Public sector pensions should be switched to Defined Contribution

Discussion in 'Budget 2018 - suggestions and submissions' started by Brendan Burgess, 10 Sep 2017.

  1. Taxpert

    Taxpert Registered User

    If the public servants won't accept this under any circumstances, then there are only 2 possible outcomes.

    1. They can like it or lump it, and it should be enforced.


    2. Everyone else will have to take less in their pensions.
  2. torblednam

    torblednam Frequent Poster

    If they won't accept what?
  3. AlbacoreA

    AlbacoreA Frequent Poster

    The problem is you don't have budget or the public backing for such action. We've been denigrating the work and value of the public sector for decades.
  4. AlbacoreA

    AlbacoreA Frequent Poster

    The other issue you have is there is a lot of specialized work in the public sector that it unique to the public sector. Trying to outsource that to to companies or people without that business knowledge, takes a lot longer and is a lot more expensive. Thats ignoring the factor that most will try to fleece the Public Sector for everything they can get.
  5. gnf_ireland

    gnf_ireland Frequent Poster

    I am looking at this thread with considerable interest. Who says this has to see an impact of the majority of public sector employees at all. In fact it may benefit them in certain cases.

    The issue I have with public sector defined benefit pensions are two fold
    1. they are a pyramid scheme that pay out of current taxation. They need to be funded in the year the liability was incurred and not push any more financial burden on our children
    2. they massively favour those who rise through the ranks quickly and retire early - such as Brian Cowen.

    The first change I would like to see made is the cost of providing the pension included on the payslip of each and every state employee, and this clearly deducted and put into a national pension reserve fund outside the control of the government. The same should happen for the PRSI contribution related to the contributory pension. This should be protected by the constitution if necessary (along with all pension funds). The contribution should be based on actual actuarial valuations and should be treated the same way as any other defined benefit scheme.

    If we allow some additional flexibility into our pension arrangements, such as a once only drawdown of up to 25% or the possibility of securing a mortgage on your pension etc, then having an individual fund may be beneficial for the public sector. It also allows them to cross between private and public sector roles much easier etc.

    The other advantage is a defined contribution pension can be an asset on death, whereas a defined benefit dies with you (in general - widows/widowers and orphans excepted)

    The issue here from my point of view is not trying to lower the pension for public sector, but rather funding it as part of the person's wage bill AND clearly showing the cost of this to the employee and the state. This should be explicit in any defined benefit scheme.
  6. Early Riser

    Early Riser Frequent Poster

    Last edited: 15 Sep 2017
    Does the new Single Scheme (for new entrants since 2013) address your concern here? The pension under this scheme is based on career average earnings, rather than final salary.

    More generally, your example of Brian Cowen is unrepresentative and atypical for the public service. Politicians and the judiciary have pensions based on 20 years service, I think. Some other groups (such as Gardai, Prison Officers, Firefighters) have pensions based on 30 years. For most others it is based on 40 years. For most pre-2004 entrants, minimum retirement age is 60 - but you would still need 40 years service to get a full pension. For post-2004 it is 65, and for post 2013 it is the State Pension age pertaining at the time of retirement. Generally you can retire up to 10 years before minimum age, but on the basis of an actuarially reduced pension (ie the pension is calculated based on your years of actual service and then reduced to reflect the extra years implied by early draw-down).
    Last edited: 15 Sep 2017
  7. Taxpert

    Taxpert Registered User

    Reform of the ps pension
    Well, it's a little bit better than that.

    First of all, they get it at 65. Private sector workers get the oap now at 66, shortly 67 and ultimately 68. If you take life expectancy at 80, then (at best), the public sector will get 3 years more than the private sector. On 12 years that's 25% extra.

    And the €36k is tax free. To get that they have to earn €72k. So, if the pension is, say €12k, that's a further 6 years pension. So 9 years extra in total. On 12 years it's 75% more than the state pension.

    Not exactly clover, I agree, but a lot better than the OAP.
    Sarenco likes this.
  8. Deiseblue

    Deiseblue Frequent Poster

    Fair play to yourself & Christy - yiz saw it coming ! ;)
  9. Itchy

    Itchy Frequent Poster

    I think the pension at 65 is actually a 'supplementary' pension that is payable before you become eligible for the state pension contributory at 66 or what it goes out to. This is also not available to new entrants post 2013.

    Also for those on the 30 year service requirement there are mandatory retirement ages. So your PS earning potential is 75% of your 40 year colleague of you are on the career average scheme.

    Notwithstanding, of course, the merits/demerits of the pension system in general.
  10. Purple

    Purple Frequent Poster

    Yep, that's why they have been getting pay increases and pensions which are far better than their private sector counterparts for decades.