Another point that seemed to be brushed over was that the public sector pay cuts seem to be well in excess of those in the economy. They conceded that the economy will constrict by 5.7%, yet the public sector workers received a 7-8% pay cut earlier this year and are facing another or similar magnitude in the Budget.
http://www.rte.ie/news/2009/0203/economy.htmlBut the 7-8% was on the gross. After tax relief it is in reality a 3.5%-4% reduction of take home pay. And this money will be given to the employee anyway when he/she retires.
Hardly a pay cut. A pay deferral would be a more appropriate term.
I would have thought this was clear by now given people have received a number of pay packets and would have been able to figure it out categorically.A person earning €15,000 gross would pay a pension levy of 3% and the levy rises gradually thereafter.
* 5% on a salary of €25,000
* 6.4% on €35,000
* 7.2% on €45,000
* 7.7% on €55,000
* 8.1% on €65,000
* 8.5% on €85,000
* 8.8% on €100,000
* 9.2% on €150,000
* 9.4% on €200,000
* 9.6% on €300,000.
Originally Posted by VOR http://www.askaboutmoney.com/showthread.php?p=937169#post937169
But the 7-8% was on the gross. After tax relief it is in reality a 3.5%-4% reduction of take home pay. And this money will be given to the employee anyway when he/she retires.
Hardly a pay cut. A pay deferral would be a more appropriate term.
The money gained from the pension levy (also applied to public sector workers who already paid into their pension fund) went back to the Government. It didn't go into any pension funds so the employee does not get the money back when s/he retires so yes, its definitely a pay cut.
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This is the bizarre sort of logic that gets me angry. So what if the money from the levy goes goes straight into the general current account. Thats where you get your pension from. Around €2 billion a year comes out that same current account to pay pensions. Thats around 10% of overall pay bill for the public sector and climbing every year. The Government are not saying that we taking this money off you for you never to see it again. They are simply asking you to make a contribution (small one) to help cover the cost of the pension.
You can argue about the fairness of the levy etc and you would have a point but don't pretend that you never see that money again at retirement. You get that money back and more.
They are simply asking you to make a contribution (small one) to help cover the cost of the pension.
Those examples explain it to me but I don't reach the same conclusion as you, or the article for that matter. I may be going crazy through stat overload.I would expect it to show 8% gross and 4% net reduction.
From the SBP - [broken link removed]
If you work within the public service you will see a dent in your take home pay to the tune of about 4 per cent on average as a result of the new pension levy.
1) Mark is a 27-year-old clerical officer working in the civil service for the last three years. He earns a gross annual salary of €26,672. The gross impact of the pension levy will mean a 5.3 per cent drop in his salary. However, once the tax relief is applied the net effect is that his salary will fall by 4 per cent.
This translates to a net loss of €1,077,which equates to roughly €90 less in his monthly pay packet - the equivalent of about nine cinema trips or roughly the cost of taxing a small car for six months.
Mark will now pay a total of €4,501 each year in tax, PRSI, levies and pension contributions. This is 17 percent of his total salary.
This is the bizarre sort of logic that gets me angry...
In defence of PS workers, the pay cuts in the private sector are also on gross pay and so are also a lot less after tax.
My wifes a public sector worker as are some friends of mine. The big gripe they have over the pension levy is that it does not go into a ring fenced scheme. When you add the pension levy to the pension contributions that they already pay and take into their Class A PRSI contributions (they only get 1 pension - 50% of salary inclusive of SW contrib. pension), they are paying way over the odds for their pensions - more than the typical employee in most medium to large companies in Ireland. Certainly my wife is paying a much higher rate of contribution that I have in private sector jobs I've done and is getting a lower pension at the end. A lot of public sector workers will now pay much more in contributions in pure cash terms than their pensions will ever be worth. My wife is paying close to 20% out of her own pocket, not counting her employers PRSI contributions which are supposed to go towards the SW pension.
The other anxiety that public sector workers have is that they do not believe that their pensions will be there by the time they reach retirement. They are bottom of the priority list for the Government when it comes to paying bills and are being gradually eroded over the years. Most younger public sector workers believe that by the time they retire, they'll be getting little more than whatever the SW pension is at that time. They just dont trust the Government with their contributions and are uncomfortable with the fact that they are being spent as current expenditure rather than being put in a pension fund.
The solution to all this is to put all public sector workers on a defined contribution scheme. At the rate of contributions most make, they would be a lot better off. I am aware that many of my PS friends are scared of DC pensions because they are unfamiliar with them and they read all the horror stories in the press. But, even if the stock markets tanked a few times during a public servants 40 year career, I honestly believe that they would still have much higher pensions on the same contributions than staying in the government scheme. I've advised my wife that if at some stage in the future, public servants are offered a DC scheme, she should sign up.
But the main difference between public sector and private pension is that with the public you are guaranteed the 50% of salary. You can't beat it and as for the private pensions, it could be any figure depending on markets at the time.
I'm not sure what the point is here as I don't think anyone has praised Irish DC pensions, certainly no one relying on one will.And lets not forget we've got some of the best pension fund managers in world here in Ireland!
My wife is paying close to 20% out of her own pocket, not counting her employers PRSI contributions which are supposed to go towards the SW pension.
they are paying way over the odds for their pensions - more than the typical employee in most medium to large companies in Ireland. Certainly my wife is paying a much higher rate of contribution that I have in private sector jobs I've done and is getting a lower pension at the end. A lot of public sector workers will now pay much more in contributions in pure cash terms than their pensions will ever be worth. My wife is paying close to 20% out of her own pocket, not counting her employers PRSI contributions which are supposed to go towards the SW pension.
But surely if DB pensions are so good, then we should aspire to them for everybody?
Making the cost more clear and transparent would be helpful.
Or else switch to DC, but with min 20%, more like 25% cont. rates, with 10-15% from the employer.
There is absolutely no chance that these same conts going into a DC fund would ever be enough to fund a 150% lump-sum and a 50% pension.
This makes the huge assumption that someone retires on the same salary they started on - does this happen often in practice? I think starting pay in the CS in the mid 1980s was around €8,000 - a starter back then (age 40-ish now) will be earning quite a bit more now don't you agree? Even the most unambitious will get the annual increments which are separate from inflation. Many will get promotions from CO to EO or EO to HEO and PO etc. But salary contributions all along are based on salary at the time - so you start contributing as a % of a low salary but get a pension based on a much higher final salary. Your argument would be a bit more valid if pensions were based on average career salary (not very appealing though is it?) - but even then the in-retirement link to workers grade inflation makes the pension a lot more valuable than you are either aware or care to admit.People can juggle figures all they want, but if you contribute 20% of your salary for 40 years, it means that you have contributed 8 years salary in total by retirement. This should give you 16 years on half pay.
I hope that if public servants ever get a choice of defined contribution or continuing as is, that you are the one advising them.Public servants would be better keeping the money and putting it in a post office savings account.
it means that you have contributed 8 years salary in total by retirement
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