A cut in the basic rates of the State pension must be considered as an option to ensure its sustainability, officials at the [broken link removed] have argued.
An expenditure review drawn up by departmental officials has expressed strong concerns about the future of expenditure levels on the State contributory and non-contributory pensions, and related universal benefit schemes for older people.
It has suggested that, without changes and in the face of demographic pressures, the State could have to provide annual increases in funding of nearly €200 million in these areas up to 2026.
I wonder if they looked at cutting public service pensions?
Didn't they change the terms of the public service pension a few years back? Isn't it based on average salary instead of final salary?
I don't agree that the Old Age Pension should be means tested. People have made PRSI contributions all their working lives and for those who were self employed, it is the only benefit they get from their contributions. They should not then be penalised because of the negligence of successive governments in ignoring the well publicised pension problem. Means test the ancillary benefits such as free travel, coal allowance etc but not the main benefit.
Instead of just cutting benefits, why don't the government put a fund in place to pay for these pension benefits in the future...
...oh, yeah
Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
The longer this problem is allowed to fester, the more unpalatable the solutions.
Didn't they change the terms of the public service pension a few years back? Isn't it based on average salary instead of final salary?
Instead of just cutting benefits, why don't the government put a fund in place to pay for these pension benefits in the future...
...oh, yeah
Absolutely right. And let's not forget the cost in tax foregone of tax relief on private pension contributions too.It is certainly about time that we started an honest discussion in this country about all State pension liabilities (public sector, contributory OAP and non-contributory OAP). The longer this problem is allowed to fester, the more unpalatable the solutions.
I'm not quite sure how you worked out that your view was 'widely held', but that's probably for another day. I'm also quite unclear as to why you think it would be OK for any employer, public or private, to walk away from contractual commitments to employees, past or present. Employees made career decisions and life decisions based on these contractual commitments. In particular, many employees accepted lower salaries that they could achieve elsewhere based on the commitment of particular pension benefits. And I'm not sure what kind of constitutional amendment might be involved - presumably you're talking about some kind of amendment to the rights to private property? If you think any such amendment would be taken lightly by much of the population, you are badly mistaken.I would agree with the widely held view that public sector pensions are overly generous and career averaging should be introduced immediately for all such pensions (whether in payment or otherwise). Alternatively, a pro-rata reduction of all such pensions may be more equitable/easier to administer. There are obviously legal issues here but there is precedent for a constitutional amendment to resolve such issues.
Such contributions are quite meaningless without comparing overall costs of living and overall state supports provided. What value do you put on the NHS, for example, and how much of the 40% gap you mention would be accounted for the gap in health services provided by the State.However, I think we also have to accept that OAPs (both contributory and non-contributory) are overly generous - the contributory OAP rate is almost 40 per cent higher than the UK equivalent!
Yes, fully agree.I strongly disagree with the suggestion that contributory State pensions should be cut for those with private pensions. Firstly, the contributory pensions have been funded over a working lifetime by way of PRSI contributions. Secondly, why would anybody make private pensions contributions if they are going to be effectively penalised? Ultimately any reduction in the amount of the contributory pension that is linked to the existence of a private pension (or any other private means) will be counter-productive and will simply exacerbate the problem.
Yes and no. Yes, the sooner we start addressing it, the better. But we are just getting our heads back above water in terms of the national economy. I'm guessing that if you were advising a young couple who were just getting their heads above water financially, but who's stability over the next few years was quite uncertain, pension contributions would be the last thing on your mind.I think that this is really the key point.
The solution now will not be palatable. But it might be manageable. If we leave it, it will be neither palatable nor manageable.
We have to start addressing the problem now.
I'm really not sure why you want to castigate this particular government who have steered the State through the biggest immediate financial crisis in our history for failing to address the long term problem, in addition to the many short term problems addressed?I would speculate that the long-term legacy of the current government will be their failure to address the pension issue.
Instead of just cutting benefits, why don't the government put a fund in place to pay for these pension benefits in the future...
Did they not take a few billion out of the pension fund to help Austerity?How exactly would the government put a fund in place to pay the these future benefits -
Just in case, some forget about the National Pension Reserve Fund that was building up quite nicely until it had to be emptied to keep our banks afloat: [broken link removed]
Absolutely right. And let's not forget the cost in tax foregone of tax relief on private pension contributions too.
I'm not quite sure how you worked out that your view was 'widely held', but that's probably for another day. I'm also quite unclear as to why you think it would be OK for any employer, public or private, to walk away from contractual commitments to employees, past or present. Employees made career decisions and life decisions based on these contractual commitments. In particular, many employees accepted lower salaries that they could achieve elsewhere based on the commitment of particular pension benefits. And I'm not sure what kind of constitutional amendment might be involved - presumably you're talking about some kind of amendment to the rights to private property? If you think any such amendment would be taken lightly by much of the population, you are badly mistaken.
Such contributions are quite meaningless without comparing overall costs of living and overall state supports provided. What value do you put on the NHS, for example, and how much of the 40% gap you mention would be accounted for the gap in health services provided by the State.
Yes, fully agree.
Yes and no. Yes, the sooner we start addressing it, the better. But we are just getting our heads back above water in terms of the national economy. I'm guessing that if you were advising a young couple who were just getting their heads above water financially, but who's stability over the next few years was quite uncertain, pension contributions would be the last thing on your mind.
I'm really not sure why you want to castigate this particular government who have steered the State through the biggest immediate financial crisis in our history for failing to address the long term problem, in addition to the many short term problems addressed?
Thanks for your measured response.Some thoughts on the above.
It would important that ALL pension benefits, including tax relief is on the table for any review of pensions. I suspect that some people would like to see a review of 'all pension benefits that apply to other people but not me'. Such reviews aren't a great basis for sound public policy, so if we are going to have a review or strategy, we need to have everything on the table.Firstly, I really did not mean to start a private v public sector debate. On the contrary, I was trying to make the point that all unfunded State pension liabilities/benefits should form part of this discussion. You are quite correct that it was presumptuous of me to assume that there is a widely held view that public sector pensions are overly generous. This may well be a view that is only held by a narrow minority.
This is factually untrue. Tax will NOT be due on all amounts drawn down. The 25% lump sum will avoid tax. The annual tax free allowance will avoid tax on a chunk of the annual income. The lower tax rate will allow for a reduced tax rate on another chunk of the annual income. The investment growth of the tax-free contributions will come into play also. The tax relief is an awful lot more than a deferral, and even if it were just that, the cash flow/timing implications would be a major issue which need to be on the table for any review.Secondly, it is not technically correct to say that relief on contributions to private pensions represents tax forgone - it actually represents a deferral of liability. Tax will be due at the prevailing rate (which we obviously cannot know in advance) on all amounts subsequently drawn down.
I was basing this on your comments about "career averaging should be introduced immediately for all such pensions (whether in payment or otherwise). Alternatively, a pro-rata reduction of all such pensions may be more equitable/easier to administer". Your proposals would involve a walking away from existing contractual commitments.Thirdly, I never suggested or implied that it was OK for anybody to walk away from their contractual commitments.
Not really. Most of those studies have shown that average salaries in the public sector are higher than average salaries in the private sector. If I noted that average salaries in Google are higher than average salaries in Greyhound, no-one would be hugely surprised. Most people understand the difference in roles, skill levels, qualifications and experience. But somehow, when the Irish Indo or other DOB-owned media reports another survey that average salaries in public sector are higher than average salaries in the private sector, common sense seems to go out the window.As regards employees accepting lower salaries in exchange for higher pension entitlements, I would simply make the point that repeated studies have shown that, on a like for like basis, public sector workers earn considerably more than their private sector counterparts - and that's without taking pension entitlements into account.
That amendment referred to future salary levels iirc, and had nothing to do with previously earned pensions.The constitutional amendment referred to in my earlier email related to the remuneration of the judiciary.
Finally, I am particularly critical of the current government policy on pensions because (a) there doesn't appear to be one!; (b) they have exacerbated the problem by raiding existing private pensions and by making private provision substantially less attractive; and (c) because the issue is becoming increasingly urgent.
I (and probably most other public sector employees) allow themselves a little grin at all the talk of raiding and robbing in relation to the very modest levy on private sector pensions (which affects me too btw), when compared against the real pension levy - the fairly savage immediate, direct and ongoing cut to salary of 5%-8%. The real pension levy hit low-earning staff who earn no public sector pension above the standard contributory pension. So really, stop whinging - it's a tax, like many other taxes. It's not nice, but it's necessary.+1 and now they have robbed the funds with the levy.
I'm also quite unclear as to why you think it would be OK for any employer, public or private, to walk away from contractual commitments to employees, past or present. Employees made career decisions and life decisions based on these contractual commitments. In particular, many employees accepted lower salaries that they could achieve elsewhere based on the commitment of particular pension benefits.
The problem here is that the country will go slowly bankrupt as we will be unable to meet all our liabilities - public sector pensions, Old Age Pensions, social welfare, health, education, etc.
In my naivety, I thought that our economic predicament was and is caused mainly by the ongoing consequences of the conversion of vast accumulated private sector (banking) debt into sovereign debt.
Obviously, I must be wrong! Public sector employees and public @private sector OAPs must be to blame and so, suffer the consequences.
In my naivety, I thought that our economic predicament was and is caused mainly by the ongoing consequences of the conversion of vast accumulated private sector (banking) debt into sovereign debt.
It sounds like you've decided that the one and only solution to this issue is for the State to walk away from the contractual entitlements of public sector staff. It would be interesting to see the analysis behind this. What other options were considered? What will be the impact on making the public service a significantly less attractive place to work? What other contractual commitments to other parties should the State consider walking away from also?The problem here is that the country will go slowly bankrupt as we will be unable to meet all our liabilities - public sector pensions, Old Age Pensions, social welfare, health, education, etc.
It's better that we address this now while we have some degree of control and choice rather than leave it to a government in 2034 to decide which payments or services are to be cut. In fact, it will probably be the IMF making the decisions at that stage. It's important to have this debate now, and start cutting now and letting those who will inevitably have their pensions cut drastically in 20 years that they cannot rely on their contractual entitlements.
Hi Sop
Most people believe this myth. In round figures, our national debt is around €200 billion and the liability for public sector pensions is around €100 billion. I have updated the estimated net cost of the bailout here - it will be around €45 billion, so it accounts for around 15% of our national debt.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?