default on old people, its most reliable voters, is ridiculous





cremeegg said:


> We are vaccinating old people who mostly stay at home, and not vaccinating young people who *must* go out to work in supermarkets, schools etc.
> 
> The death grip the old have on Irish society, that will not change anytime soon. The pension funding crisis will not be resolved at the expense of the old.


Older people at much more likely to end up in hospital and bring the health system to collapse. Vaccinating older people and healthcare workers makes perfect sense and is international practice.


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## time to plan (28 Mar 2021)

noproblem said:


> At least you answered the question and thank you for that. Very little to give old people today for what they did for everyone. I'd suggest no pensioner should get less than €300.00 per week, that should be a minimum to just live/survive.


Maybe there could be some committee if well meaning middle class people who could divide them into deserving and undeserving and act accordingly.


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## Deiseblue (28 Mar 2021)

galway_blow_in said:


> certainly no more than 200 per week


Absolute electoral poison,  any Government in situ at the time considering reducing the maximum contributory OAP so drastically could I think consider means testing first - less poisonous but only marginally.
Meanwhile the ever populist Sinn Fein would sit back contemplating being able to form a Government unaided in the near future.


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## Protocol (28 Mar 2021)

noproblem said:


> The social ins the Irish taxpayer is charged at the moment  pays for social welfare, inc pensions, health, etc.




PRSI does not pay for healthcare.

Healthcare is financed by taxes.

The only h/c paid for by PRSI is Treatment benefit.


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## Protocol (28 Mar 2021)

Just a note / point:


There are two main State pensions at the moment

(1) contributory, based on SI conts - _I will call this SPC_

(2) non-contributory, means-tested


If somebody is claiming that the SPC may or should be means-tested, are they saying that:

*abolish the SPC, and only have a non-con pension?*


If that happened, then SI conts would have to be cut, as SI conts pay for the SPC


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## NoRegretsCoyote (28 Mar 2021)

Protocol said:


> PRSI does not pay for healthcare.
> 
> Healthcare is financed by taxes.


PRSI is largely speaking just another tax.

It is not hypothecated.

When PRSI income exceeds contributory benefits the Exchequer takes the residual. And when there is a deficit the Exchequer finances it.

There is no fund except an accounting presentation.


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## NotMyRealName (28 Mar 2021)

Deiseblue said:


> I'm in the lucky position of having an occupational pension and I've recently qualified for the full contributory State Old Age Pension.
> Personally , although it would be a disappointment,  I would have no quibble with the concept of means testing thereby going a long way to protecting those who need the maximum OAP in order to barely survive.
> Alternatively I'm willing to loosen my " death grip " on the State by volunteering to be young again !


Not sure about the means testing. I'd like to consider it a tax rebate on the "riskier" ex-pension investments we have to pursue for a meagre return after punitive taxes . So I won't feel guilty......if I get that far...


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## galway_blow_in (28 Mar 2021)

noproblem said:


> At least you answered the question and thank you for that. Very little to give old people today for what they did for everyone. I'd suggest no pensioner should get less than €300.00 per week, that should be a minimum to just live/survive.



well i strongly disagree , 200 is plenty to live on when there are so many other perks on top including free travel , medical card , tv licence , fuel allowance , the list is long

my mother manages to save about a hundred euro per week on her state pension


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## galway_blow_in (28 Mar 2021)

Deiseblue said:


> Absolute electoral poison,  any Government in situ at the time considering reducing the maximum contributory OAP so drastically could I think consider means testing first - less poisonous but only marginally.
> Meanwhile the ever populist Sinn Fein would sit back contemplating being able to form a Government unaided in the near future.



i fully accept it wont happen , the government caved in over wealthy pensioners and medical cards circa 2009 , they arent going to reduce the state pension no matter how bad things are


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## noproblem (28 Mar 2021)

galway_blow_in said:


> well i strongly disagree , 200 is plenty to live on when there are so many other perks on top including free travel , medical card , tv licence , fuel allowance , the list is long
> 
> my mother manages to save about a hundred euro per week on her state pension


Her children and grandchildren mustn't be getting too much on birthdays or for that sake any other celebration either. No wonder you want them to suffer


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## Deiseblue (29 Mar 2021)

galway_blow_in said:


> well i strongly disagree , 200 is plenty to live on when there are so many other perks on top including free travel , medical card , tv licence , fuel allowance , the list is long
> 
> my mother manages to save about a hundred euro per week on her state pension


Saving €100 euro a week , as a pensioner myself what with internet gambling, fine dining , relaxed afternoon pints , a penchant for nice clothes , trips to the continent with mates for top class football games , two months in the sun with my wife and a new car I think I’d struggle slightly to save.
The stereotypical view of pensioners spending their lives indoors , reading Ireland’s Own by the light of a guttering candle whilst drinking endless cups of tea and saving avidly for a decent funeral is a thing of the past.
Obviously with the pandemic it’s easy to save currently but if spared I’m looking forward to a massive blow out when it’s allowed.
To hell with saving I say !


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## galway_blow_in (29 Mar 2021)

Deiseblue said:


> Saving €100 euro a week , as a pensioner myself what with internet gambling, fine dining , relaxed afternoon pints , a penchant for nice clothes , trips to the continent with mates for top class football games , two months in the sun with my wife and a new car I think I’d struggle slightly to save.
> The stereotypical view of pensioners spending their lives indoors , reading Ireland’s Own by the light of a guttering candle whilst drinking endless cups of tea and saving avidly for a decent funeral is a thing of the past.
> Obviously with the pandemic it’s easy to save currently but if spared I’m looking forward to a massive blow out when it’s allowed.
> To hell with saving I say !



I'm not saying pensioner's shouldn't spend but the state pension is welfare at the end of the day


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## NoRegretsCoyote (29 Mar 2021)

galway_blow_in said:


> I'm not saying pensioner's shouldn't spend but the state pension *is welfare* at the end of the day



There are two pensions:

A means-tested non-contributory pension
A *non-means-tested contributory *pension
The contributory state pension is of course a social welfare payment funded on a pay-as-you-go basis. But you only get it after a lifetime of paying social insurance contributions (PRSI). Many people can and do stay in work longer so that they build up an entitlement here.

*It is not by any means a hand-out or charity.*


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## Jim2007 (29 Mar 2021)

galway_blow_in said:


> I'm not saying pensioner's shouldn't spend but the state pension is welfare at the end of the day



It is absolutely not welfare under any stretch of the imagination.


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## Jim2007 (29 Mar 2021)

galway_blow_in said:


> i fully accept it wont happen , the government caved in over wealthy pensioners and medical cards circa 2009 , they arent going to reduce the state pension no matter how bad things are



Most likely it will just be frozen and thus decline in value over time.  And they won't have a choice about it because there simply is not enough payers to sustain it.

Most likely it will be an EU decision in the end not an Irish one.  All EU states are in the same situation and are all moving in the same direction.  No politician wants to be the one to deliver the bad news, so the easy solution is to make it at the EU level, that way they can all go home to their respective states claiming the EU made them do it.


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## noproblem (29 Mar 2021)

Piece being discussed on the Pat Kenny show right now about Auto Enrollment


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## galway_blow_in (29 Mar 2021)

Jim2007 said:


> It is absolutely not welfare under any stretch of the imagination.



thats only true for a minority of recipients , the majority of recipients draw down a lot more than they put in during their working lives in PRSI , then you have recipients who hardly put in anything and in some cases nothing at all


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## Sarenco (29 Mar 2021)

galway_blow_in said:


> thats only true for a minority of recipients , the majority of recipients draw down a lot more than they put in during their working lives in PRSI , then you have recipients who hardly put in anything and in some cases nothing at all


How would somebody that has made no PRSI contributions qualify for the State (Contributory) Pension?


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## The Horseman (29 Mar 2021)

Sarenco said:


> How would somebody that has made no PRSI contributions qualify for the State (Contributory) Pension?


Currently they don't as far as I know.


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## The Horseman (29 Mar 2021)

Unless we get the auto enrolment system up and running we will see those who took out private pensions subsidising those who did not bother considering the longer term. 

The state should not be on the hook for people who don't take responsibility in at least in part for their own future. What about all of us who do take responsibility and still end up digging others out.


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## joe sod (29 Mar 2021)

The problem now is that with the massive money that has been spent so far on the corona,  the flexibility and time the government thought they had on how to pay for pensions is now gone. 
Of course the government has studiously avoided talking about how the corona is going to be paid for and who is going to pay for it.
 There are worrying signals on the bond markets that endless  borrowing to pay for everything might not last too long as interest rates need to move higher.


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## galway_blow_in (29 Mar 2021)

Sarenco said:


> How would somebody that has made no PRSI contributions qualify for the State (Contributory) Pension?



based on the OP , i was not aware that this discussion was exclusively related to the contributory pension but even it is ?

most who are in receipt of the contributory  state pension will draw down a lot more than they made in contributions , that canadian lady Jill Kirby has written about this on more than one occasion in the irish media


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## NoRegretsCoyote (29 Mar 2021)

galway_blow_in said:


> most who are in receipt of the contributory state pension will draw down a lot more than they made on contributions


Not necessarily if you make an assumption of tax-free growth over 50 years like with a private pension.....


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## Allpartied (29 Mar 2021)

I think people get a little over anxious about these things.  
I've been hearing about the pension crisis for decades. 
Ultimately, the purpose of government is to distribute income fairly. 
As more and more capital accumulates in the hands of fewer and fewer people, the state will have to intervene more aggressively to ensure everyone has access to sufficient capital. In particular, as labour becomes less rewarding or less necessary. 
It's far more likely that, in the future, universal basic incomes will be the norm.


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## Cervelo (29 Mar 2021)

Can I ask if your not going to start a pension for fear that a personal pension might disqualify from the state pension 
What are you going to do with the excess income that is not been invested in a pension ???


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## galway_blow_in (29 Mar 2021)

Allpartied said:


> I think people get a little over anxious about these things.
> I've been hearing about the pension crisis for decades.
> Ultimately, the purpose of government is to distribute income fairly.
> As more and more capital accumulates in the hands of fewer and fewer people, the state will have to intervene more aggressively to ensure everyone has access to sufficient capital. In particular, as labour becomes less rewarding or less necessary.
> It's far more likely that, in the future, universal basic incomes will be the norm.



Government doesn't make choices re_ the state pension based on any concept of fairness , it's entirely down to voter muscle


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## Sarenco (29 Mar 2021)

galway_blow_in said:


> most who are in receipt of the contributory state pension will draw down a lot more than they made in contributions


Can you point me to anything to back this up?

Bear in mind that employer PRSI contributions are significant source of funding.


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## Allpartied (29 Mar 2021)

Cervelo said:


> Can I ask if your not going to start a pension for fear that a personal pension might disqualify from the state pension
> What are you going to do with the excess income that is not been invested in a pension ???



The only rational course of action, would be to retire early.  

Take the savings, at age 50, live on it until the state pension becomes available.  Make voluntary PRSI contributions in the meantime.


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## ATC110 (29 Mar 2021)

NoRegretsCoyote said:


> *It is not by any means a hand-out or charity.*


if the total SI contributions are less than the actuarial cost of providing a contributory state pension, then it is both a handout and charity.


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## ATC110 (29 Mar 2021)

Jim2007 said:


> It is absolutely not welfare under any stretch of the imagination.


It is in some cases. Under the old system, if someone made ten successive minimum SI contributions (€500 PA) from age 56 to 66, they would get a full contributory state pension.

The retirement welfare payment they receive would cover their total contributions in under six months.


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## jpd (29 Mar 2021)

All payments by the state are "welfare" to some extent in that they transfer money collected from taxes to recipients.

Society has to decide 
1. how to collect money to pay for various services provided by the State and
2. how to distribute these monies to those providing the services and to other recipients as "welfare"
3. how much to borrow from future generations of tax payers to provide services today from tomorrow's taxes

It is society who decide who is deserving and who isn't by setting the rules for managing the level of payments, deciding the recipients


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## Sarenco (29 Mar 2021)

jpd said:


> All payments by the state are "welfare" to some extent in that they transfer money collected from taxes to recipients.


I disagree.

Social insurance is a socialised insurance programme against economic risk. 

Some contributors will live long lives and collect more than they contributed in premiums (PRSI), while some will die young and collect less or nothing at all.  But this does not make it welfare.

Compare with house insurance - most folks pay premiums their whole lives and collect nothing.  An unlucky minority suffer a fire or flood and collect far more than they contribute.  Does that make it welfare?  Of course not.

Does it make any difference if a State agency collects the premiums?  Nope.

@galway_blow_in stated above that *most *who are in receipt of the contributory state pension will draw down *a lot more *than they made in contributions.  I would be very interested to see if there is any factual basis for this assertion but I suspect it's untrue.


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## jpd (29 Mar 2021)

Except that PRSI brings in about € 10B and Social Welfare spending is about € 20B so where is the insurance in that?

Any private insurance running on that basis would be out of business in a flash


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## NoRegretsCoyote (29 Mar 2021)

@Sarenco 

There are actuarial projections on this which I will dig out when I can.

As far as I can recall for an average earner contributions basically equal payouts under a reasonable set of investment return assumptions.

It's a very good deal for MW workers and not surprisingly a very bad deal for someone like a hospital consultant.


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## fistophobia (29 Mar 2021)

Cervelo said:


> Can I ask if your not going to start a pension for fear that a personal pension might disqualify from the state pension
> What are you going to do with the excess income that is not been invested in a pension ???


The fear is that they means test contributory state pension.
I am convinced this is going to happen. The demographics and dependency rate point to this.
I also think they are going to move on pension assets. The pension levy - double it.
Its an easy one to collect at source.


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## cremeegg (29 Mar 2021)

fistophobia said:


> The fear is that they means test contributory state pension.
> I am convinced this is going to happen. The demographics and dependency rate point to this.
> I also think they are going to move on pension assets. The pension levy - double it.
> Its an easy one to collect at source.


Just because the pension system will become unaffordable does not mean it will be reformed.

The alternative is to take money from elsewhere to support pension spending. 

For example the agricultural economy is unaffordable and has been for many years, but it is funded by taking money from elsewhere.

I suspect a significant VAT hike or some other such thing will be used to pay for pensions. I do not expect that pensions will be cut.


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## Sarenco (29 Mar 2021)

jpd said:


> Except that PRSI brings in about € 10B and Social Welfare spending is about € 20B so where is the insurance in that?
> 
> Any private insurance running on that basis would be out of business in a flash


Contributions to the social insurance fund in 2019 were around €11.5billion.  

Payments from the SIF in 2019 were around €10billion, of which around €7billion related to the State (Contributory) Pension and Widow(er's) Pension.

In other words, the SIF had an excess of income over expenditure in 2019 (that is unlikely to be the case for 2020 for obvious reasons).


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## Sarenco (29 Mar 2021)

fistophobia said:


> The fear is that they means test contributory state pension


That essentially means the abolition of the State (Contributory) Pension, leaving us with the State (Non-Contributory) Pension (which is already means tested).

Personally, I think the chances of the Government abolishing the State (Contributory) Pension are close to zero.


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## NoRegretsCoyote (30 Mar 2021)

I've adapted table 11.1(a) from the review of the social insurance fund at end 2015.

It basically compares lifetime contributions and drawdowns for workers with a full contribution history at a variety of income levels. Average wage is €37k pa and is assumed not just state pension contributory but also invalidity, illness and jobseeker’s Benefits, also survivors' benefits. Standard actuarial assumptions for indexation and investment growth are used.



*Pension**Minimum Wage**National average earnings (NAE)**NAEx2**NAEx3*€238.304.91.60.80.5

A value of 1 means that lifetime contributions and drawdowns are balanced. A value >1 means someone receives more than they have paid in, and  a value of <1 means less. Remember it includes employers' PRSI too.

It shows that low-wage workers do very well out of the social insurance system. This is as  you would expect due to its flat-rate nature. Higher-paid workers pay in much more than they take out.

They don't show average full-time wages which are around €48k, but if they did the value would be 1.2 or so. So we can say that the average full-time worker gets about 20% more than what they put in to the social insurance system over a lifetime.


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## cremeegg (30 Mar 2021)

NoRegretsCoyote said:


> I've adapted table 11.1(a) from the review of the social insurance fund at end 2015.
> 
> It basically compares lifetime contributions and drawdowns for workers with a full contribution history at a variety of income levels. Average wage is €37k pa and is assumed not just state pension contributory but also invalidity, illness and jobseeker’s Benefits, also survivors' benefits. Standard actuarial assumptions for indexation and investment growth are used.
> 
> ...


That is a very good outcome for the average full time worker, even for those earning up to NAEx2 above, €74k.  

A return of 0.8 is excellent given 

the insurance aspect
the fact that the return is state supported 
and most people just think of it as tax anyway


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## galway_blow_in (30 Mar 2021)

NoRegretsCoyote said:


> I've adapted table 11.1(a) from the review of the social insurance fund at end 2015.
> 
> It basically compares lifetime contributions and drawdowns for workers with a full contribution history at a variety of income levels. Average wage is €37k pa and is assumed not just state pension contributory but also invalidity, illness and jobseeker’s Benefits, also survivors' benefits. Standard actuarial assumptions for indexation and investment growth are used.
> 
> ...



i thought circa  48 k was the average wage in the public sector as opposed to the overall workforce ?


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## NoRegretsCoyote (30 Mar 2021)

galway_blow_in said:


> i thought circa 48 k was the average wage in the public sector


It is (roughly) the mean *full-time wage* for whole workforce.

Average wages include people who work part- and full-time.


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## Protocol (30 Mar 2021)

48k is mean earnings for all full-time workers.

It is not average salaries.

It is not average incomes.

It includes over-time, bonuses, etc.

*It is NOT the median.*

Here is the data:





__





						Earnings and Labour Costs Annual Data 2019 - CSO - Central Statistics Office
					






					www.cso.ie
				




It is 48,946 in 2019.


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## Protocol (30 Mar 2021)

NoRegretsCoyote said:


> It's a very good deal for MW workers and not surprisingly a very bad deal for someone like a hospital consultant.




Yes, there is redistribution going on within the PRSI system.

AFAIK, in most other countries, there is a contributions ceiling, so the redistribution is limited.


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## NoRegretsCoyote (30 Mar 2021)

Protocol said:


> *It is NOT the median.*


You are right. I've edited my post.


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## ashambles (30 Mar 2021)

For a fairly well off EU country our pension is cheap (for the state - for the employee it can be very poor value). In terms of our national income it is, and I think for the foreseeable future will be, affordable.

A country like France or Sweden pays out a pension based on salary for all workers - up to some cap. 

Unlike some countries our PRSI contribs are uncapped, for example anyone earning over around I think 70k in Ireland pays more social insurance than they would in Sweden. (Also we've a USC which is depending on the point the DoF wants to make is neither tax nor social contribution.)

In other countries PRSI payment are often untaxed, here you pay tax on your PRSI. 

The DOF (according to this weeks sunday times) has said abandoning plans to raise the pension age to 68 will cost 50B over 50 years - that's a lot of money but in national debt terms it's not significant. Paying public workers for example over 50 years will cost 1000B+ for comparison. 

The regular focus on the barely adequate state pension as the fix to all our potential economic woes is misplaced.


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## The Horseman (30 Mar 2021)

cremeegg said:


> Just because the pension system will become unaffordable does not mean it will be reformed.
> 
> The alternative is to take money from elsewhere to support pension spending.
> 
> ...


The failure to deal with the pensions issue is the reason we are in the position we are. The issue has to be addressed at some point. 

A VAT hike is unlikely to work as it gives people some control in spending so people may purchase less of the good/service to reduce the cost and therefore reducing income to the State. 

I personally don't think the state pension will be cut in monetary terms but in real terms/purchasing power terms I think it will. Whether we want to accept the situation or not it needs to be addressed. 

The state pension is actually a pyramid scheme. We should be investing (or at a min not raiding the pension fund) when we are in financial need as a state.


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## cremeegg (30 Mar 2021)

The Horseman said:


> The failure to deal with the pensions issue is the reason we are in the position we are.


The reason we are in this position is because there will in coming decades be a significant change in the ratio of people of working age to people of pension age. 


The Horseman said:


> The issue has to be addressed at some point.


Funds will have to come from somewhere certainly.


The Horseman said:


> A VAT hike is unlikely to work as it gives people some control in spending so people may purchase less of the good/service to reduce the cost and therefore reducing income to the State.


VAT applies to all goods and services, even if some goods are zero rated. It is impossible to avoid paying VAT. Though of course the source of funds may be something else. I suggest VAT as a possibility because it is so broad in its application.


The Horseman said:


> The state pension is actually a pyramid scheme. We should be investing (or at a min not raiding the pension fund) when we are in financial need as a state.


It is not a pyramid scheme. The idea that todays worker is putting money aside through the social wlefare system to fund his/her retirement is not applicable.

Todays workers pay for todays pensioners, just as they pay for todays children including the education system.


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## SPC100 (31 Mar 2021)

Can we still borrow at close to 0? Let's take a bit of risk, borrow say 200B; stick it in a diversified portfolio. That should have it mostly sorted within twenty years.

The state can save and invest too....

Slightly tongue in cheek.


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## The Horseman (31 Mar 2021)

cremeegg said:


> The reason we are in this position is because there will in coming decades be a significant change in the ratio of people of working age to people of pension age.
> 
> Funds will have to come from somewhere certainly.
> 
> ...


I am not sure what you are saying different to what I have said in the first point. We are not dealing with the issue we know is coming.

You can actually avoid VAT by simply not purchasing the good/service (most notably those items purchased with discretionary spending). If the price is raised to much people simply will not purchase. This is why the VAT rate for hospitality was reduced to 9% to reduce the price to the end consumer. 

Todays workers do indeed pay for todays pensioners which is exactly the same as a pyramid scheme. Those who contributed in the past are receiving funds from todays workers. This model wont work if the number of workers to pensioners increases and the burden of funding pensions in the future fall on a smaller number of workers and pensioners expect to receive the same pension in todays terms in the future.


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## cremeegg (31 Mar 2021)

The Horseman said:


> Todays workers do indeed pay for todays pensioners which is exactly the same as a pyramid scheme. Those who contributed in the past are receiving funds from todays workers. This model wont work if the number of workers to pensioners increases and the burden of funding pensions in the future fall on a smaller number of workers and pensioners expect to receive the same pension in todays terms in the future.


Very soon the PRSI contributions of workers will not be sufficent to pay the pensions of retired people.

Rather than cutting pensions what I expect will happen is that funds from other sources will be used to pay pensions.


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## jpd (31 Mar 2021)

Quite - unfortunately the number of "other sources" is rather limited
1. Increase income taxes
2. Increase PRSI and/or USC (these are just income taxes in my eyes)
3. Increase VAT
4. Increase corporation tax
5. Reduce spending elsewhere - education, health being the big spenders

Options 1-3 are generally paid by individuals (in the case of VAT, eventually) out of income so expect a big moan
Option 4  - would seem to be a no, no but Hey?
Option 5 - difficult to do

Hard choices will have to be made at some time in the next 20-30 years


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## Protocol (31 Mar 2021)

jpd said:


> Quite - unfortunately the number of "other sources" is rather limited
> 1. Increase income taxes
> 2. Increase PRSI and/or USC (these are just income taxes in my eyes)
> 3. Increase VAT
> ...



All taxes are paid by individuals.

CT is paid by either:

(1) workers in the company
(2) customers
(3) shareholders


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