Private v Public Sector Pension comparison.

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world201812

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Hi all,

I posted about a pension information some months back, and got some brilliant replies. Thanks.

Looking for more advice!

Private sector employee with a DC scheme. 5% employee contribution and 7% employer contribution

I am in my mid-30’s, and am starting from scratch in terms of pension provision, unfortunately.

I have a PRSA with approx 20k in it from a previous job/life.

My question is job wise, I may have the opportunity to join the public sector in the next little while.

Am I really far better off joining the public sector for pension purposes alone?

Is Defined Benefit worth way more than Defined Contribution?

I’m risk averse and financially conservative by nature, and know that when a family member retired they got a lump sum from the public sector of approx 75k which was 1.5 times their final salary.

Am I right in thinking with a DC, private sector pension as I have there is no lump sum payment equivalent and what you get out is highly uncertain?

I’m wondering would it be worth taking a pay-cut, entering the public sector for pension reasons alone.

From friends and relations who have retired, the ones with the best quality of life/pensions, appear to be public servants.

I am aware from friends who are in the public sector now, they say the recent single scheme is nowhere near as good, and the contributions required are colossal.

Anyhow, would be great to get a realistic picture of what I should do, pros and cons, and the ‘weighting’ of a public v private sector pension.

Would for example a 30k public sector gig be on a par value wise with a 40k private sector one when pension factored in?
 
All very good questions.

Anyone giving a definitive answer today about the relevant values of private v public pensions in 30 years time would certainly be qualified for residence in La La land.

About the only certainty you can say about pensions, is that the pension environment in 30 years time will not resemble todays in the same way that the pension environment of the 1950s did not resemble that of the 1980s nor 2010s

The problem of continuing public service pensions (and social welfare pensions, it must be said) at the current level will be a huge drain on the nations resources in the next 20/30m years and I have no doubt that the working cohort (who fund the whole thing, remember) will not accept the burden
 
Note that PS make substantial pension conts. The normal 6.5% regular contribution.

Plus the PRD, which is 10% up to 60k.

However, the min point where the PRD starts has been increased to 28,750.

So a PS on 28k is not paying PRD anymore.


This means that every payrise/increment/promotion after 35k approx faces 48% tax approx and 16.5% pension conts.
 
Thanks for getting back so fast.

JPD – Surely the status quo won’t change, the public sector are a massive block of workers, and why would they have less clout 30 years from now?

– Thanks for that, So the tax is the same, but the 16.5% pension contribution after 35k is that not tax deductible?

Is there any online calculator or chart that gives an indication of take home public sector pay etc?
 
Apart from trying to predict a pension outcome in 30+ years time, remember that if you join the Public Service now, you may not be joining a traditional Defined Benefit scheme. New entrants are likely joining an “average salary” scheme, which is less generous than the old DB structure.
 
Thanks Conan, but it is still guaranteed? As in you know what you will get out of it as in 50% of average earnings over X years versus private sector DC whereby if market tanks and you are on cusp of retirement, your income tanks as a pensioner? Or am I being overly simplistic?
 
I worked on an interesting exercise where I compared an existing DC scheme with the new Avereage service PS Scheme on a projected basis. Due to the comparative employee contributions plus pensions levy, the private DC scheme gave a better result in 80% of cases. It wasn't a particularly generous scheme but from the data I looked at , if lower/medium paid private sector workers invested the equivalent employee contributions with a modest employer contribution then in projection terms they would be better off than the result from the public sector,


Big If of course is the risk, you are taking on the full risk in a private scheme and the public sector scheme should be as close to guaranteed as you will get.

However as previous posters state , it's difficult to say where this will all lie in decades time.
 
PaxmanK said:
Do public sector worker get the contributory old age pension these days
Click to expand...
I'm a PS and lets say I get 40 yrs service and end up on a salary of 40k, my pension works out like this:
Old Age state pension = 12,500
PS pension = 40k/2 = 20k less 12.5k OAP = 7.5k
So 12.5k + 7.5k = 20k pension in total per annum.
 
Protocol said:
It's integrated into their pension.
Click to expand...

Incorrect for new entrants and indeed entrants for some time now. They pay normal PSRI and are entitled to the same pension as anyone else in addition to their PS pension
 
Yes, and that is known as an integrated or co-ordinated pension.

PS hired since April 1995 pay full rate PRSI, and can receive the CSP.

However, they don't get 50% work pension plus the CSP.

Their work pension is adjusted to account for the CSP.

This is known as integration or co-ordination.
 
Thanks DBL2018, good to know.

So if you decide to join the public sector, and earn modestly, you’d want to be getting promoted at some point in your career.

Delboy, interesting calculation, good to know. Thanks.
 
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