Public sector pensions should be switched to Defined Contribution

Firefly said:
How?

Existing employees
2) The benefits accrued by existing workers would be given a present value and this would be added to their Defined Contribution pot
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I'm referring to this:
Brendan Burgess said:
One of the big advantages of switching to a Defined Contribution system, is that the true cost of employing public servants would be clear and transparent. We should not be deferring these costs.

We would immediately recognise that we have a huge deficit in the public sector pension scheme. This would be good to recognise as it would show by just how much we are living beyond our means.

It would have a cash flow implication for future contributions. The existing ones would have a transfer value but it would be subject to a hair cut as we could not afford it.

Brendan
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Or maybe I've misunderstood something? It appears Brendan intends to value the benefits accrued through the DB scheme, to arrive at a transfer value across to the DC scheme, and apply a (quite vague) haircut to it on its way over...
 
torblednam said:
I'm referring to this:


Or maybe I've misunderstood something? It appears Brendan intends to value the benefits accrued through the DB scheme, to arrive at a transfer value across to the DC scheme, and apply a (quite vague) haircut to it on its way over...
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I see your point. Personally I think existing agreements should be honoured up to a specific day, say 01.01.2018 after which all DB pensions would convert to DC pensions. So for someone who has worked for 20 years already, upon retirement they should receive a DB pension based on 20 years service plus whatever their DC pension pot buys them.

There would be huge initial cost running to achieve this I would imagine but with rates so low I would imagine the government could borrow for for close to zero percent over a long period of time. I think the markets would actually like it too as although our national debt would be increased, we would have drawn a line through a gaping future liability which would taper off at an increasing rate.
 
Brendan Burgess said:
Existing employees
2) The benefits accrued by existing workers would be given a present value and this would be added to their Defined Contribution pot
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would this not be crazy expensive, basically crystallising decades of future liability for a million or so workers?
 
Hello,

For all the logic there is in this submission, there is absolutely no way in hell the politicians will grasp this nettle and why should they, when they can simply ignore the problem and leave it for others to deal with in years to come... and that's before we move on to discussing them possibly doing something that would negatively impact on their own future income.
 
MrEarl said:
Hello,
For all the logic there is in this submission, there is absolutely no way in hell the politicians will grasp this nettle and why should they, when they can simply ignore the problem and leave it for others to deal with in years to come... and that's before we move on to discussing them possibly doing something that would negatively impact on their own future income.
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I wonder how the likes of Eoghan Murphy, Simon Harris, Brendan Griffin and Helen McEntee feel about all this - presumably they'll still be doing the rounds when the chickens come home to roost? All current Ministers (two Ministers of State) and carrying significant portfolios. There must be FF young guns waiting in the wings too, no?
 
Public servants pension entitlements have already been seriously reduced. The majority of low and middle grade post 2013 public servants will pay more towards their pension that they are ever likely to claim in benefits. Their combined pension includes the state pension and they pay for this portion of their pension on the double. They fund this €12,000 approx by paying A rate prsi throughout their career and also by paying a pension contribution of circa 13% of salary including the pension levy throughout their 35 year plus career.

Brendan are you in favour of having the state pension as a defined contribution scheme too? The fact that people can qualify for this having made just 10 years A rate PRSI contributions is rather generous don't you think!
 
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I think that the fairest approach would be to shut down the DB piece and preserve the accrued benefit.

Then just kick off the DC from today.

Basically what happened in BOI and AIB etc.
 
Threadser said:
Brendan are you in favour of having the state pension as a defined contribution scheme too? The fact that people can qualify for this having made just 10 years A rate PRSI contributions is rather generous don't you think!
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Absolutely.

I have been arguing for this for some time. People's PRSI contributions should go into a fund in their own name and their pension should be paid out of that.

You raise a good point about the A rate PRSI.

All I want is that public servants should get the same deal as generous employers pay their staff.

So you should get the Contributory pension and a defined contribution pension.

Brendan
 
Brendan Burgess said:
So you should get the Contributory pension and a defined contribution pension.
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Thanks for your magnanimity, but I already get a contributory pension as part of the current DB scheme as an A class payer; it's subsumed into my pension payment. The value of my DB pension (before you tear up my T&C's), properly stated, is 50% final salary minus whatever the contributory pension is when I retire.

For the very large number of lower grade staff who earn less than 50k, and therefore would be in line for a pension of 20k - 25k, the excess based on the current state pension is about 8k - 12k p.a..

Now I'm no actuary or investments whizz so maybe someone else can quickly tell how far short the current arrangement, whereby the employee pays 6 point something percent contribution plus a pension related deduction, falls short of funding the projected benefits. (Oh, and there's the lump sum on retirement to be factored in too.)

That answer tells you the current level of imputed contributions by the employer.

I expect that as a matter of arithmetic certainty, this imputed contribution by the employer increases as you go up the chain to higher paid staff. However, any studies I've ever seen state that the public/private pay gap is actually negative at senior managerial levels, and I had always put part of that down to the certainty of a DB pension guaranteed by the State.
 
Gordon Gekko said:
I think that the fairest approach would be to shut down the DB piece and preserve the accrued benefit.

Then just kick off the DC from today.

Basically what happened in BOI and AIB etc.
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I can only speak about the BOI pension scheme.

What happened was that a hybrid scheme was agreed & initiated in early 2007 - part defined benefit & part DC so that only a part of the risk falls on the employee.

Crucially ( & thankfully In both myself & my wife's case ) all employees recruited before January 2007 remain part of the original DB scheme which promises a maximum of 2/3 rds of final salary on retirement if one works 45 years.

Importantly neither scheme is integrated with the OAP - truly the Rolls Royce of pensions.

In terms of Brendan's views on Public Sector pensions , allocation of social housing & the level of social welfare payments I think that he is simply whistling in the wind .

FF & FG have been enervated by the rise of the left & as a matter of pragmatism will not reduce social welfare payments but have increased jobseekers & have promised to increase the OAP , the question of social housing will simply concentrate on the provision of same & not on a graded allocation of same , interestingly Brendan Ogle is setting his sights on a movement set on increasing social housing - whatever your views on Mr. Ogle he certainly has a record of delivering results.

The Unions will not stand for such drastic changes to the public sector pension scheme nor will any Government risk the industrial anarchy that will ensue as a result of such changes.
 
Wow, so if you did 45 years in BoI and finished on a salary of say 60k...you got a pension of 40k + the OAP of 12k.
Thats some deal
 
torblednam said:
Thanks for your magnanimity, but I already get a contributory pension as part of the current DB scheme as an A class payer; it's subsumed into my pension payment. The value of my DB pension (before you tear up my T&C's), properly stated, is 50% final salary minus whatever the contributory pension is when I retire.

For the very large number of lower grade staff who earn less than 50k, and therefore would be in line for a pension of 20k - 25k, the excess based on the current state pension is about 8k - 12k p.a..
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I think this is a very important point that torblednam makes. An awful lot of public/civil servants (lower-medium paid) contribute to a pension for up to 40 years and actually come away with very little when the OAP is deducted.
I know the headline of 50% salary for 40 years service sounds great but the reality for many is very different. Especially when compared to someone receiving the OAP who may never have worked in their life.
 
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Is the position that someone on €24k a year for 40 years effectively gets no pension?

i.e. because their 50% is simply the State Pension

They obviously get their €36k lump sum, but that's hardly being in clover.
 
Delboy said:
Wow, so if you did 45 years in BoI and finished on a salary of say 60k...you got a pension of 40k + the OAP of 12k.
Thats some deal
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It's actually better than that - you can retire on full pension after 40 years if the Bank agrees & such agreement is usually forthcoming as I only know a handful of people in BOI aged over 55 & then in due course the OAP kicks in if you attain the appropriate age.
 
Gordon Gekko said:
Is the position that someone on €24k a year for 40 years effectively gets no pension?

i.e. because their 50% is simply the State Pension

They obviously get their €36k lump sum, but that's hardly being in clover.
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Yes, the 12 k CSP is deemed to cover 50% of salary, so no occupational pension paid.

I think the benefit formula is now somewhat more complex, but your principal point is correct.

Your conts will also be low, as they too are adjusted for the CSP.
 
Delboy said:
An awful lot of public/civil servants (lower-medium paid) contribute to a pension for up to 40 years and actually come away with very little when the OAP is deducted.
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Let's be absolutely clear. I want to see fair and generous pensions for all the public service.

If we have a scheme at present that is exploiting low paid employees and "spoiling" high paid employees, then my scheme would redress that.

The public service, low paid or high paid, should get the same generous defined contribution pension as any other generous employer offers. No more and no less.


Brendan
 
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Gordon Gekko said:
Is the position that someone on €24k a year for 40 years effectively gets no pension?
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Does anyone work for 40 years and end up on a final salary of €24,000?

Deiseblue said:
It's actually better than that - you can retire on full pension after 40 years if the Bank agrees & such agreement is usually forthcoming as I only know a handful of people in BOI aged over 55 & then in due course the OAP kicks in if you attain the appropriate age.
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Wow, now I know why my charges are so high.
 
Purple said:
Does anyone work for 40 years and end up on a final salary of €24,000?
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Probably not unless they are working part time/job sharing etc.

Perhaps someone from the CS can outline the top of the scale salary on the lowest grade but I presume it would be around mid 30k?

In my part of the PS, top of the scale on the lowest grade is around €38k if I recall correctly. It takes about 14 years to get there such is the number of increments. And there is quiet a high number of employees on that grade. So they will get a pension of 7k after 40 years service on top of their OAP of 12k.
Hardly stellar
 
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