Public Service Employees, does your before tax salary show a 7-8% cut or a 3-4% cut?

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Howitzer

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csirl said:
Another point that seemed to be brushed over was that the public sector pay cuts seem to be well in excess of those in the economy. They conceded that the economy will constrict by 5.7%, yet the public sector workers received a 7-8% pay cut earlier this year and are facing another or similar magnitude in the Budget.
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VOR said:
But the 7-8% was on the gross. After tax relief it is in reality a 3.5%-4% reduction of take home pay. And this money will be given to the employee anyway when he/she retires.
Hardly a pay cut. A pay deferral would be a more appropriate term.
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http://www.rte.ie/news/2009/0203/economy.html
A person earning €15,000 gross would pay a pension levy of 3% and the levy rises gradually thereafter.
* 5% on a salary of €25,000
* 6.4% on €35,000
* 7.2% on €45,000
* 7.7% on €55,000
* 8.1% on €65,000
* 8.5% on €85,000
* 8.8% on €100,000
* 9.2% on €150,000
* 9.4% on €200,000
* 9.6% on €300,000.
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I would have thought this was clear by now given people have received a number of pay packets and would have been able to figure it out categorically.

Public Sector employees, does your, before tax, salary show a 7-8% cut or a 3-4% cut? (@55K)
 
Re: Pension Levy - real cost

I would expect it to show 8% gross and 4% net reduction.

From the SBP - [broken link removed]

If you work within the public service you will see a dent in your take home pay to the tune of about 4 per cent on average as a result of the new pension levy.

1) Mark is a 27-year-old clerical officer working in the civil service for the last three years. He earns a gross annual salary of €26,672. The gross impact of the pension levy will mean a 5.3 per cent drop in his salary. However, once the tax relief is applied the net effect is that his salary will fall by 4 per cent.
This translates to a net loss of €1,077,which equates to roughly €90 less in his monthly pay packet - the equivalent of about nine cinema trips or roughly the cost of taxing a small car for six months.
Mark will now pay a total of €4,501 each year in tax, PRSI, levies and pension contributions. This is 17 percent of his total salary.

2) John is an assistant principal officer in the civil service, earning a gross annual salary of €66,179. The 47-year-old has worked in the same government department for the last 25 years. He is the sole earner in his home, with his wife working as a stay-at home mother.
The levy will reduce John’s gross salary by 8.1 per cent, but after tax relief the net impact of the levy will be a 4.6 per cent reduction in his take-home pay. He will be €3,059 worse off each year, with his net weekly wages falling by almost €60 - the amount John and his wife spend each week on a meal for two in their local restaurant.
The introduction of the new pension levy means that John will now pay a total of €18,177 each year in tax, PRSI, levies and pension contributions. This is 27 per cent of his total salary.
 
Re: Pension Levy - real cost

Originally Posted by VOR http://www.askaboutmoney.com/showthread.php?p=937169#post937169
But the 7-8% was on the gross. After tax relief it is in reality a 3.5%-4% reduction of take home pay. And this money will be given to the employee anyway when he/she retires.
Hardly a pay cut. A pay deferral would be a more appropriate term.
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The money gained from the pension levy (also applied to public sector workers who already paid into their pension fund) went back to the Government. It didn't go into any pension funds so the employee does not get the money back when s/he retires so yes, its definitely a pay cut.

 
Re: Pension Levy - real cost

rabbits said:
The money gained from the pension levy (also applied to public sector workers who already paid into their pension fund) went back to the Government. It didn't go into any pension funds so the employee does not get the money back when s/he retires so yes, its definitely a pay cut.

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This is the bizarre sort of logic that gets me angry. So what if the money from the levy goes goes straight into the general current account. Thats where you get your pension from. Around €2 billion a year comes out that same current account to pay pensions. Thats around 10% of overall pay bill for the public sector and climbing every year. The Government are not saying that we taking this money off you for you never to see it again. They are simply asking you to make a contribution (small one) to help cover the cost of the pension.

You can argue about the fairness of the levy etc and you would have a point but don't pretend that you never see that money again at retirement. You get that money back and more.
 
Re: Pension Levy - real cost

Sunny said:
This is the bizarre sort of logic that gets me angry. So what if the money from the levy goes goes straight into the general current account. Thats where you get your pension from. Around €2 billion a year comes out that same current account to pay pensions. Thats around 10% of overall pay bill for the public sector and climbing every year. The Government are not saying that we taking this money off you for you never to see it again. They are simply asking you to make a contribution (small one) to help cover the cost of the pension.

You can argue about the fairness of the levy etc and you would have a point but don't pretend that you never see that money again at retirement. You get that money back and more.
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:) I was merely replying to the note saying that the pension levy went into the pension fund (which is a specific fund rather than the general exchequer - regardless of it all coming out of the same original pot which wasn't the point of the comment).

They are simply asking you to make a contribution (small one) to help cover the cost of the pension.
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I already do pay towards my pension from the (not highly inflated - sorry about that) salary that I recieve. This has been the case since I started in my job and has never been any different.

Just to clear things up in case the thread starts to go on about these things - I get the standard minimum holidays to take when I wish that everyone else in the country is entitled to (not more) and I don't have a months worth of mandatory sick days that I am expected to take each year either. There are most definitely scandelous areas in the civil service (especially) and in the public service (which is where I am) but the bulk of the staff are earning normal salary levels for jobs that often require 3rd level qualifications.
 
Re: Pension Levy - real cost

VOR said:
I would expect it to show 8% gross and 4% net reduction.

From the SBP - [broken link removed]

If you work within the public service you will see a dent in your take home pay to the tune of about 4 per cent on average as a result of the new pension levy.

1) Mark is a 27-year-old clerical officer working in the civil service for the last three years. He earns a gross annual salary of €26,672. The gross impact of the pension levy will mean a 5.3 per cent drop in his salary. However, once the tax relief is applied the net effect is that his salary will fall by 4 per cent.
This translates to a net loss of €1,077,which equates to roughly €90 less in his monthly pay packet - the equivalent of about nine cinema trips or roughly the cost of taxing a small car for six months.
Mark will now pay a total of €4,501 each year in tax, PRSI, levies and pension contributions. This is 17 percent of his total salary.
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Those examples explain it to me but I don't reach the same conclusion as you, or the article for that matter. I may be going crazy through stat overload.

In example 1) Mark receives 90 Euro a month less in his BEFORE tax pay - which doesn't equate to 9 cinema trips.

So it's 8% Gross, 4% Net of Pension Levy and 2% Net.

Can someone with an actual PS payslip have a rummage around and give a real real example?

In general, the pay cut seems to me to be 3-4% rather than the oft quoted 7-8%.
 
Re: Pension Levy - real cost

In defence of PS workers, the pay cuts in the private sector are also on gross pay and so are also a lot less after tax.

My wifes a public sector worker as are some friends of mine. The big gripe they have over the pension levy is that it does not go into a ring fenced scheme. When you add the pension levy to the pension contributions that they already pay and take into their Class A PRSI contributions (they only get 1 pension - 50% of salary inclusive of SW contrib. pension), they are paying way over the odds for their pensions - more than the typical employee in most medium to large companies in Ireland. Certainly my wife is paying a much higher rate of contribution that I have in private sector jobs I've done and is getting a lower pension at the end. A lot of public sector workers will now pay much more in contributions in pure cash terms than their pensions will ever be worth. My wife is paying close to 20% out of her own pocket, not counting her employers PRSI contributions which are supposed to go towards the SW pension.

The other anxiety that public sector workers have is that they do not believe that their pensions will be there by the time they reach retirement. They are bottom of the priority list for the Government when it comes to paying bills and are being gradually eroded over the years. Most younger public sector workers believe that by the time they retire, they'll be getting little more than whatever the SW pension is at that time. They just dont trust the Government with their contributions and are uncomfortable with the fact that they are being spent as current expenditure rather than being put in a pension fund.

The solution to all this is to put all public sector workers on a defined contribution scheme. At the rate of contributions most make, they would be a lot better off. I am aware that many of my PS friends are scared of DC pensions because they are unfamiliar with them and they read all the horror stories in the press. But, even if the stock markets tanked a few times during a public servants 40 year career, I honestly believe that they would still have much higher pensions on the same contributions than staying in the government scheme. I've advised my wife that if at some stage in the future, public servants are offered a DC scheme, she should sign up.
 
Re: Pension Levy - real cost

If only they'd simply called it for what it is - a pay cut - rather than obfuscating the issue by calling it a pension levy.

I'm pretty sure many in the PS genuinely don't know how much their pay has decreased by. And many of those who do, and are in a position to inform debates, choose not to.

If you want to call it a Pension Levy the average cut is 8%

If you want to call it a Pay Cut the average is 4%.
 
Re: Pension Levy - real cost

csirl said:
In defence of PS workers, the pay cuts in the private sector are also on gross pay and so are also a lot less after tax.

My wifes a public sector worker as are some friends of mine. The big gripe they have over the pension levy is that it does not go into a ring fenced scheme. When you add the pension levy to the pension contributions that they already pay and take into their Class A PRSI contributions (they only get 1 pension - 50% of salary inclusive of SW contrib. pension), they are paying way over the odds for their pensions - more than the typical employee in most medium to large companies in Ireland. Certainly my wife is paying a much higher rate of contribution that I have in private sector jobs I've done and is getting a lower pension at the end. A lot of public sector workers will now pay much more in contributions in pure cash terms than their pensions will ever be worth. My wife is paying close to 20% out of her own pocket, not counting her employers PRSI contributions which are supposed to go towards the SW pension.

The other anxiety that public sector workers have is that they do not believe that their pensions will be there by the time they reach retirement. They are bottom of the priority list for the Government when it comes to paying bills and are being gradually eroded over the years. Most younger public sector workers believe that by the time they retire, they'll be getting little more than whatever the SW pension is at that time. They just dont trust the Government with their contributions and are uncomfortable with the fact that they are being spent as current expenditure rather than being put in a pension fund.

The solution to all this is to put all public sector workers on a defined contribution scheme. At the rate of contributions most make, they would be a lot better off. I am aware that many of my PS friends are scared of DC pensions because they are unfamiliar with them and they read all the horror stories in the press. But, even if the stock markets tanked a few times during a public servants 40 year career, I honestly believe that they would still have much higher pensions on the same contributions than staying in the government scheme. I've advised my wife that if at some stage in the future, public servants are offered a DC scheme, she should sign up.
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But the main difference between public sector and private pension is that with the public you are guaranteed the 50% of salary. You can't beat it and as for the private pensions, it could be any figure depending on markets at the time.
 
Re: Pension Levy - real cost

peelaaa said:
But the main difference between public sector and private pension is that with the public you are guaranteed the 50% of salary. You can't beat it and as for the private pensions, it could be any figure depending on markets at the time.
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But isn't that what the highly paid pension fund manager is supposed to do? Lock in any gains made on the upside as the market starts to turn down?

Of course when every one takes their cut e.g. 4 or 5% off each contribution plus any commission, plus management fees, plus administration fees, plus bid offer spreads etc etc etc its no wonder the actuality doesn't live up to the salesman's talk.

And lets not forget we've got some of the best pension fund managers in world here in Ireland!

[broken link removed]
 
Re: Pension Levy - real cost

And lets not forget we've got some of the best pension fund managers in world here in Ireland!
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I'm not sure what the point is here as I don't think anyone has praised Irish DC pensions, certainly no one relying on one will.

On the contrary anyone with a DC pension will tell you the pension companies offer terrible pension schemes that cost too much, generally are over heavy in Irish equities and indeed property. Good Irish fund managers will be headhunted internationally as happened before with BIAM when their managers managed to avoid the tech bubble crash, as a result Irish funds almost by definition will be poorly managed.

The only reasons anyone invests in a DC pension is tax relief and the employer contribution, other than that they're useless. Always interesting to ask the pension advisers whether they've a DC pension themselves, usually the answer is no.

However to their slight defense many articles criticizing them tend not to be up to date, they've staged a huge recovery over the last 6 months or so - thanks to being overweight in Irish equities. They're still rubbish but dumb luck aka NAMA has undone much of the damage.
 
Re: Pension Levy - real cost

csirl said:
My wife is paying close to 20% out of her own pocket, not counting her employers PRSI contributions which are supposed to go towards the SW pension.
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DB pension of 50% of final salary minus SW pension, index linked to the wages of the grade you retired at, would cost far more than 20% salary to buy in the market.
 
Re: Pension Levy - real cost

csirl said:
they are paying way over the odds for their pensions - more than the typical employee in most medium to large companies in Ireland. Certainly my wife is paying a much higher rate of contribution that I have in private sector jobs I've done and is getting a lower pension at the end. A lot of public sector workers will now pay much more in contributions in pure cash terms than their pensions will ever be worth. My wife is paying close to 20% out of her own pocket, not counting her employers PRSI contributions which are supposed to go towards the SW pension.
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Typical public sector workers pay 4% PRSI on income up to 75k, less a 127 pw exemption.

They also pay approx 5% pension cont. (complex, but approx 5%).

They also now pay the pension levy.

There is absolutely no chance that these same conts going into a DC fund would ever be enough to fund a 150% lump-sum and a 50% pension.

The DB pension is heavily subsidised by the taxpayer. This is why the DB occupational pension is so good.

My suggestion is as follows:

Keep the DB pensions.
Charge the workers more, to reflect the true cost, e.g. 10% of wages
Make explicit on all payslip the Govt notional or actual contribution, e.g. another 15% of wages.
 
Re: Pension Levy - real cost

Plus we could change the contracts for all incoming staff to DC. Whenever new recruits might join, God only knows.
 
Re: Pension Levy - real cost

But surely if DB pensions are so good, then we should aspire to them for everybody?

Making the cost more clear and transparent would be helpful.

Or else switch to DC, but with min 20%, more like 25% cont. rates, with 10-15% from the employer.
 
Re: Pension Levy - real cost

Protocol said:
But surely if DB pensions are so good, then we should aspire to them for everybody?

Making the cost more clear and transparent would be helpful.

Or else switch to DC, but with min 20%, more like 25% cont. rates, with 10-15% from the employer.
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I see where you are coming from but it is just not possible to give every one DB.Whether we like it or not, the next generation will end up working to pay for our pensions. Do you want to lumber them with even more debt. Its €101bn at present.

The DC idea with higher employee contributions, better tax breaks and better investment options would be ideal.
 
Re: Pension Levy - real cost

There is absolutely no chance that these same conts going into a DC fund would ever be enough to fund a 150% lump-sum and a 50% pension.
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People can juggle figures all they want, but if you contribute 20% of your salary for 40 years, it means that you have contributed 8 years salary in total by retirement. This should give you 16 years on half pay. Which means that you should be able to live to 65+16yr = 81years old even if your contributions only barely kept up with inflation. As 81 years old is older than the average life expectancy, it means that the government is profiting from public service pensions. Public servants would be better keeping the money and putting it in a post office savings account.
 
Re: Pension Levy - real cost

csirl said:
People can juggle figures all they want, but if you contribute 20% of your salary for 40 years, it means that you have contributed 8 years salary in total by retirement. This should give you 16 years on half pay.
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This makes the huge assumption that someone retires on the same salary they started on - does this happen often in practice? I think starting pay in the CS in the mid 1980s was around €8,000 - a starter back then (age 40-ish now) will be earning quite a bit more now don't you agree? Even the most unambitious will get the annual increments which are separate from inflation. Many will get promotions from CO to EO or EO to HEO and PO etc. But salary contributions all along are based on salary at the time - so you start contributing as a % of a low salary but get a pension based on a much higher final salary. Your argument would be a bit more valid if pensions were based on average career salary (not very appealing though is it?) - but even then the in-retirement link to workers grade inflation makes the pension a lot more valuable than you are either aware or care to admit.

csirl said:
Public servants would be better keeping the money and putting it in a post office savings account.
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I hope that if public servants ever get a choice of defined contribution or continuing as is, that you are the one advising them.
 
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