I also think that something that needs to be considered when comparing pension benefits is the possibility for private sector workers to be made redundant and be paid a considerable lump sum. All public servants post 95 pay full A rate PRSI but will never have the possibility of being made redundant. This can be seen a huge advantage as redundancy can be catastrophic for someone who will struggle to get another job. However I have a number of friends who have been made redundant and have received quite considerable lump sums (more than I will be entitled to after my decades of PS service) and have secured another job within a number of months. I know the company themselves will fund some of this payment but they are also getting maximum benefit for their PRSI contributions.
As pointed out the call on the SIF is pretty low.I also think that something that needs to be considered when comparing pension benefits is the possibility for private sector workers to be made redundant and be paid a considerable lump sum. All public servants post 95 pay full A rate PRSI but will never have the possibility of being made redundant.
This statement is totally misleading.The biggest giveaway in terms of pension is the state pension. Full state pension at the moment it is available to workers who pay minimum 10 years
Even if you pay full A rate PRSI for 40 years, the state pension is very generous relative to the contributions required. This is compared to the pension contributions, additional pension contributions and full PRSI required for public sector pensions which include the state pension entitlement for workers who started since 1995. Am I correct in saying that you don't currently need 2080 full PRSI contributions to qualify for the full state pension, but this is changing soon?This statement is totally misleading.
The only class of worker who could qualify for full state pension with 10 years contributions is a worker who only started working at age 56 and continued working without interruption up to age 66.
It would only work for a worker whose birthday falls on 1st January.
Very few workers fit into that category.
PS pensions are inflexible in that
- Nothing passes to the estate of the individual - so if someone is single and childless and dies the day after retiring the pension dies with them
- There is no benefit in working beyond full service - therefore, ps workers feel pressure to retire otherwise they leave behind benefits they've paid in
- Some workers who retire with full service post-95 have uncertain and awkward situation where the state contributary pension is not available until they are 67 - therefore have to investigate and apply for supplementary/go on the dole etc.
- Workers who do not have standard service e.g. full 40 years - have inflexible choices to make extra payments.
Nor was I. It was a thought experiment to demonstrate that a PS pension has huge inflexibility and limitations on use.
You say that such a pension would cost a million to purchase, I say someone with a million would never purchase it due to the inflexibility.
As a household that benefited from redundancy 4 times... I have trouble to consider it as an advantage as we had twice the statutory redundancy payment and 2 payouts that were far from life changing. However, each time we ended up in jobs that did not necessarily fit and changed again fairly promptly, causing months of uncertainty. Getting older, we are now fairly conscious that if a redundancy happens later in life it could be more difficult to find a suitable position. Redundancy don't only happen when there are jobs around...
I looked at the latest incarnation - the career average pension scheme. It is integrated with the OAP but for simplicity I looked at the cost of the benefits above the CSP threshold. The benefits for one year's contribution of 6.5% are 3.75% lump sum plus 1.25% pension. They also have a calculator for additional voluntary top-ups. For a 30 year old to purchase these benefits they are would be charged 34.45%!! Presuming this latter figure is broadly based on commercial terms we can see that the 6.5% to augmented to 34.45% by the employer. This is better than the best employer subsidised arrangement in the private sector.I take all the comments here pointing out characteristics of the different PS pensions. There are pros and cons of PS pensions and DC private pensions. But the oft-quoted "PS Gold Plated Pension" is not reality.
But if a person starting out in their working life were to analyse a Post '95 PS pensions vs making the same contributions to a private DC pension over 40 years, and look coldly and logically at the pros and cons of each, I think most would choose the private DC pension.
I looked at the latest incarnation - the career average pension scheme. It is integrated with the OAP but for simplicity I looked at the cost of the benefits above the CSP threshold. The benefits for one year's contribution of 6.5% are 3.75% lump sum plus 1.25% pension. They also have a calculator for additional voluntary top-ups. For a 30 year old to purchase these benefits they are would be charged 34.45%!! Presuming this latter figure is broadly based on commercial terms we can see that the 6.5% to augmented to 34.45% by the employer. This is better than the best employer subsidised arrangement in the private sector.
Ah! That all hangs together so. Anyway main point is that the Employer contribution is about 3 times the employee contribution and far better than any private sector DC scheme.Don't forget the ASC as well as the normal 6.5% contribution.
Yes, the notional employer contribution is large.
| 2019 | Rate | 2020+ | Rate |
|---|---|---|---|
| €0 to €32,000 | Exempt | €0 to €34,500 | Exempt |
| Over €32,000 to €60,000 | 6.66% | Over €34,500 to €60,000 | 3.33% |
| Over €60,000 | 7% | Over €60,000 | 3.5% |
I agree that redundancy can be hugely traumatic and financially disruptive. However I have some friends who have got their house deposit on the basis of being made redundant and finding a similar job quickly. It depends of course on the job market and and the age/qualifications of the person being made redundant. Also voluntary redundancy schemes can be very popular for those who need an immediate lump sum and have a plan for carrer change, study etc.+1 I would find it difficult to agree with the argument that the possibility of a redundancy payment followed by an immediate new job is a perk, compared with a job with no possibility of redundancy.
Anyway main point is that the Employer contribution is about 3 times the employee contribution and far better than any private sector DC scheme.
Looking at a Private DC vs Post '95 PS PensionI looked at the latest incarnation - the career average pension scheme. It is integrated with the OAP but for simplicity I looked at the cost of the benefits above the CSP threshold. The benefits for one year's contribution of 6.5% are 3.75% lump sum plus 1.25% pension. They also have a calculator for additional voluntary top-ups. For a 30 year old to purchase these benefits they are would be charged 34.45%!! Presuming this latter figure is broadly based on commercial terms we can see that the 6.5% to augmented to 34.45% by the employer. This is better than the best employer subsidised arrangement in the private sector.
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