NoRegretsCoyote
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The fear is that they means test contributory state pension.Can I ask if your not going to start a pension for fear that a personal pension might disqualify from the state pension
What are you going to do with the excess income that is not been invested in a pension ???
Just because the pension system will become unaffordable does not mean it will be reformed.The fear is that they means test contributory state pension.
I am convinced this is going to happen. The demographics and dependency rate point to this.
I also think they are going to move on pension assets. The pension levy - double it.
Its an easy one to collect at source.
Contributions to the social insurance fund in 2019 were around €11.5billion.Except that PRSI brings in about € 10B and Social Welfare spending is about € 20B so where is the insurance in that?
Any private insurance running on that basis would be out of business in a flash
That essentially means the abolition of the State (Contributory) Pension, leaving us with the State (Non-Contributory) Pension (which is already means tested).The fear is that they means test contributory state pension
Pension | Minimum Wage | National average earnings (NAE) | NAEx2 | NAEx3 |
€238.30 | 4.9 | 1.6 | 0.8 | 0.5 |
That is a very good outcome for the average full time worker, even for those earning up to NAEx2 above, €74k.I've adapted table 11.1(a) from the review of the social insurance fund at end 2015.
It basically compares lifetime contributions and drawdowns for workers with a full contribution history at a variety of income levels. Average wage is €37k pa and is assumed not just state pension contributory but also invalidity, illness and jobseeker’s Benefits, also survivors' benefits. Standard actuarial assumptions for indexation and investment growth are used.
Pension Minimum Wage National average earnings (NAE) NAEx2 NAEx3 €238.30 4.9 1.6 0.8 0.5
A value of 1 means that lifetime contributions and drawdowns are balanced. A value >1 means someone receives more than they have paid in, and a value of <1 means less. Remember it includes employers' PRSI too.
It shows that low-wage workers do very well out of the social insurance system. This is as you would expect due to its flat-rate nature. Higher-paid workers pay in much more than they take out.
They don't show average full-time wages which are around €48k, but if they did the value would be 1.2 or so. So we can say that the average full-time worker gets about 20% more than what they put in to the social insurance system over a lifetime.
I've adapted table 11.1(a) from the review of the social insurance fund at end 2015.
It basically compares lifetime contributions and drawdowns for workers with a full contribution history at a variety of income levels. Average wage is €37k pa and is assumed not just state pension contributory but also invalidity, illness and jobseeker’s Benefits, also survivors' benefits. Standard actuarial assumptions for indexation and investment growth are used.
Pension Minimum Wage National average earnings (NAE) NAEx2 NAEx3 €238.30 4.9 1.6 0.8 0.5
A value of 1 means that lifetime contributions and drawdowns are balanced. A value >1 means someone receives more than they have paid in, and a value of <1 means less. Remember it includes employers' PRSI too.
It shows that low-wage workers do very well out of the social insurance system. This is as you would expect due to its flat-rate nature. Higher-paid workers pay in much more than they take out.
They don't show average full-time wages which are around €48k, but if they did the value would be 1.2 or so. So we can say that the average full-time worker gets about 20% more than what they put in to the social insurance system over a lifetime.
It is (roughly) the mean full-time wage for whole workforce.i thought circa 48 k was the average wage in the public sector
It's a very good deal for MW workers and not surprisingly a very bad deal for someone like a hospital consultant.
You are right. I've edited my post.It is NOT the median.
The failure to deal with the pensions issue is the reason we are in the position we are. The issue has to be addressed at some point.Just because the pension system will become unaffordable does not mean it will be reformed.
The alternative is to take money from elsewhere to support pension spending.
For example the agricultural economy is unaffordable and has been for many years, but it is funded by taking money from elsewhere.
I suspect a significant VAT hike or some other such thing will be used to pay for pensions. I do not expect that pensions will be cut.
The reason we are in this position is because there will in coming decades be a significant change in the ratio of people of working age to people of pension age.The failure to deal with the pensions issue is the reason we are in the position we are.
Funds will have to come from somewhere certainly.The issue has to be addressed at some point.
VAT applies to all goods and services, even if some goods are zero rated. It is impossible to avoid paying VAT. Though of course the source of funds may be something else. I suggest VAT as a possibility because it is so broad in its application.A VAT hike is unlikely to work as it gives people some control in spending so people may purchase less of the good/service to reduce the cost and therefore reducing income to the State.
It is not a pyramid scheme. The idea that todays worker is putting money aside through the social wlefare system to fund his/her retirement is not applicable.The state pension is actually a pyramid scheme. We should be investing (or at a min not raiding the pension fund) when we are in financial need as a state.
I am not sure what you are saying different to what I have said in the first point. We are not dealing with the issue we know is coming.The reason we are in this position is because there will in coming decades be a significant change in the ratio of people of working age to people of pension age.
Funds will have to come from somewhere certainly.
VAT applies to all goods and services, even if some goods are zero rated. It is impossible to avoid paying VAT. Though of course the source of funds may be something else. I suggest VAT as a possibility because it is so broad in its application.
It is not a pyramid scheme. The idea that todays worker is putting money aside through the social wlefare system to fund his/her retirement is not applicable.
Todays workers pay for todays pensioners, just as they pay for todays children including the education system.
Very soon the PRSI contributions of workers will not be sufficent to pay the pensions of retired people.Todays workers do indeed pay for todays pensioners which is exactly the same as a pyramid scheme. Those who contributed in the past are receiving funds from todays workers. This model wont work if the number of workers to pensioners increases and the burden of funding pensions in the future fall on a smaller number of workers and pensioners expect to receive the same pension in todays terms in the future.
Quite - unfortunately the number of "other sources" is rather limited
1. Increase income taxes
2. Increase PRSI and/or USC (these are just income taxes in my eyes)
3. Increase VAT
4. Increase corporation tax
5. Reduce spending elsewhere - education, health being the big spenders
Options 1-3 are generally paid by individuals (in the case of VAT, eventually) out of income so expect a big moan
Option 4 - would seem to be a no, no but Hey?
Option 5 - difficult to do
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