sector_001
Registered User
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- 13
Hiya!
Mrs Sector started a public sector job that comes with a DB pension (they call it "superannuation").
I am wondering whether she should (if it is allowed) explore dropping out of this pension scheme and setting up a private PRSA DC-type plan.
Here's what puzzles me.
Salary €43K
Annual pension-related gross deductions = €4.3K
- incl PRD pension levy & various Superannuation EE contributions.
10 years from now, if she leaves and freezes her entitlements, I reckon she'll have:
- €43,407 Total Gross Pens contributions
- (€26,044 Total Net Pens contributions.... net of 40% PAYE marginal tax rate)
and would then be entitled to (from age 65):
- €16,032 Tax-free Lump Sum
- €2,350 Gross Annual Pension
- (€1,316 Net Annual Pension assuming we're in 40% tax band but ignoring PRSI, USC)
I reckon that means she'll have to receive the pension for 11.6 years before she breaks even.
.... (43,407-lumpsum) / gross annual
I have not built in any assumed salary increases into the calculations (she gets no increments), but let's say if there ever are any they will likely to first order equate to inflation. So it's safe enough to stick to present day value calculations.
If I was putting €43.4K into a DC pension over 10 years and had 5+ years further to retire, that's give me a min 15 year investment horizon. Factoring in an ARF scenario, I'd cautiously call it a 20 year investment horizon (plus a further 10 year drawn down), I'd be disappointed with lower than a 5% APR on the 15 years.
That should certainly equate to a DC pension pot worth €70.7K at age 65.
Which even just drawing down 5% pa is €3.5K DC pension drawn down.
So why not exit the golden public sector pension??
Mrs Sector started a public sector job that comes with a DB pension (they call it "superannuation").
I am wondering whether she should (if it is allowed) explore dropping out of this pension scheme and setting up a private PRSA DC-type plan.
Here's what puzzles me.
Salary €43K
Annual pension-related gross deductions = €4.3K
- incl PRD pension levy & various Superannuation EE contributions.
10 years from now, if she leaves and freezes her entitlements, I reckon she'll have:
- €43,407 Total Gross Pens contributions
- (€26,044 Total Net Pens contributions.... net of 40% PAYE marginal tax rate)
and would then be entitled to (from age 65):
- €16,032 Tax-free Lump Sum
- €2,350 Gross Annual Pension
- (€1,316 Net Annual Pension assuming we're in 40% tax band but ignoring PRSI, USC)
I reckon that means she'll have to receive the pension for 11.6 years before she breaks even.
.... (43,407-lumpsum) / gross annual
I have not built in any assumed salary increases into the calculations (she gets no increments), but let's say if there ever are any they will likely to first order equate to inflation. So it's safe enough to stick to present day value calculations.
If I was putting €43.4K into a DC pension over 10 years and had 5+ years further to retire, that's give me a min 15 year investment horizon. Factoring in an ARF scenario, I'd cautiously call it a 20 year investment horizon (plus a further 10 year drawn down), I'd be disappointed with lower than a 5% APR on the 15 years.
That should certainly equate to a DC pension pot worth €70.7K at age 65.
Which even just drawing down 5% pa is €3.5K DC pension drawn down.
So why not exit the golden public sector pension??