Garda pay

[Purple]

My dear Duke,

I note that you are having some difficulty with the tax treatment of pension contributions contained in my post last night or, to be really technical, earlier today! So, please allow me to elaborate a little further....

Another way of estimating the value is to ask what contribution would be required of a person aged 20 who wishes to fund a pension of €25k payable at age 50. According to the Pensions Authority Calculator that person would be required to pay in the order of €30k p.a., or 50% of earnings each year to achieve this goal.

Their average pension is €33,000 a year.

 

[Duke of Marmalade]

Dan you grossed up the pensions in payment. Since these are already gross that was a significant error. However, because of other compensating errors in your method you got more or less the same answer as John Horgan. It is like the Junior Cert student who when asked the area of a 4 by 4 square adds up the lengths and gets 16. If she is lucky she will get an examiner like Purple who would give her full marks.

 

[Dan Murray]

I agree. I agree fully. Honest to Allah!! And I’m blaming the change in medication, at least, in part!!

This report is an absolute shambles. It’s available on the link below.

[broken link removed]

I like to read such reports, first hand, from time to time. I honestly cannot remember ever reading a more poorly structured, presented and written official report. I accept that these points relate primarily to style but they do count for something.

Moving on to substance, the value of pensions is very significant element in the report and the issue that has attracted greatest media reaction. I only managed to read up to page 48 which deals with the valuation basis of current pension benefits. I simply could not read beyond this.

Pretty much all of post 56 in this thread (apart from the parentheses) and the second paragraph of post 60 are….....wait for it……..mot par mot citations from Horgan's report!! I truly believe this merits a GOTCHA PLUS....

These valuation estimates are shoddy, almost beyond belief. Looking at each point individually, the Duke has already rightly ridiculed the tax treatment and had the sense to realise that there must be

...other compensating errors in your method you got more or less the same answer as John Horgan......

And indeed there are actually many errors but let me just deal with the biggest whopper. Horgan applies the following basis to calculate the value of the pension benefit.

1. Current payments to pensioners €311m
   
   
2. Current contributions of active members € 36m
   
   
3. Cash-flow difference between (1) and (2) €275m
   
   
4. Number of serving gardaí 12,816
   
   
5. Shortfall per garda: (3) dividided by (4) €21,500

This logic is just so stupid. Just to expand, it would follow that if the numbers of gardaí were to double, the cost of their pension benefits would halve and vice versa!!

The second point is also plain stupid. Purple has already pointed out that the average pension is €33,000. Accordingly, the references to €25k and age 50 (especially without explaining why) are simply ludicrous.

Apart from the ineptitude of the report writer, I am struck by the matching ineptitude of the GRA in not immediately being able to undermine Horgan’s credibility (and by extension his argument) by highlighting any the above effectively. If they had, my little ruse in this thread would obviously not have worked. Remember the GRA had sight of the report for 2 weeks before its publication - so they had plenty of time to talk to someone who can count beyond ten without taking his shoes and socks off.

Incidentally, the related GRA press release is priceless. Apart from anything else, it's an absolute goldmine for my "writing errors" thread. It's pretty incredible that an organisation representing so many people, earning so much in total annual compensation (say, c. €100k), could be so shoddy. In fairness to Horgan, he presumably negotiated a set fee for the job and was not going to waste any of it by sharing some of his fee with folk who could count well or type nicely.

 

[Duke of Marmalade]

Dan I am trying to distil out what may be satirical swipes at a venerable Duke but, taken at face value, I owe you sincere apologies

Not apologies for the content of my contributions which I think you may actually agree with, but apologies for not realising you were quoting from the report. That section on pensions is really quite awful, I don't know how you managed to survive 48 pages

Actuarial note:

If a pension fund (notional or otherwise) has reached demographic and financial stability then the following identity would hold:

Contributions + Interest (possibly notional) = Benefits

Horgan's back of a postage stamp calc could only possibly be near right by pure fluke, as it has no theoretical justification whatsoever.

 

[Purple]

In my earlier posts I took the average pension of €33'000 and used the pension calculator from the Pensions Authority website and went with a salary of €66,000 and a 30 year working life. They said "Based on the assumptions used by this calculator, you are not expected to meet your Target Pension of €33,000 p.a. in retirement.You need to increase your contributions to 40% of Salary a year in order to meet your Target Pension. Alternatively, you could consider reducing your Target Pension in retirement or retiring at a later age."

Given that the average Garda salary on the CSO website was €66,000, and that they didn't get a state pension (and don't pay for one) I took it that €66,000 + 40% = €92,400 and surmised that the cost of funding the element the state would normally provide would bring it over the €100,000 mark. I'm no expert though so I'm open to correction. I also don't know how much should be added for the €107,000 average lump sum payment they get when they retire.

If anything €100,000 looks like a low figure.

 

[Firefly]

II also don't know how much should be added for the €107,000 average lump sum payment they get when they retire.

I've asked this before. For any public sector worker out there....do the pension contributions they make even cover their tax-free lump sum amount?

 

[Duke of Marmalade]

Ok guys, I've been doing some sums on the Single Public Service Pension Scheme which applies to new Garda recruits. The Horgan report gets this all wrong. Pension accrues at .58% on the first 45K and 1.43% on the excess over that figure (Horgan quotes 1.25% which applies to other public servants). Lump sum accrues at 4.29% (Horgan 3.5%). So you see Garda get extra accrual to compensate for anticipated retirement earlier than other PS. The accruals are CPI adjusted so this is a career average scheme rather than a final salary scheme.

So I took a plausible career path from a new 20 year old recruit at €30K finishing as a sergeant at top of scale earning €62K.

Assuming retirement at 55 (earliest allowed) the pension would be €14K p.a. and the lump sum would be €85K. Shows how much the PS Unions shafted new recruits.

Using that actuarial postage stamp I rate 14k p.a. pension at age 55 to be worth about 500K so add in the lump sum to get around 600K. Divide by 35 to get it worth about 17K per annum and finally knock off average contributions of 2K to get equivalent extra pay of 15K.

 

[elacsaplau]

.....so they had plenty of time to talk to someone who can count beyond ten without taking his shoes and socks off.
and
In fairness to Horgan, he presumably negotiated a set fee for the job and was not going to waste any of it by sharing some of his fee with folk who could count well or type nicely.

Dan - you the man!

Excellent exposé of a very poor report. It gave me a right good and much needed laugh. My favourite bits are above - thanks! Also, I must say I enjoyed your little gambit!

Horgan genuinely looks like a cheapskate and the GRA's management of this, laughable. It seems to me that the media hasn't covered itself in glory on this one either.

 

[Purple]

Ok guys, I've been doing some sums on the Single Public Service Pension Scheme which applies to new Garda recruits. The Horgan report gets this all wrong. Pension accrues at .58% on the first 45K and 1.43% on the excess over that figure (Horgan quotes 1.25% which applies to other public servants). Lump sum accrues at 4.29% (Horgan 3.5%). So you see Garda get extra accrual to compensate for anticipated retirement earlier than other PS. The accruals are CPI adjusted so this is a career average scheme rather than a final salary scheme.

So I took a plausible career path from a new 20 year old recruit at €30K finishing as a sergeant at top of scale earning €62K.

Assuming retirement at 55 (earliest allowed) the pension would be €14K p.a. and the lump sum would be €85K. Shows how much the PS Unions shafted new recruits.

Using that actuarial postage stamp I rate 14k p.a. pension at age 55 to be worth about 500K so add in the lump sum to get around 600K. Divide by 35 to get it worth about 17K per annum and finally knock off average contributions of 2K to get equivalent extra pay of 15K.

You can't look at their scale; look at what they actually earn. The average pay is €66,000. The average pension is €33,000. The average lump sum is €107,000.
Your figures would be correct if they were paid less.

 

[Firefly]

Using that actuarial postage stamp I rate 14k p.a. pension at age 55 to be worth about 500K so add in the lump sum to get around 600K. Divide by 35 to get it worth about 17K per annum and finally knock off average contributions of 2K to get equivalent extra pay of 15K.

2k per year x 35 years is 70k and that's 10k less than the tax free lump sum. Do public sector workers contribute anything towards their pension?

 

[Dan Murray]

Also, I must say I enjoyed your little gambit!

Ah yes - I had great hopes for my beloved Urusov which, as ever, only got half accepted - ending up as some sort of cross between a Scotch and a Danish. No more of such flavourings in the future for me. Henceforth, it's magnolia Ruy Lopez all the way....

 

[jjm]

Duke posted I've been doing some sums on the Single Public Service Pension Scheme which applies to new Garda
I suspect the Shafted new members who leave before the reach retirement age . I may be corrected new members retirement pension includes retirees getting half of the new Career Average Scheme on there official retirement age.Hope Duke can explain it to you.When they brought in PRSIi A1 for public service Unions got a 5% pay increase for new entrances to cover PRSI. In other words the were on 5% more than the person who started the day before them on the old D stamp.

 

[Duke of Marmalade]

Firefly yes it can be viewed that no contributions go towards pension. That is true of all public servants. It is also broadly true of most private sector DB schemes, indeed for some of these members make no contribution whatsoever.

Purple my sums show that for a typical career path the new SPSPS will deliver a pension of 23% and a lump sum of 137% of final salary. Those ratios hold no matter how much you uplift the scales to get actual earnings.

Current retirees are getting 50% and 150% respectively. I was demonstrating the extent to which new recruits have been shafted. I can see a split in the PS unions developing whereby new recruits who have been stuffed on scales as well as pensions will breakaway from their predecessors who selfishly pulled up the ladder. How could any new recruit stomach any improvement to the pay and conditions of their predecessors before this yawning inequity is closed?

Dan I must make a note to play the Berlin defence when engaging with you in future

 

[Purple]

Purple my sums show that for a typical career path the new SPSPS will deliver a pension of 23% and a lump sum of 137% of final salary. Those ratios hold no matter how much you uplift the scales to get actual earnings.

Ok, so your calculations were for new recruits only. I get it now.

Current retirees are getting 50% and 150% respectively. I was demonstrating the extent to which new recruits have been shafted. I can see a split in the PS unions developing whereby new recruits who have been stuffed on scales as well as pensions will breakaway from their predecessors who selfishly pulled up the ladder. How could any new recruit stomach any improvement to the pay and conditions of their predecessors before this yawning inequity is closed?

Yes I agree. A modest decrease in the tapay and pensions of the old guard gardai would allow the leveling up of the newer members but that would be fair and reasonable and could be sustainable economically so it won't happen.

 

[cremeegg]

I suspect the Shafted new members who leave before the reach retirement age .

What exactly is it you suspect them of ? Murder, Arson, Careless driving ?

Come on, you have posted some contributions worth reading, but you should make the effort to read over your posts. This is not your first that is largely unintelligible.

 

[Dan Murray]

Dan I must make a note to play the Berlin defence when engaging with you in future

Interesting but ultimately a flawed choice - if dewall crumbled, what hope is there for defence?

 

[jjm]

cremeegg
Carefull Driving while not caring for other Members. Go figure it out.

 

[Firefly]

Firefly yes it can be viewed that no contributions go towards pension. That is true of all public servants. It is also broadly true of most private sector DB schemes, indeed for some of these members make no contribution whatsoever.

That's probably why many schemes in the private sector have shut / converted to DC schemes. In fact, I don't know of any employers in the private sector mad enough to offer DB schemes to new employees in this day and age. Anyone in the PS more than 15 years out from retirement should be demanding from their unions that their scheme be converted to DC - the DB schemes are clearly unaffordable but the head is firmly in the sand!

 

[Gerry Canning]

I do remember my company in 1990 taking a holiday from contributing to the then DB (defined benefit) scheme because returns were so good.
Is it not in legislation that DB schemes must pay at least 70% to all members?
Given that we are in investment (doldrums) maybe anyone in DB might be better to hang in and not move to DC (defined contribution) model.

Just wondering ?

 

[Purple]

I do think the liabilities are being over stated due to the historically low interest rates/returns on investments available at the moment.