Actuarial valuation DB Pension

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Edenbridge146

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Hi folks

What does an actuarial valuation of a DB public sector pension include as i have some queries as in the middle of a divorce -

An actuarial valuation was conducted on my Defined benefit public sector pension
The actuary was selected by my ex husband's legal team as part of our divorce negotiations
In the report - it 'predicted' my life span using CSO statistics using new values for growth for SORP projections and by pension is worth 36k over 30 years so will have a final valuation of over 1,000,000 Euro

However the report didn't consider my bad health - but not sure if it should include it ??
Firstly - I am a smoker - have been for 20 years - i know - my bad - i know !!
Secondly - the fact i am a Type 1 Diabetic
Should an actuarial valuation consider these circumstances as these are known variables which can affect life span

The actuary report also included the equity in the family home - and just used todays valuation.
It did not include. a similar growth using SORP projections over the same time period as the pension - only today's valuation .

The annuity rate is significantly higher on property than it is on a DB pension - so the figures don't seem to be compared like for like

Is this correct in actuaries predictions ?
 
Hi Clubman - I have - but my solicitor didn't know the answer to these questions either - i thought there may some actuaries on here that may shed some light - thats all
 
I would have thought that a portion of the pension would be assigned to him under an adjustment order when it becomes payable. You don't have any pension fund so the value of 500k or any other value is meaningless at this time.
 
Are you Pre or Post 95 ? This is important has Old Age Pension is coordinated into the Post 95 Figures , I assume your other half is going to be able to claim old age pension also so that calculation should be deducted for a start .
As regards the actual pension , should you remarry then the survivor part of the pension should you die will go to your current spouse not your divorced one , he has no lifetime claim on that .
You dont have a pension pot as such so any "figure " is fictional , if you god forbid die in 5 years after retiring then the bulk of the pension dies off with you and there is no actual pension fund to leave in your will .
 
I attended a teachers retirement planning seminar at the weekend where a financial advisor told the group that the estimated cost of a teachers defined benefit pension of €35,000 at age 60 would be 1.8 million euro for a non public servant to buy. I was astounded to hear this figure but didn't get an opportunity to question what I would consider to be a somewhat inaccurate estimation. The advisor in question failed to mention that these pensions are inclusive of any state pension entitlement which is available to all from aged 67 based on A rate PRSI contributions only. I understand that there is no "fund" for these pensions but a significant amount of pension contributions (6.5% of salary) plus ASCs (extra tax) have to be paid during a career. As already mention as a single person if you die, the pension dies with you, so any "actuarial valuation" would be speculative.
 
Threadser said:
the estimated cost of a teachers defined benefit pension of €35,000 at age 60 would be 1.8 million euro for a non public servant to buy.
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These estimates are silly I agree.

Almost no one with a pension fund puts it all into an inflation-protected annuity similar to a PS pension.

Likewise a residual ARF is fully inherited by a spouse while a PS pension is 50% to the survivor. A residual ARF can be bequeathed to an adult child (less 30% tax) and a PS pension cannot.

People forget too but public service pensioners had their pensions cut approx. 2009-2015 linked with public service workers.
 
A € 35,000 per annum, inflation linked, pension is a very valuable asset. It will be paid for over 20 or 25 years on average

At 3% inflation over 25 years, that amounts to a payout of € 1.3M
 
The figure of €1.8 million is not a million miles off and I'd say they were basing the figures on a PS pension of €35,000 per year (with State Contributory Pension on top). If I do a very quick annuity quote and pick all the bells and whistles, a pension of €35,000 for life would cost over €1.7M. That's based on these assumptions...

  • Male aged 60, spouse aged 60.
  • Escalation on pensions of 5% per year. (PS pensions are inflation-linked but that's rare with private sector annuities.)
  • 50% widow's pension (same as PS pensions)
The financial advisor probably also used the most expensive annuity company s/he could find, in order to make the point.

That said, I'd prefer to see examples used which are closer to the reality of the majority in the room. Perhaps retirement at 65 or 66, lower pension (taking account of the State Contributory) etc.
 
jpd said:
is a very valuable asset
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It’s not an asset.

You can’t buy it or sell it.

It’s a (somewhat uncertain) stream of future income that dies with you.


LDFerguson said:
Escalation on pensions of 5% per year. (PS pensions are inflation-linked but that's rare with private sector annuities.)
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No they are not! They are linked to existing public sector pay by custom and practice and are fully at the discretion of the Minister for Finance. They have been cut in the past.

In the five years to Q42024 the CSO estimates that private sector average earnings grew by 26% and public sector pay by 20%.

Inflation as measured by by CPI was 20%. Public service workers and retirees have therefore seen zero growth in real incomes over the period.

It’s amazing that someone selling these products doesn’t know the basic facts.
 
Threadser said:
I attended a teachers retirement planning seminar at the weekend where a financial advisor told the group that the estimated cost of a teachers defined benefit pension of €35,000 at age 60 would be 1.8 million euro for a non public servant to buy. I was astounded to hear this figure but didn't get an opportunity to question what I would consider to be a somewhat inaccurate estimation. The advisor in question failed to mention that these pensions are inclusive of any state pension entitlement which is available to all from aged 67 based on A rate PRSI contributions only
Click to expand...

Surely he was talking about the Public Service Occupational Pension? The State Pension (payable to all Class A employees, PS or not) is a completely different thing.

A pre-2004 Class A employee retiring at 60 with 40 years service would get this amount on a final pensionable remuneration of €100,000. Not typical (at 60 anyway) but hardly unheard of.

A Class D would get it on a salary of €70,000 (but no State Pension).
 
LDFerguson said:
The figure of €1.8 million is not a million miles off and I'd say they were basing the figures on a PS pension of €35,000 per year (with State Contributory Pension on top
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But the point I was making is that there isn't a state contributory pension entitlement on top. Most people buying an annuity will have a state pension from age 67 currently on the basis of 1080 A rate contributions only. The cohort of public servants who are class D PRSI payers have no entitlement to the state pension or those who pay class A have a state pension included in their teacher's pension. What would the estimated value of the state pension paid over 15 years for a 67 year old male be? Should this not be subtracted from the headline 1.8 million quoted? I have no expertise in pensions but the amount quoted just seemed very large.
 
Threadser said:
The cohort of public servants who are class D PRSI payers have no entitlement to the state pension or those who pay class A have a state pension included in their teacher's pension.
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That is incorrect. The State Pension is a DSP Benefit based on PRSI record. It is not included in "the teachers' pension". If the Financial Adviser was including the State Pension in his actuarial calculation of a PS pension then he was talking through his posterior!
 
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