Public or Private pension - stick or twist!

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Feria50

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I have been offered a public service job where the gross pay is better than my current salary but I am totally confused about the single scheme system that is now in place in the PS, despite having spent the morning reading up on it! I am 32

Current position in private sector:
Gross salary €41k (2% annual growth perhaps)
Employer contributes 12%
Employee contributes 3%
Total = 15% (employer contributions are pretty generous..)

I have been paying into the pension for the past 5 years and returns have always been above 10% p.a. Unlike the public service, my pension can go up and down and could in theory be wiped out one day.

Public service position:
Gross salary €48k with a 10 point scale bringing it to c. €60k p.a. (before any pay deals)

Trying to take a stab at calculating my final pension in the latter position assuming I travel the scale over 10 years bringing me to age 42 with 26 years remaining to age 68.

I dont dislike my current job so the smallest details will affect my decision
 
Nordkapp said:
You would be entering on the Strand 4 pension with retirement age of 70 and career average earnings. Look at the pension calculator for this on the pensions authority website
Click to expand...

Not sure how this helps, unless of course I am missing something... I don't see how the link can be used to estimate final public service pension given that contributions to same are made using a 2 pronged approach from 2013 onward.. % of net pensionable salary etc.

My likely pension in my current role, subject to market conditions obviously, is simple enough to calculate
 
Feria50 said:
Not sure how this helps, unless of course I am missing something... I don't see how the link can be used to estimate final public service pension given that contributions to same are made using a 2 pronged approach from 2013 onward.. % of net pensionable salary etc.

My likely pension in my current role, subject to market conditions obviously, is simple enough to calculate
Click to expand...

I would have thought this was much more difficult to predict?
The public sector pension post 2013 is now based on 1/80th of your career average salary (not final salary as previously) for each year you have paid in, up to 40 years of service, with a lumpsum of 120/80ths (again based on full service of 40 years). In your own case, you can but additional years at a cost to make up the extra service if you wish. Your career average salary is obviously difficult to predict depending on how quickly you think you will progress etc but I guess you could estimate it roughly looking at the various scales.
 
Thank you Gravitygirl.

Based on real simple numbers, no CPI indexing etc. would this sound accurate:

Say career average salary in the PS of €55k

36 years service bringing me up to 68 birthday

€55k / 80 x 36 = €24,750 p.a.(from my reading the state pension is not added on top)

€55k / 80 x 120 = €82,000 lump sum

versus

Current pension value today €20k

Annual contributions of €6.15k (15% of €41k)

Assumed growth 5% p.a.

Pension value in 36 years = €537k

25% lump sum of €134k

€403k to purchase pension, with state pension of €12k on top
 
Interesting comparison, perhaps others could comment but assuming 5% annual growth each year for the next 36 years seems very optimistic to me (even allowing for the 10% PA already achieved during the past 5 years) - I would also be interested to know how that performance has been achieved this past 5 years
 
planck said:
Interesting comparison, perhaps others could comment but assuming 5% annual growth each year for the next 36 years seems very optimistic to me (even allowing for the 10% PA already achieved during the past 5 years) - I would also be interested to know how that performance has been achieved this past 5 years
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Its an AON Hewitt managed pension. Employees have some limited options to choose from e.g. diversified growth fund, equity fund and 1or 2 others. Mine has been mixed between these 2

Beyond this I dont have a break down of where funds are invested
 
thanks, seems to be performing well, I have no idea what the Irish benchmark is during that period, I will read up on that for my own interest, for you I still think the 5% annual growth assumption every year for the next 36 years is a very optimistic assumption - perhaps you should rerun your simulation with say 1 - 2 % growth
 
While 1-2% growth may be prudent, over a 40 odd year term I think it may be too conservative
 
Do the job that you think you will enjoy the most.

A pension scheme is not a good enough reason to stay/ go from a job and when you have over 3 decades to go before you can actually draw it down, it definitely isn't!! Both positions offer good pension schemes, so I would really look at growth opportunities, enjoyment of your, work environment etc.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
SBarrett said:
Do the job that you think you will enjoy the most.

A pension scheme is not a good enough reason to stay/ go from a job and when you have over 3 decades to go before you can actually draw it down, it definitely isn't!! Both positions offer good pension schemes, so I would really look at growth opportunities, enjoyment of your, work environment etc.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
Click to expand...

Wise words
 
Feria50 said:
Based on real simple numbers, no CPI indexing etc. would this sound accurate:

Say career average salary in the PS of €55k

36 years service bringing me up to 68 birthday

€55k / 80 x 36 = €24,750 p.a.(from my reading the state pension is not added on top)

€55k / 80 x 120 = €82,000 lump sum
Click to expand...

Feria50 - I think your ballpark calculation of pension is essentially accurate. I make it a total pension of about €25,965. But note that this would be composed of 2 elements - an Occupational Pension of €13,572 (yearly accrual of €377) and the State Pension of €12,392. It is a coordinated scheme. I make the lump sum as €74,250 (yearly accrual of €2062.5).

I note that you seem to be comparing this projected pension with no CPI indexing to a private scheme with an assumed future growth rate. Apples and oranges ?

However, I would concur with the observations of Brendan and Huskerdu about not basing your decision on the pension primarily.
 
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To me also it seems you have a long way to go, almost a full working life, you are already addressing the pension issue and, finally, no matter what choice you make (public or private) you will probably be OK on that score, the big question is how do you wish to use and spend these next 36 years, I would say make your choice based on that.
 
Aside from the pension, if you went to the public sector essentially getting a pay rise of 7K before tax, that's a good head start on the salary ladder.

As others have said, find the job you want. Grass isn't always greener on the other side.
 
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