Pay cut to join civil service. Current private pension 205k.

C

colin79ie

Registered User
Messages
369
Hi,
I have been in the private sector up until now but have recently applied for a civil service position.
My current salary is 90k and I pay 15% into our pension (10 from me + 5 from employer)

The civil service position is 'ap' grade, think 69-85k .

My current group pension value is 205k.

Given that I'm 42, would it be madness to consider the civil service position and it's current pension arrangements or am I reading into the negatives too much?

The pay cut would mean also be cutting the private pension and losing the 5% employer contribution.
 
I guess what I'm trying to determine is that if I was successful in getting the job, would I be worse or better off pension wise, than if I continued in my current job and with the private pension, or would I still need to be putting substantial amounts in to the private one to get the same pension when I retire, given my age starting in the ps?

The pay cut is something else to be considered later. The main reason for applying is work life balance. Current role involves a lot of travel , up to 150 days/year. The position applied for would mean being home every night.

I had planned on paying as much as I could into the private one with the hope of retiring a bit early.

I guess the 'negatives' I read about were to do with new Vs old ps pensions etc.
 
colin79ie said:
I guess what I'm trying to determine is that if I was successful in getting the job, would I be worse or better off pension wise, than if I continued in my current job and with the private pension, or would I still need to be putting substantial amounts in to the private one to get the same pension when I retire, given my age starting in the ps?
Click to expand...
There is no simple answer. A few thoughts:

  1. Performance of your existing pension fund is very hard to predict over the course of the next 40 years. It depends as well as to what your mix of equities and bonds is. It depends on your outgoings but at 42 with €205k contributing €13.5k a year I doubt you were on track to retire at 60;
  2. Your PS pension will be very straightforward to work out. Basically a formula involving career-average earnings times how long you've worked;
  3. The one advantage of a "mixed" approach like yours is that you will be able to resign from the PS at 60 and still access your private pension fund. You could draw down aggressively to bridge the gap until PS pension age which is linked to state contributory pension (66 now, but could rise);
  4. You can always "top up" your private pension along the way and avail of tax relief. The explicit contributions in the PS Single Scheme will only be about 5% for you. Someone in their 40s can contribute up to 25% and get full relief at their marginal rate so you have lots of headroom;
  5. There is no "explicit" employer contribution in the PS. Even though you contribute a bit there is no fund either. So don't think of yourself as "losing" something here. There is a big notional employer contribution, you just don't see it. It's just a completely different way of contributing for and paying pensions.
  6. Carefully work out the net and gross in your old and new job. There is something called an "additional superannuation contribution" which is basically a tax on public servants. Rates below for Single Scheme members which would shave off about 1.6% of your gross I think.




Member of the Single Scheme:
Amount of Remuneration Rate of Deduction
Up to €34,500 Exempt
Greater than €34,500 but not over €60,000 3.33%
Greater than €60,000 3.5%
 
Make sure you're comparing like with like. You may well be getting bonus, health insurance, disability insurance in your current position that you won't be getting in the public sector.

That amount of travel would be a serious problem for many people as they get older, so you might want to thing about whether your current position is viable in the long term anyway.

I touched on one issue about mixing public and private pensions in the 'should I recycle' thread in the Public Sector Pensions category. Feel free to contribute to that discussion too.
 
colin79ie said:
The civil service position is 'ap' grade, think 69-85k
Click to expand...

colin79ie said:
Given that I'm 42, would it be madness to consider the civil service position and it's current pension arrangements or am I reading into the negatives too much?
Click to expand...

Your civil service pension will be determined by the age at which you retire, the length of service at that time and your career progression in the interim.

As an AP, it will take about 10 years to move to the max of the pay scale. A full pension is payable at age 60 and requires 40 years’ service. (Less any Social welfare pension you’re entitled to).

A full pension pays 50% of salary. This reduces if retirement is sought earlier than age 60 and/or if there is less than 40 years service.

If, say, you put in 20 years and remain in the AP grade for all of this time, you would be entitled to half of the full pension i.e. 85k divided by 2 multiplied by 20 fortieths (approximately 21k).

If you were promoted to PO after say 10 years and stay on that grade for another 10 years, your pension would be career-averaged i.e. half of it would be based on the max of the PO salary and half on the max of AP grade. As you would still have only 20 years in total however, you would still only receive a pension of about a quarter of your salary. (Less any Social welfare pension you’re entitled to).

You could potentially stay until age 70 which would give you a max of 28 years service. This would of course bolster your pension entitlement.

Be aware that as a general service AP you are likely to move around over the course of your career and it is likely that you would be required to travel at some point.

While the CS may have a reputation for being a stress-free environment, this isn’t necessarily the case. For example, you could find yourself being assigned to area completely unrelated to your strengths, preferences or interest. Dealing with this can be very stressful.

Working within the wider public/political system can also be soul destroying, if all to find you’re doing is answering parliamentary questions about what it is you’re doing.
 
Last edited:
Salvadore said:
If, say, you put in 20 years and remain in the AP grade for all of this time, you would be entitled to half of the full pension i.e. 85k divided by 2 multiplied by 20 fortieths (approximately 21k).
Click to expand...
Not quite. He's only 42 now so if retiring at 62 he could only draw down the occupational pension at state pension retirement age (currently 66, but likely to rise by then).

Of course the advantage of having a private fund like the OP is that you can draw down aggressively if you retire from the civil service early until you are old enough for the occupational pension.
 
AlbacoreA said:
What about buying back years to get the full PS pension.
Click to expand...
The rates for buying back extra years have gone up over the past 10-15 years or so, so any new contracts for buying years would be of questionable value, compared to the return that you would get if you put the same money into AVCs.

You'd also want to consider the risk of having all or more of pension eggs in the Government pension basket. If a future Government defaulted or decided to take a dramatically different approach, those benefits might not get paid out.
 
I would have assumed (incorrectly perhaps) that a private pension would carry more risk, and the bang for buck would be less than the Public. Even with the increased cost of buying back years.
 
Last edited:
At retirement the OP will probably have in some parts of their wealth in:

  1. A state contributory pension
  2. Civil service occupational pension
  3. A house
  4. Private pension fund
This is pretty well diversified. I would focus more on getting best expected return as there will never be too many eggs in one basket.
 
AlbacoreA said:
I would have assumed (incorrectly perhaps) that a private pension would carry more risk, and the bang for buck would be less than the Public. Even with the increased cost of buying back years.
Click to expand...
I was advised by two separate pension advisors, both with considerable expertise in public sector pensions, that the rates for new contracts for buying back years since about 2008 were not competitive, and you'd be better off in an AVC fund.
NoRegretsCoyote said:
At retirement the OP will probably have in some parts of their wealth in:

  1. A state contributory pension
  2. Civil service occupational pension
  3. A house
  4. Private pension fund
This is pretty well diversified. I would focus more on getting best expected return as there will never be too many eggs in one basket.
Click to expand...
1 and 2 are coming from the same source, and subject to the same future risks. The question would be whether to add additional resources to 1/2 or 4. It may well depend on the relative scale of 1/2 vs 4.
 
RetirementPlan said:
I was advised by two separate pension advisors, both with considerable expertise in public sector pensions, that the rates for new contracts for buying back years since about 2008 were not competitive, and you'd be better off in an AVC fund.

1 and 2 are coming from the same source, and subject to the same future risks. The question would be whether to add additional resources to 1/2 or 4. It may well depend on the relative scale of 1/2 vs 4.
Click to expand...
I would disagree that 1 and 2 are subject to the same future risks. There are similar risks relating to pressures on public expenditure, but they are to a large extent independent risks. For example, the state could choose to change the state contributory pension, without touching the civil service occupational pension entitlements for existing scheme members.
 
time to plan said:
I would disagree that 1 and 2 are subject to the same future risks. There are similar risks relating to pressures on public expenditure, but they are to a large extent independent risks. For example, the state could choose to change the state contributory pension, without touching the civil service occupational pension entitlements for existing scheme members.
Click to expand...
Agreed, to some extent they are independent.

For example the state contributory pension could fall but your occupational civil service pension would top up the difference.

Bear in mind that state pensions were not cut in the bad years 2008-2013. But public service occupational pensions were all subject to a levy (effectively a cut).
 
NoRegretsCoyote said:
Agreed, to some extent they are independent.

For example the state contributory pension could fall but your occupational civil service pension would top up the difference.

Bear in mind that state pensions were not cut in the bad years 2008-2013. But public service occupational pensions were all subject to a levy (effectively a cut).
Click to expand...
But on 1 January 2014, the State Pension (Transition) for 65 year olds was abolished.
 
You must log in or register to reply here.
Back
Top