Pensions Apartheid: Public vs Private sector pensions

[LDFerguson]

Here's a link to a good article by independent actuary, Tony Gilhawley, on the differences between public and private sector pensions.

[broken link removed]

I'd be interested in hearing comments. As the whole "public vs private sector" debate and public sector bashing have been done on Askaboutmoney many times, I'd be most interested to hear comments that refer specifically to the article.

 

[Complainer]

Is this considered to be a 'good' article because it serves a particular agenda? 'Apartheid' is indeed an appropriate term to be used for this kind of unbalanced attack on a group of employees. The article is extrordinarily unbalanced, misleading and inaccurate, and reminds me of the kind of 'dem blacks are takin all our jobs' nonsense that one hears on late night radio shows. For example;

" 100% have private pension coverage" - Rubbish - many low-paid public/civil servants get little or no pension coverage over and above the standard OAP, which they have paid for through their PRSI contributions. This forum is littered with examples of public sector staff who got hit with the recent pensions levy, but don't actually get a pension.

" Most public servants will get a GUARANTEED tax free retirement lump sum of 150% of salary AND a pension for life of 50% salary" -GUARANTEED tax free retirement lump sum' Where is the source for his assumption that 'most public servants' have a full 40 years service to get this level of benefit? Where is the comparison against the lump sum provided in private pension schemes?

" The public servant is not exposed to any risk to his or her retirement benefits." Rubbish again. In many ways, the public servant is exposed to more risk than private pensioner, as his pension is at the discretion of the Govt of the day for the lifetime of the pension.

" Government recently transferredhttp://www.askaboutmoney.com/#_edn1 €1.25bn deficit on certain public sector funded schemes to the taxpayer. " Misleading and inflamatory nonsense - As these were public sector funded schemes, they were always the responsibility of the State. The 'transfer' was technical in nature, and did not add or remove any liability for the taxpayer.

"SECTOR ARE PAYING FOR PENSIONS THREE TIMES OVER " More inflammatory and misleading nonsense. The private sector does not pay for for SW pensions. All sectors pay for SW pensions. The public sector does not get exclusive benefits for SW pensions. All sectors benefit from SW pensions.

" WHAT IT TAKES TO FUND A PENSION - Assumes a 5% pa investment return with earnings growth of 3% pa" So why assume 5%? Why not assume the 10%-15% growth figures that were commonplace a few years back (and may well be commonplace a few years out)? Why not use the 8% growth figure that Tony's friends in PIBA will use when selling their private pensions?


Tony is clearly a man on a mission, and he may well manage to fool Irish Independent readers with this kind of biased diatribe. Why did he fail to mention the cost and benefit of disability income protection frequently provided to members of private pension schemes?



This is neither a 'good article' nor is it 'independent' analysis. I just wish I had more time to expose the further holes in the article.

 

[LDFerguson]

Hi Complainer,

Thanks for your comments. I referred to it as a good article because it's well-written. I don't know enough about the demographic profile of the public service to comment on the accuracy (or perhaps lack thereof) of the piece, which is why I invited comments from those who know more than me about the subject.

For the record, lest I be accused of bias, I would also refer to your reply as a very good reply.

Regards, Liam

 

[Padraigb]

I look at this:

[FONT=Arial Black, sans-serif]THE PRIVATE SECTOR ARE PAYING FOR PENSIONS THREE TIMES OVER[/FONT][FONT=Arial Black, sans-serif]BEFORE[/FONT][FONT=Arial Black, sans-serif] IT CAN PROVIDE FOR ITS OWN PENSIONS[/FONT]
The private sector is currently paying, through taxes and PRSI contributions, for pensions three times before it can even begin to set aside funds for its own future pensions:
 SOCIAL WELFARE PENSIONS PAID TO CURRENT PENSIONERS.
€[FONT=Arial Black, sans-serif]4[/FONT][FONT=Arial Black, sans-serif].0bn[/FONT][FONT=Arial Black, sans-serif]i[/FONT]
 PUBLIC SERVICE PENSIONS PAID CURRENTLY TO RETIRED PUBLIC SERVANTS
This is just the current cash payments to current public service pensioners. In addition there is the annual benefit accrual cost for current public service employees, estimated at €5.4bn pa.
€[FONT=Arial Black, sans-serif]2[/FONT][FONT=Arial Black, sans-serif].3bn[/FONT][FONT=Arial Black, sans-serif]ii[/FONT]
 NATIONAL PENSIONS RESERVE FUND CONTRIBUTION
The taxpayer pays 1% pa GNP to the NPRF, which is designed to fund part of future State and public service pensions from 2025 onwards. Estimate at €1.7bn in 2009
€[FONT=Arial Black, sans-serif]1.[/FONT][FONT=Arial Black, sans-serif]7bn[/FONT]
CURRENT PENSION EXPENDITURE
€[FONT=Arial Black, sans-serif]8bn[/FONT]

and I see an unfair representation of the facts. This is a set of costs borne by private and public sector workers jointly, and on similar terms, in that public sector workers also have to make their pension contributions after those costs are met.