SFT and Garda pensions - is this right?

[Dr Strangelove]

The Irish Times has another story about the SFT and makes the following claim about the tax liability:

Garda sources said any long-standing member who applies for the Garda Commissioner’s post, to succeed Drew Harris next year, would face a tax liability of at least €500,000 when they eventually retired. The sources added that the liability is so large they doubted any long-serving Garda members would apply for the job.

Is this right?

I can only find pay scales from a year ago.

Rank	Pay (€ 000)
Commissioner	291
Deputy Commissioner A	187
Assistant Commissioner A	165

The delta in going from Deputy Commissioner to Commissioner is €104k. For a pre-2013 entrant to AGS this will mean an retirement 30/60*€104k=€52k additional annual pension and 90/60*€104k= €156k additional lump sum.

So an additional €52k in annual pension. Assume a valuation factor of 30 for a 59 or 60 year old retiring. So €1.56m in capital value of the additional pension plus €156k lump sum.

This gives a €1.72m in additional capital value of the pension. Would this produce a €500k tax liability? I struggle with SFT calculations.

Even if the €500k tax liability calculation is correct, would they ever be financially worse off than if they stayed at Commissioner level?

 

[Steven Barrett]

I didn't see where they got the numbers from either. Public servants can also get a 20 year interest free loan off the State by taking a reduced pension for that period, so it would be €25,000

That would be a pension of €145,500 less €25,000 = €120,500 on a Commissioners pension at 60 or a Deputy Commissioners pension of €93,500.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[Dr Strangelove]

Public servants can also get a 20 year interest free loan off the State by taking a reduced pension for that period, so it would be €25,000

And isn't it right that if you die before the 20 years is up the loan dies with you?

For example a 60-year old Irish male only has a 10% chance of dying before 70 and a 35% chance of dying before 80.

 

[Gordon Gekko]

I suppose the counterargument is that it should die with them, given they’ve died and therefore haven’t collected the money.

If I have €3.5m in my fund, I actually have it. A public servant with a notional €3.5m hasn’t got it yet, and doesn’t get it if he or she dies.

 

[Steven Barrett]

And isn't it right that if you die before the 20 years is up the loan dies with you?

For example a 60-year old Irish male only has a 10% chance of dying before 70 and a 35% chance of dying before 80.

Yes, it dies with them.

I suppose the counterargument is that it should die with them, given they’ve died and therefore haven’t collected the money.

If I have €3.5m in my fund, I actually have it. A public servant with a notional €3.5m hasn’t got it yet, and doesn’t get it if he or she dies.

A valid point.

 

[BlackandBlue]

public servants can also get a 20 year interest free loan off the State by taking a reduced pension for that period

I have seen this (or similar) several times.
Does anyone have a link?