I am a post-2013 entrant to the public service and I would like to calculate the current value of my occupational pension (Single Public Sector Pension Scheme), given my average salary and contributions to date. I have so far built up a lump sum of approximately €15,000 and an annual pension of €2,500 per annum. Assuming I left the public sector tomorrow and retired later in life at age 65 to 68, what is the present value of my pension?
I have seen in other threads that Revenue will sometimes generate a notional pension pot value by multiplying the recurring annual pension payment by 20 and adding the lump sum. In my case, 15,000+(20*2,500)=€65,000. This looks like a reasonable starting point, but I would like to improve on this estimate if I can.
I am sure that there must be some way of calculating the pension’s value more formally. For instance, is there a database of annuity rates available that might help me? I found a UK-based article which cited an annuity rate of 3.9% for a 65 year old, with payments indexed to inflation (“CPI enhancement”). Does that sound like an accurate number? If so, a suitable multiple for my purposes might be closer to (1/0.039)=25.6 than 20.
The only other issue I can think of is that I might want to discount the future pension cashflows by a rate greater than expected CPI growth. This would mean that simply applying a multiple as above would be overstating the value of the pension in present value terms, as the CPI adjustment would not cancel out with the discount rate adjustment. I do not have very clear thoughts on this point, though I am sure that the risk of non-payment (perhaps observable in sovereign bond markets) or uncertainty about public sector pay policy in future should feed into this discount rate choice somehow.
I wonder have posters thought hard about this issue before or would they have a good sense of how to go about this estimation?
I have seen in other threads that Revenue will sometimes generate a notional pension pot value by multiplying the recurring annual pension payment by 20 and adding the lump sum. In my case, 15,000+(20*2,500)=€65,000. This looks like a reasonable starting point, but I would like to improve on this estimate if I can.
I am sure that there must be some way of calculating the pension’s value more formally. For instance, is there a database of annuity rates available that might help me? I found a UK-based article which cited an annuity rate of 3.9% for a 65 year old, with payments indexed to inflation (“CPI enhancement”). Does that sound like an accurate number? If so, a suitable multiple for my purposes might be closer to (1/0.039)=25.6 than 20.
The only other issue I can think of is that I might want to discount the future pension cashflows by a rate greater than expected CPI growth. This would mean that simply applying a multiple as above would be overstating the value of the pension in present value terms, as the CPI adjustment would not cancel out with the discount rate adjustment. I do not have very clear thoughts on this point, though I am sure that the risk of non-payment (perhaps observable in sovereign bond markets) or uncertainty about public sector pay policy in future should feed into this discount rate choice somehow.
I wonder have posters thought hard about this issue before or would they have a good sense of how to go about this estimation?