The truly shocking cost of State pensions

Its a pretty factual non emotional non alarmist artical that sheds light on the cost of public service pensions to the state, which in anyones language is absolutely astronomical.
 
Sarenco said:
Some pretty frightening figures in today's IT -

http://www.irishtimes.com/news/politics/pensions-could-make-millionaires-of-civil-servants-1.2814021
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I agree totally that many Public servant pensions are crazy. Ex Ministers on 120k +

That said the most popular grade in the Public Service is a Clerical Officer. A Clerical officer after 40yrs service will have a weekly pension of approx. 350 euro before tax. No old age pension is payed. Not a huge pension by any means after 40yrs on the job.
 
According to the article, the pension paid to the average civil servant who retires at 60 with 40 years of service would cost €1.5 million if bought in the marketplace. The lump sum is extra.
 
Sarenco said:
According to the article, the pension paid to the average civil servant who retires at 60 with 40 years of service would cost €1.5 million if bought in the marketplace. The lump sum is extra.
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That is one hell of a stretch. The average civil servant doesn't get a pension worth €1.5 million. His intention in the article is to skew the figures so that the seemingly excessive pensions of top civil servants are used to tar the whole civil service.

I'm surprised you fell for that one, Sarenco.
 
Páid said:
I'm surprised you fell for that one, Sarenco.
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I just quoted the article! The assumptions re age, marital status, etc. are all detailed in the article.

I very much take the point that larger pensions paid to more senior civil servants will push up the average figure but I've no reason to believe that the €1.5 million figure does not represent the average.

Speaking of larger pensions -

http://www.kenfoxe.com/2016/08/nine...while-16-get-annual-pensions-of-over-e125000/
 
Good at showing in simple terms how alarming (and incredibly valuable) the public sector pension is. However, you will find this benefit is not appreciated or understood across the Civil Service.

The whole pyramid scheme is of course unsustainable but that is over the medium/long term,, and our politicians only look 4 years ahead at best... its bury your head in the sand time again,,,
 
Pension time is far -far -away , stop worrying , the world is due to end on 5th May 2052 , I think its called the Rapture Concert.So those of you who have provided for Earthly Old Age , will lose out , and horror,, the rest go to Hell!

On a serious note though , when the sums on payout don,t add up to the States income in the future years , terms will be changed and pensions will be reduced , but I would suggest not by calamitous amounts..
 
Páid said:
That is one hell of a stretch. The average civil servant doesn't get a pension worth €1.5 million. His intention in the article is to skew the figures so that the seemingly excessive pensions of top civil servants are used to tar the whole civil service.

I'm surprised you fell for that one, Sarenco.
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It seems harder than it should be find out what annuity rates are in Ireland, but from what I remember something as close as you can get to a public sector pension would cost around 36000 euro for each 1000 in pension received. That would be from 65.

However an inflation linked annuity from 60 for a healthy person would be more expensive, think we've a few posters who work in the area so might be able to tell us.

1.5m might buy in terms of annuities for a 60 year old - maybe 30-35k euro? For a 65 year old it should be around 42k (2.8% annuity)

So it wouldn't be a surprise if a package equivalent to a 60 year old retiring civil servant would cost 1.5m.
 
ashambles said:
1.5m might buy in terms of annuities for a 60 year old - maybe 30-35k euro?
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That's probably about right but the example also assumes that the retiree is male and has a spouse that gets half the pension if the retiree dies, that the spouse is three years younger than the retiree, and that the pension increases with inflation, though with a cap of 5 per cent in any one year.
 
Sarenco said:
That's probably about right but the example also assumes that the retiree is male and has a spouse that gets half the pension if the retiree dies, that the spouse is three years younger than the retiree, and that the pension increases with inflation, though with a cap of 5 per cent in any one year.
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If a young person aspired towards a pension of €24,000 per year, which is just below the average for retired civil servants last year, and wanted to retire aged 65, they would have to start investing €15,750 annually from age 25. That is the equivalent of one third of gross income. If they wanted to retire at 60 and started investing at age 20, the starting contribution would be €17,850.
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He states in the article that the average civil servant retires at just above €24,000 per year and that an equivalent fund in the private sector would be worth €1.5m. Both Sarenco and Ashambles seem to agree that a €1.5m fund would result in a pension of €30-35k (up to 40% more than the author states) and using Ashambles figure of €36,000 per €1,000 received would result in a fund worth €860,000 (any of the calculators I used resulted in a similar figure). It's no wonder the actuary wanted to remain anonymous as his/her figures don't stand up. Why are they ignoring the lump sum? It is because it would skew the figures in favour of civil servants?

All of this, by the way, is ignoring the fact that there are more/less lucrative pensions payable depending on whether you started pre or post 1995 or indeed the embargo on recruitment. Both of these will have a considerable impact on the cost of future pensions.
 
Hi Paid

The article doesn't actually say that the average civil servant retires at just above €24,000 and that pension would have a market value of €1.5m. You have combined two discrete and unconnected sentences in the article to arrive at that distorted conclusion.

The article actually says the pension paid to the average civil servant who retires at 60 with 40 years of service would cost €1.5 million if bought in the marketplace and the assumptions underlying that calculation are explicitly set out in the article.

Quite separately, the article says that a pension of €24,000 is just above the average paid to retired civil servants last year. We have no idea what level of service the average pensioner had (some pensioners may only have worked for a few years in the civil service), their gender, age, etc.

I would imagine that the average civil servant with 40 years service would retire today on a pension materially in excess of €24,000 (and, yes, larger pensions paid to more senior civil servants feed into the average figure).

Also, bear in mind that the article explicitly assumes that (a) the pensioner is male with a wife, three years his junior, that will receive 50% of the pension if he dies first; and (b) the pension is index linked (i.e. payments escalate in line with inflation). Both these factors would add very significantly to the cost of purchasing an equivalent annuity on the open market.

So, putting it all together, I agree with ashambles that it is entirely plausible that the pension paid to the average civil servant who retires at 60 with 40 years of service would cost €1.5 million if bought in the marketplace.

And that's just the pension - the tax free lump sum is an additional benefit.
 
Páid said:
All of this, by the way, is ignoring the fact that there are more/less lucrative pensions payable depending on whether you started pre or post 1995 or indeed the embargo on recruitment. Both of these will have a considerable impact on the cost of future pensions.
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The article focuses on the actuarial value of public sector pensions today - it says nothing about the cost of public sector pensions to the exchequer into the future.

That's a whole other discussion but I'm certainly happy to acknowledge that some steps have been taken to contain the pensions bill into the future. The problem is that these measures won't be nearly enough.
 
There are more holes in the article than an African American man after a routine police stop.

All aboard the gravy train!
 
The economist didn't want to be named? I wonder why. The article is woefully lacking in facts, the PS pension scheme in this country is in a shambles.
 
ppmeath said:
The article is woefully lacking in facts, the PS pension scheme in this country is in a shambles.
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All assumptions used in the calculations are explicitly set out in the article. What do you think is missing exactly?
 
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