The truly shocking cost of State pensions

Sarenco said:
An annuity that pays a 60 old man €30k pa, indexed for life with a surviving spouse benefit of 50%, would cost a heck of a lot more than €1m, at current annuity rates.

Also, the article only refers to civil servants - not public servants more generally.
Click to expand...

How much is "a heck of a lot"?
 
Gordon Gekko said:
Doesn't a pension of €30,000 cost around €1,000,000 in the open market?

That's the pension for a public servant on €60,000.

No way €60,000 is the average salary in the public sector.
Click to expand...

The average pension according to the article is just above €24,000 which would put the average salary on retirement at ~€48,000.

You could blindly accept what the author is saying or you could critically assess it. The burden of proof is on the author making the claims yet he doesn't;
  • Provide the name of the actuary or the name of the company where they work.
  • Provide the figures gleaned from the pensions authority calculator he mentions
  • Provide any details of the "annuity calculator supplied by a major financial services firm" or name that firm
  • Provide verifiable figures to back up this statement "Demographic trends indicate that the system is unsustainable."
In a nutshell he is comparing the pension a civil servant receives (having accrued it over 40 years with all his presumptions) to what it would cost is purchased today. Why is that even a valid comparison? It would be if you were selling a house.

Sarenco (or anyone else), is there a calculator available online that can verify the authors claim that a €24,000 pension is valued at €1.5m? With or without the lump sum of €72,000.

For a lie to be believeable there must be a grain of truth in it. This article is nonsense.
 
This is the mother of all ponzi schemes! Bernie Madoff would be proud. If the government had any sense they would immediately convert all defined benefit pensions to defined contributions from this point on (I would be ok with the benefits up until now). This would draw a clear line in the liability for future taxpayers. I'm actually a little surprised the workers and unions are not pushing this - they must all know deep down that at some point in the future the cash just won't be there. Wouldn't a defined contribution be a better bet - afterall the money would be privately owned by the worker. For the record, Mrs. Firefly is back working at the HSE.
 
Paid,

On k100 accumulated on a pension fund, will make a pension @3% on an annuity pension for 20 years starting @65 = circa 6500 a year of a pension without indexation etc.
Means that to get pension of k24 the value of pension in todays buying terms = @ a minimum k370.
Indexation and spouses/survivors add ons will increase that to well above k 370.
As a stab @ it , average k24 pension in public service = k500 in todays terms.
But spreading that state cost over 20 years makes the k500 just a figure.

The crunch will come when State can,t afford the annual known pension bill,
If that happens , State pensions will be cut !

Apart from people living longer and demographics , no-one can predict the future, we are maybe viewing things a bit too pessimistically.
 
Gerry Canning said:
Paid,

On k100 accumulated on a pension fund, will make a pension @3% on an annuity pension for 20 years starting @65 = circa 6500 a year of a pension without indexation etc.
Click to expand...

Where do you get these figures from.

I would have expected a €100k pension pot to produce a much smaller pension than the €6,500 pa you suggest.

I must admit I am finding it hard to find a published annuity rate.
 
just to add hopefully some clarity to the discussion ( argument?) .
I have sourced an indicative annuity quote for the following;
  • Male age 65 female age 62
  • Fund to buy annuity is €1mio
  • The annuity inflates at 3% per annum
  • The annuity provides for a 50% spouses pension
  • The guaranteed term is 5 years
  • nil commission
  • The annuity income is €19,542.20
and I now tiptoe quitly away....
 
creemegg .

It seems that pension annuities pay about 3% per annum .
So k100 by 3% over 240 months = 554 per month = 6648 per annum . (not very scientific)
North Stars is much better,and more a worry !
 
And here's an indicative quote based on the criteria described in the article, ie:
  • Male age 60; female age 57
  • Fund to buy annuity is €1,500,000
  • The annuity increases in line with inflation, subject to a cap of 5% per annum
  • The annuity provides for a 50% spouses pension
  • The guaranteed term is 5 years
  • nil commission
  • The annuity income is €23,542.20
That's an annuity rate of 1.572%.
 
And another indicative quote for a €1,000,000 fund:-
  • Female age 60; Male age 62
  • Fund to purchase annuity is €1,000,000
  • The annuity increases in line with inflation, subject to a cap of 5% per annum
  • The annuity provides for a 50% spouses pension
  • The guaranteed term is 5 years
  • Nil commission
  • The annuity income is €16,772.20 (€322.54 per week)
 
Sarenco said:
And here's an indicative quote based on the criteria described in the article, ie:
  • Male age 60; female age 57
  • Fund to buy annuity is €1,500,000
  • The annuity increases in line with inflation, subject to a cap of 5% per annum
  • The annuity provides for a 50% spouses pension
  • The guaranteed term is 5 years
  • nil commission
  • The annuity income is €23,542.20
That's an annuity rate of 1.572%.
Click to expand...

From who ? Or are you going to make us guess?
 
My indicative quotes were sourced from Irish Life.

I would encourage you to obtain alternative quotes for comparison/verification purposes.
 
Sarenco said:
And here's an indicative quote based on the criteria described in the article, ie:
  • Male age 60; female age 57
  • Fund to buy annuity is €1,500,000
  • The annuity increases in line with inflation, subject to a cap of 5% per annum
  • The annuity provides for a 50% spouses pension
  • The guaranteed term is 5 years
  • nil commission
  • The annuity income is €23,542.20
That's an annuity rate of 1.572%.
Click to expand...
That is absolutely amazing stuff! Who in there right mind would purchase an annuity at these kinds of rates. I mean, if you had savings of €1.5M at 60 and (say) expected to live to the ripe old age of 90, you could cream off 50k per year for 30 years rather than purchase an annuity, and surely you'd have gained a little interest over those 30 years also :) Sounds like those guys that supply annuities are on a very good thing!!!
 
Sarenco said:
My indicative quotes were sourced from Irish Life.

I would encourage you to obtain alternative quotes for comparison/verification purposes.
Click to expand...
I would like to verify the quote you posted. Is this the calculator you used - [broken link removed]
 
I actually got the quotes through my broker. 10 minute 'phone call and he emailed me the figures.
 
Here's what i got from from Irish Life

Annuity Details
Quote Basis: Standard
Quote Date: 06/10/2016
Interest Rate: 0.31%
Payment Frequency: Monthly
Currency: Euro
Pension Type: Compulsory Purchase
Pension Details
Available fund: €1,000,000.00
First Life Pension Amount: €20,922.20
Second Life Pension Amount: €10,461.10
Escalation Type: None
Escalation Rate: 0%
Investment Protection: No
Guarantee Period: 5 years
Commencement Date: 06/10/2016
Commission: 2%
Reversion %: 50.0
Overlap Indicator: No
Beneficiary Details
First Life: Ringo Star
DOB: 07/04/1967
Gender: Male
Second Life: Mrs Star
DOB: 07/04/1967
Gender: Female
 
Hi Sarenco,

Thanks for those numbers - they really made me sit up!

If you wouldn't mind could you provide the numbers for someone retiring at 65 with an annuity of 1m?

Thanks,
Firefly.
 
You must log in or register to reply here.
Back
Top