galway_blow_in
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Meet the new boss - same as the old boss
Meet the new boss - same as the old bossam I correct in saying this has no impact on public sector workers who have in effect achieved same through DB scheme?
One rule for private sector and another public.
A hospital consultant getting hammered is a nice problem to have.100%. To get a PFT, your pension must be over the new lower threshold when it comes in, not the projected value. This especially applies to those in DB pensions.
Hospital consultants are already getting hammered with a pension threshold of €2m, with all of them breaking it. A drop of €500,000 in pension threshold will cost them €200,000 in tax and the remaining €300,000 will be taxed under PAYE. They will get €156,000 out of that €500,000. An effective tax rate of 68.8%
*assuming no personal fund threshold.
Steven
http://www.bluewaterfp.ei (www.bluewaterfp.ei)
The value of a hospital consultant's public service pension is over €2m without AVC's or personal pensions. In other words they are in a compulsory scheme that will give them a massive tax bill at retirement, which will reduce the pension that they are entitled to.
As for sympathy, recently qualified doctors are very badly paid and work long hours. They tend to be sent to different hospitals around the country. Most have to go abroad to complete their training. They usually get consultant status in their mid to late 30's. And then they have to deal with the HSE and hospital administrators for their working careers. Given the importance of the job they do and the amount of training they have completed, they deserve their money.
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.A hospital consultant getting hammered is a nice problem to have.
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.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.
Until you have no consultants left to hammer. Genius.A hospital consultant getting hammered is a nice problem to have.
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?
Until you have no consultants left to hammer. Genius.
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 don't think they will be running off anywhere,
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
You don’t.Not sure if I have that right
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.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).
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.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 bythe 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.
Thanks for letting me know.You don’t.
People with very high incomes should (and indeed do) pay high rates of tax.But these don't just have to be generic changes which benefit the very wealthy.
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.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).
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.I don't think they will be running off anywhere, anytime soon, if the NHS ( where salaries are substantially lower) is a good comparison.
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
So no argument, pay is not the issue, as they are among the best paid medical consultants in the world.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.
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.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.
When they go to those countries it is not the salary that retains them, but the ethos and environment in which they work.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.
Have I got that right?
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?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.
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.
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