Irish Times:"Exposing a two-tier and unequal pension system" public vs. private

The key sentence for me is as follows:

There are understandable and valid reasons why public servants were given more favourable treatment in the past. The generous pensions were an inducement to some of the best and brightest people in the State to stay in the public sector rather than bringing their skills and experience into the private sector where they could have earned more.

I have always believed that the generous PS pension arrangements arose because Trade Union negotiators were able get them past politicians who knew that the costs would not materialise until long after they themselves had left the scene.

There is no cost to any current administration in agreeing a pension benefit which will not become due for many years. An easy sop to the unions.
 
The difficulty is lack of flexibility in the Public Sector and "linkages" negotiated by the unions. Rates of reward cannot be increased in any one area (where there is a shortage) without knock on effects right across the board.

+1. Look at all the hassle trying to hire nurses. If the demand is there the wages offered should be increased, but doing so would result in an orderly queue forming at government gates.
 
I have always believed that the generous PS pension arrangements arose because Trade Union negotiators were able get them past politicians who knew that the costs would not materialise until long after they themselves had left the scene.

There is no cost to any current administration in agreeing a pension benefit which will not become due for many years. An easy sop to the unions.

Yip. Plus the fact that politician's pensions are also DB.
 
The critical point here is that pension pots valued at €2 million or more are subject to a “super tax” rate of 70 per cent.

A TD is treated as being well under this threshold but a private sector employee with the same pension entitlements is over the limit and liable to “super tax”.


The "super tax" is an anomaly which no one is meant to incur.

It's an anomaly for sure but not evidence of a wicked conspiracy against the private sector.

Can someone explain, is the cut in point for the super tax different between public and private sectors or not. Thanks
 
Rather than everyone being on DC pensions everyone should be on DB. The market is incapable in today's conditions of delivering that which points to the State underwriting longevity improvements and even investment return and inflation. A society where middle income retirees are required to manage multi million euro pots is so terribly inefficient.

Absolutely disagree.

A defined benefit pension is a lie.

The employer offering it has no idea if they will be able to honour the terms of the scheme 50 years into the future.

It is no good to the employee because they must always doubt that the promise will be defaulted on.

A society where middle income retirees are required to manage multi million euro pots is so terribly inefficient.

As for efficiency they could outsource the management to professional investment managers.

As to bearing investment risk in their pensions, well that risk exists anyway, but with a defined pension scheme the employers has promised to bear the risk. A promise they do not know that they can keep.
 
I have always believed that the generous PS pension arrangements arose because Trade Union negotiators were able get them past politicians who knew that the costs would not materialise until long after they themselves had left the scene.

There is no cost to any current administration in agreeing a pension benefit which will not become due for many years. An easy sop to the unions.
cremeegg
There are more people in unions in the private sector than in the public service actually 5 or 6 100% more in fact
, Think about the shelving of the car park tax it was not the unions who got it shelved it was pressure from head of departments who got it suspended quitely/not intelimented
,These pensions originally designed for themselves ,If the were funded the same as the private sector DB and capped there would be on problem,
Lots of good well ran DB pensions schemes Buy an annuity for each person who retires so it is very easy to control and see cost,
State Sponsored Bodies DB schemes already show the way,
 
Last edited by a moderator:
creemegg the rules for the 'super tax' are the same it's just that no one in Public S gets high enough a pension to incur it. No one in the Private S should put so much into their supplementary pension fund that it incurs the super tax.
 
cremeegg
There are more people in unions in the private sector than in the public service actually 5 or 6 100% more in fact

True, however private sector employers are not so quick to make promises about future costs.


Lots of good well ran DB pensions schemes Buy an annuity for each person who retires so it is very easy to control and see cost,

The problem arises long before any annuity needs to be bought.

An new employee in their 20s is promised a pension 40 plus years in the future, to run for who knows how long.

The investment environment in those 40 years is completely uncertain.

DB pensions are simply a lie. The extraordinarily strong investment climate in the 80s means that those retiring until recently were not caught out.
 
cremeegg you think the State can guarantee to pay pensions 50 years into future?

DB provides huge societal benefits in terms of generation pooling of longevity and investment risks. There is no point a punter handing the management of these risks to a professional, that's what I mean by inefficient.

The capital required for the risks involved are proving beyond the appetite of the market. The State should get involved in mitigating the extreme risks. For example if folk live far longer than anticipated it is Society's problem.
Would I be correct in saying you did an example of the cost some time in the past year I remember seeing it .I did notice a few bad mistakes that is why i remember seeing it,
 
cremeegg you think the State can guarantee to pay pensions 50 years into future?

No I don't think that the state can deliver any such guarantee. That is why I agree with Brendan that all PS pensions should be DC.

DB provides huge societal benefits in terms of generation pooling of longevity and investment risks. There is no point a punter handing the management of these risks to a professional, that's what I mean by inefficient.

The capital required for the risks involved are proving beyond the appetite of the market. The State should get involved in mitigating the extreme risks. For example if folk live far longer than anticipated it is Society's problem.

I agree with your concerns here, however I don't see DB pensions as a solution. I see them as a cover-up to hide the problem. We are saying to PS workers that they will receive 40/80s when they retire, linked to ongoing salaries. everyone knows that this is unlikely.

I accept that pooling of longevity and investment risk may be desirable, though surely a DB scheme may, depending on its members age profile, do the opposite. e.g. if lots of people retire now that focusses investment risk on future retirees.

Not in the public sector case of course because there is no investment risk, there is nothing invested to be at risk.
 
I am intrigued Duke, I would also welcome the input from those of a left-leaning disposition who often claim that private enterprise are just chasing profits. Would they prefer that all workers have a defined benefit pension from the state coffers, to, you know, make it fairer?

Btw, how's that pinkometer going? ;)
 
Now leave TheBigShort out of it at least he knows when he is walking on egg shells,
 
I am intrigued Duke, I would also welcome the input from those of a left-leaning disposition who often claim that private enterprise are just chasing profits. Would they prefer that all workers have a defined benefit pension from the state coffers, to, you know, make it fairer?

Btw, how's that pinkometer going? ;)
Oh you mean like the contributory & non contributory State pensions payable to all citizens on attaining the appropriate age ?

Of course in the case of public sector workers such state pension is integrated whereas a large number of private sector workers will receive the state pension in addition to their occupational pension.
 
We would all be better off public and private sector if the Government took a % of what they take each week from our wages in prsi and ring fenced into a fund to pay the long term requirements of both groups of workers

Hopefully It will not affect me I will be drawing state pension in less than 2 years I also have a private pension which the company paid 2/3 of the cost this brings my pension well over what i would get for the same wages in the public service I would have contributed around the same % as as a public servant

The problem I see is unless part of the PRSI along with all of the public servants contributions are ring fenced and invested there will be no money to pay then long term .I am in the happy position of being able to look at this having worked in the private sector and seeing my employers contributions sitting in a large pension pot along with my own contributions .

Again the private sector worker needs to have part of there PRSI ring fenced for the same reason , The next generation of Public and private sector worker need to start moving on this now or there will be nothing in the pot when there time comes to retire ,
 
creemegg the rules for the 'super tax' are the same it's just that no one in Public S gets high enough a pension to incur it.

Well according to BB above, a TDs pension is high enough to incur the supertax but because of the way it is valued by Revenue it does not

I actually think I know the answer to this one, bit I don't work in pensions so of course I m not an expert, and I am going to put you to the trouble of explaining it.
 
Hopefully FG won't spend the proposed " Rainy Day Fund "

How on earth then are we going to recapitalise our errant Banks when they inevitably screw up again , after all the National Pension Reserve fund cannot come to the rescue again after it was cannibalised to bail them out previously.
 
Back
Top