galway_blow_in
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Meet the new boss - same as the old boss
Sinn Féin Budget reducing the SFT to €1.5M
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clinteastwood
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A hospital consultant getting hammered is a nice problem to have.
Allpartied
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And, indeed, they are well paid, very well paid.
Irish consultants paid €41,000 more than their counterparts in the UK
Irish hospital consultants are better paid than their colleagues in the UK, earning an average salary of €170,000 for treatment of public patients.
www.independent.ie
I agree that they should be well paid and, as someone who has worked in public healthcare for over 35 years, I have seen many of them work well beyond the contracted hours and well beyond their job descriptions. For the most part they are highly committed and well worth their wages.
However, I am a bit confused. Are you saying that public servants who receive a public sector pension, nominally valued at over 2 million euros, will be presented with a tax bill on retirement, even if they have no private pension, no AVC or other pension savings?
Surely they just get their public sector pension ( lets say 100k per annum) and pay the appropriate tax.
If they have to pay tax on some additional pension savings, savings that they haven't previously paid tax on, that's not very pleasant, but it's a problem most people would be delighted to have.
T McGibney
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The guts of 20 years ago, my fit and healthy father suffered a rare illness that is on average contracted by one person a year in Ireland. It isn't normally fatal but the treatment he underwent ended up killing him, basically because Irish-based hospital consultants lacked collective expertise on the condition and how best to treat it. Had the country not undergone a pretty much continuous, and still continuing, brain drain of hospital consultants in the years and decades previously, it's quite likely he would have fully recovered.
By all means, welcome the hammering of hospital consultants if you're so ideologically inclined. But don't be surprised some day if the consequences of that comes back to badly bite you or a member of your family.
No, they're saying that this public service pension of €100k is equivalent to a pension fund north of €2m and that this excess fund above the standard fund threshold must be taxed. The public sector schemes have a deal where they can pay this from their monthly pension over a number of years. DC scheme members have it deducted from their fund immediately on retirement.And, indeed, they are well paid, very well paid.
Irish consultants paid €41,000 more than their counterparts in the UK
Irish hospital consultants are better paid than their colleagues in the UK, earning an average salary of €170,000 for treatment of public patients.
I agree that they should be well paid and, as someone who has worked in public healthcare for over 35 years, I have seen many of them work well beyond the contracted hours and well beyond their job descriptions. For the most part they are highly committed and well worth their wages.
However, I am a bit confused. Are you saying that public servants who receive a public sector pension, nominally valued at over 2 million euros, will be presented with a tax bill on retirement, even if they have no private pension, no AVC or other pension savings?
Surely they just get their public sector pension ( lets say 100k per annum) and pay the appropriate tax.
If they have to pay tax on some additional pension savings, savings that they haven't previously paid tax on, that's not very pleasant, but it's a problem most people would be delighted to have.
Until you have no consultants left to hammer. Genius.
AAAContributor
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Yes.
A consultant at the time of retirement with no private pension or AVCs etc will be entitled to an annual pension and lump sum.
That has to be valued for the purposes of the SFT using 'factors' or a multiplier of the annual pension + the lump sum.
Most cases that value will be over the SFT threshold of €2m and chargeable excess tax of 40% will be due on the difference between the capitalised value of the pension less €2m (with a credit for tax paid on the lump sum).
However, unlike someone with a private pension in excess of €2m who has to pay the tax, the hospital consultant can avail of what's called a 'Loan Option'.
With the 'Loan Option', the employer hospital pays the tax out of it's hospital budget and deducts this from the annual pension over 20 years. It is akin to an interest-free loan.
As most retired consultants are higher rate tax payers, the annual 1/20th deduction is taken from the gross pension and so they get tax relief at their marginal rate.
A further benefit is that if the consultant dies during the 20 years, the debt owing is fully discharged.
Source: https://circulars.gov.ie/pdf/circular/hse/2014/08.pdf
Allpartied
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In the UK, the figures were manipulated and scaremongering was used to enhance pension rights for the very wealthy. As usual, these arguments, about hard working doctors, self sacrificing for the greater good, are used by very wealthy people, to feather their, already, very plump nest.
Doubts grow over number of NHS doctors helped by pension giveaway
New figures reveal only 100 hospital doctors left NHS in 2022 due to voluntary early retirement, despite claims by Jeremy Hunt
www.theguardian.com
In fact, Irish Hospital Consultants are very well paid in the public sector and, many, still have the option to supplement their salaries with private work ( often using publicly funded buildings, equipment and staff) .
I don't think they will be running off anywhere, anytime soon, if the NHS ( where salaries are substantially lower) is a good comparison.
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Dr Strangelove
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I think the point is that they would retire a few years earlier than they otherwise would. This is a big waste of valuable human capital.
I know several middle ranking public servants (not in the health sector) who retired at or around 60, not because of tax, but simply because they were accruing no further pension benefits from working.
I was talking very recently to one senior, career public service manager in his early 50s who actually plans to resign at 55 and live off savings and part-time work rather than stay on and be hammered by the SFT at 60.
No one is suggesting that these people need sympathy, but from a public service delivery perspective it probably doesn’t make sense to give them very, very big incentives to leave early.
Allpartied
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OK, so they, basically, just pay 40% tax on their pension value above 2 million. But they can still take the money and pay the tax over 20 years. So, effectively they are paying the same rate of tax that a working person, earning, 100k per annum is paying?
The other guy, who has a big pension pot, just writes a cheque and the sum is removed from his pension pot?
Not sure if I have that right, but its still not a bad problem to have, compared to the average public sector worker, who will get a pension of 20k per annum ( inclusive of state pension).
You don’t.
It's not a bad problem, but it does disincentivize a consult from working beyond, say 55, as it effectively means a large reduction in their remuneration for the same work.
Allpartied
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I do think there need to be more incentives to encourgage people to stay on at work, if they possess very specialised skills. But these don't just have to be generic changes which benefit the very wealthy.
Flexible pre retirement arrangements or long service paid sabbaticals, for example.
Thanks for letting me know.
Dr Strangelove
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People with very high incomes should (and indeed do) pay high rates of tax.
The issue is that this high rate of tax becomes extremely high (and indeed, some would argue punitive) at a relatively arbitrary threshold by way of the SFT.
Otherwise, I agree that there are probably some clever design solutions to remove these disincentives for high-earning public servants who don’t have the option to stop contributing like people with private sector DC schemes.
Steven Barrett
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The average public sector worker doesn't have to insure themselves to go to work. They don't have to have the same level of training or expertise or make as important decisions about people's lives. Of course consultants are paid significantly more, they are experts in their area of medicine.
There is already a shortage of consultants. The new children's hospital will be full of new equipment but not enough doctors to run them.
Most doctors go abroad to complete their training. Usually to the UK, Australia, Canada or the US. They will simply not return. A lot of time and money is spent on getting these doctors to a certain level and it is then lost to other countries.
My badly explained point is it is not right to provide pension benefits to someone that will automatically lump them with a massive tax bill at the end. Yes, they can get a 20 year interest free loan but what good is this extra money at 85? Lots of them will be dead, others won't really care, it will go to nursing home fees.
Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
Allpartied
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So, let me have a go.
Consultant Pensionable Remuneration 250K ( old D Rate scheme)
40 years Service gives pension of 125K ( assuming retirement at 65)
And lump sum of 375k.
Tax on lump sum is 20% of 175k = 35000
Value of pension for the purpose of SFT is 20 x 125k = 2.5million
Current SFT = 2m
Leaving an excess of 500k and a tax bill of 200k ( minus 35k, paid as part of lump sum?) = 165k
Using the interest free loan to repay, the annual bill is 8500 Euros, or 687 per month.
New proposed SFT = 1.5m
Excess = 1m and a tax bill of 400k - 35k = 365k
Using the interest free loan to repay, the annual bill is 18250, increase of 9750 Euros per annum.
Remembering that the tax bill remains the same, whilst the pension continues to increase in line with Consultant Pay rates, that is not too bad.
In addition, the Widows and Childrens element remains, after death, without penalty, the tax liability being written off upon demise.
The application of PFT is also not included in these calculations.
Have I got that right?
Allpartied
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So no argument, pay is not the issue, as they are among the best paid medical consultants in the world.
The way to overcome the shortage of consultants is to put the resources into training medical staff. Instead of us poaching medical staff from less developed countries lets invest in proper training structures, with a larger pool of medical colleges and well funded training pathways for Irish trained doctors. There is no shortage of people applying, through the CAO, for medical training.
When they go to those countries it is not the salary that retains them, but the ethos and environment in which they work.
Proper structured hours, fully staffed clinics, wards, supports and equipment.
We are gettting there, but the old habits still linger, with hospitals regarded as war zones for trainee doctors, rather than well managed, well staffed centres for learning and controlled supervision.
AAAContributor
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No.
The capital value will be higher for a consultant in the pre-1995 pension scheme retiring today aged 65 with 40 years service.
A substantial portion of the annual pension (the amount accrued as at 31-12-2013) will be capitalised at the 20-cap factor.
However, a sizeable portion will capitalise at a factor of 26 (for a 65-yr old).
The gross lump sum also has to be included for the purposes of the SFT.
All told, the capitalised value is probably somewhere close to €3.2m for a consultant in the scenario that you propose.
Allpartied
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But the PFT of 2.3m would apply up to 2014? and 5.4m up to 2008. Which would make up over half the capitalised value?
So, tax liability would , probably, be substantially lower than my example.
My main point is that very high earners get well paid throughout their career, and pretty well paid in retirement.
These reductions are designed to make best use of public money. Whilst a modicum of assistance to pension fund accumulation is good practice, there needs to be a limit.
Very well paid people have huge potential for investments, savings and other acquuisitions, with their post tax salary. They really don't need excessive help from the ordinary tax payer to inflate their pensions.
AAAContributor
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In your example, the consultant working fully public with no private pension will not have accumulated pension benefits of €2.3m as at 1 Jan 2014 and so could not apply for a PFT of €2.3m.
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