Can you explain that to me?
Independent review body - Public Sector working hours.
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Baby boomer
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Yes. The Single PS Scheme, introduced in the wake of the GFC, is not as favourable as the old traditional, final salary based, PS pension schemes. For that reason, it is less costly to provide and members are charged the lower rates of Additional Superannuation Contribution.
So members on the old scheme are contributing 10.5% on incomes over €60k, plus their Pension Levy (as it is commonly known). Is that correct?
What rate of PRSI do those employees pay?
Baby boomer
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Not quite. The 10.5% is the pension levy. Some PS employments also pay 5% normal normal.pension contribution plus 1.5% spouses and childrens contribution. (aka widows and orphans, for those of a certain vintage!)
Pre 1994, modified (low) rates, usually Class B for Civil Service and Class D for wider public service.
Post 1994, standard Class A rates.
Pre 94s don't get state contributory OAP, post 94s do, but their pension is integrated so, effectively, the OAP is deducted from their occupation PS pension.
And finally, post 94 payscales are 5% higher than pre 94 ones - this was the deal done way back in the early nineties when the government agreed not to "go after" pensions paid to existing pre 94 civil servants. There endeth the history lesson for today.
Okay, so they are contributing 10.5% towards a 50% DB pension with the 150% tax free lump-sum on retirement. That means they are coming nowhere close to funding their own pension. That said most people come nowhere close to funding their State pension through PRSI either.
Baby boomer
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Yes, or 15.5% in some PS employments.
Very true. I've seen actuarial assessments that put the true cost at anything from about 30% to 50% of salary. Higher for those with lower retirement ages and faster accrual, eg guards, prison officers, army officers. In fairness, the actuarial cost is artificially inflated because funded DB schemes are forced to adopt VERY conservative assumptions and investment strategy. I've no idea really what a "fair" comparative cost would be for an unfunded scheme, intuitively I'd guess around 25%. But I could be WAY wrong!
Indeed. Although, the higher you're paid and the more your contributions are real rather than credited, the closer you will come. That's why it would be totally wrong to means test the contributory OAP.
A fair assessment.
Until the PRSI ceiling was removed nobody funded their State pension so those who are now retired contributed even less.
Baby boomer
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Yeah, I'd forgotten about that. Although, I'd find it hard to begrudge those who paid astronomical tax rates in the 70s and early 80s. I was briefly exposed to the 65% rate myself for a while and there was levies and PRSI on top of that too. VAT and excise was higher too. Remember excise duty on TVs and video recorders?!
I missed that but I went onto the highest tax band as a 3rd year apprentice and paid income tax and PRSI on the first pound I earned. I think that it should still be so in the latter case but people on average incomes shouldn't pay anything at the highest rate.
I'm ideologically predisposed to lower taxes on income, including high earners, and higher taxes on retained wealth.
@Purple
Typically, PS pay 6.5% pension conts, made up of 5% plus 1.5% for the Spouses and Children.
One sub-group of PS, known as civil servants (10% approx. of PS) pay just the 1.5%.
Please note: PS have always paid the 6.5%, pre and post 1995.
The PRD introduced in 2009/2010, is another pension cont. As part of the salary restoration, it was reformed, and now it starts at 32/34k. So on any income over 32/34k, a PS pays 16.5% pension cont.
Typically, PS pay 6.5% pension conts, made up of 5% plus 1.5% for the Spouses and Children.
One sub-group of PS, known as civil servants (10% approx. of PS) pay just the 1.5%.
Please note: PS have always paid the 6.5%, pre and post 1995.
The PRD introduced in 2009/2010, is another pension cont. As part of the salary restoration, it was reformed, and now it starts at 32/34k. So on any income over 32/34k, a PS pays 16.5% pension cont.
Same with HSE workers. The 2 different scales only applied in the Civil Service.
Is that all HSE employees or just the workers?
