Public Service Pensions: 5.2% seems a lot?

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new paye worker

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I have just joined the public sector, aged 29, and have to join the compulsory pension scheme, it works out at about 5.2% of gross pay, is this a lot??

I know is never to early to start etc, but it just seems like a hell of a lot of money.
 
Public sector pensions

> I know is never to early to start etc

Actually not everybody agrees that this is so - particularly if you don't already own your own home. For example here's Brendan's view...

www.askaboutmoney.com/guide/ch11.htm

> but it just seems like a hell of a lot of money.

I wouldn't have thought that 5.2% was outrageous for a 29 year old. In fact I reckon it's too low but it depends on what you pension savings goals are and what sort of scheme you are in (e.g. is your scheme a defined benefit or defined contribution scheme and/or is superannuation separate etc.?).

In my own situation ... during my late 20s and 30s (so far) I've generally tried to maximised my occupational, personal and PRSA (defined contritbution pension) contributions to the relevant agre related tax/PRSI/health levy exemption ceilings...



but what's appropriate depends on the individual to a large extent.
 
Hi NPW,

The scheme is compulsory so you dont have a choice. In general (at present) public secor superannuations are regarded as a good thing.

They are normally of the defined benefit DB kind. This means that you retire on a proportion of your salary at retirement. The proportion depends on the number of years served. Your employer promises to pay this even if the stock markets go badly. So the employer takes all the risk and you take none.

There are two types of public sector superannuation schemes funded and unfunded. Funded schemes as in the ESB the employee makes contributions (and the employer makes matching contributions) and the contributions are invested in a fund. The pensions of retiring employees are paid from this fund. Minimum funding regulations (try to) ensure that such funds are kept solvent.

In unfunded schemes as exist in the civil service proper the government take a contribution and promise to pay your pension out of day to day funds as the need arises.

One of the problems associated with the funded superannuation scheme arises when a commercial semi state (Irish Shipping) (Irish Fertilisers) go belly up or are other wise unable to meet their penion liabilities. In these cases the risk rebounds on to the employee and you might find yourself retiring on a proportion of what you expected. Many funds have performed badly over the last few years and the likelihood is that some of them at least may reneig on their commitments.

Unfunded governement schemes may seem a safer bet especially since Charlie McCreevy has set up funds for this purpose.

Another thing to bear in mind with these public sector schemes is the "Death in Service" benefits which might obivate the need for private life assurance cover.

caveat: Im not a pensions expert (everything I have learned I have learned here on AAM since last september since I started posting)

Good luck in your new job.

ajapale
 
6.5%

The normal contribution rate in public service pension schemes is 6.5% by the employee.
 
Hi Ajapale,

thanks a mill for the detailed response (and the good wishes) it has made for very informative reading, seems like I am actually on an ok deal.

Onething I wanted to check (with u or anyone out there) is:

Another thing to bear in mind with these public sector schemes is the "Death in Service" benefits which might obivate the need for private life assurance cover.
Click to expand...
Haveing got the job I am now getting a mortgage (the rebel years are over) and in line with advise elsewhere on this forum have opted for the cheapest mortgage protection life cover available. My next question was did I need private life cover? Is it off any benefit to the people in the public sector? Am single with no dependents
 
New PAYE worker:

As a single person with no dependents I don't see any reason for you to take out a private life assurance policy.

When/if your circumstances change, you can then decide to review your life assurance requirements.

Marion :hat
 
Thanks for that, one final thought (last one I promise) have checked it out and work will pay for up to six months full pay on sick leave and half pay after that. Is there any point getting insurance on top of that or will insurance companies even do better than that.

thanks again
 
I think you have to be employed for more than 3 years to qualify for the generous sick leave entitlements.
ajapale
 
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