Should public sector workers pay more for their pensions?

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Although the media are always saying that public sector pensions are very generous, it is rarely suggested that the workers should pay more for them.

People who joined the public sectore pre-1995 pay 6.5% of salary for a generous index-linked DB scheme.

Maybe they should pay more, even maybe 7.5% of salary?
 
Although the media are always saying that public sector pensions are very generous, it is rarely suggested that the workers should pay more for them.

People who joined the public sectore pre-1995 pay 6.5% of salary for a generous index-linked DB scheme.

Maybe they should pay more, even maybe 7.5% of salary?
Perhaps - but only if they are also given full Class A PRSI benefits, which that category of public servants doesn't generally have. There are trade-offs!
 
It will never happen. The public sector unions who run the country ( for their benefit) would not allow a change in pension terms. Take a look at what happened with BOI when they tried to alter the pension terms for their workers.
 
It will never happen. The public sector unions who run the country ( for their benefit) would not allow a change in pension terms. Take a look at what happened with BOI when they tried to alter the pension terms for their workers.
Yeah, 'cause that there BoI is full of public sector unions. :confused:
 
Exactly. If BOI can't manage it how are we going to get the civil servants to do it?
 
Actually, there've already been major [incremental, admittedly, and on "new entrant" basis] changes for civil servants: in 1995, in moving to Class A PRSI and increased pension contributions; in 2004, changes to retirement age. Have you heard huge commotion about them?
 
Actually, there've already been major [incremental, admittedly, and on "new entrant" basis] changes for civil servants: in 1995, in moving to Class A PRSI and increased pension contributions; in 2004, changes to retirement age. Have you heard huge commotion about them?

Have you heard what the unions secured in return?
 
Have you heard what the unions secured in return?

for the 2004 change the unions negoiated pension entitlements for low paid public sector workes (eg part time cleaners).

prior to this someone who earned less than twice the contributory old age pension didn't get a work pension.

(they were told that they were in the pension scheme, but didn't make any payments and didn't recieve a penny from the scheme when they retired!!)
 
Much is vaunted in the press about the value of the public sector pension. However, although it and the job are secure, the max. pension on retirement is 50% of final salary, assuming full service of 40 yrs. A private sector pension pays 66% of final salary, assuming full service. That's quite a difference and goes some way to explain the take up in PRSAs by public servants since 2003.

Slim
 
Much is vaunted in the press about the value of the public sector pension. However, although it and the job are secure, the max. pension on retirement is 50% of final salary, assuming full service of 40 yrs. A private sector pension pays 66% of final salary, assuming full service. That's quite a difference and goes some way to explain the take up in PRSAs by public servants since 2003.

Slim

In addition to the 50% of final salary they also get a tax free lump sum of 1.5 times salary. In total this is approximately equivalent to a pension of 2/3rds of salary for private sector employees.
 
Much is vaunted in the press about the value of the public sector pension. However, although it and the job are secure, the max. pension on retirement is 50% of final salary, assuming full service of 40 yrs. A private sector pension pays 66% of final salary, assuming full service. That's quite a difference and goes some way to explain the take up in PRSAs by public servants since 2003.

Nonsense.

- First point: public service workers also get a lump sum, which puts the overall value of their retirement benefits on a par with the 66% figure

- Second point: public servants get guaranteed increases in their pensions in line with salary increases for the post/grade they were at when they retired. Private sector pensioners may get increases (stress may) but never in line with salary inflation and maybe, if they're lucky, in line with price inflation.

- Third point: Slim makes it sound like all private sector workers are in DB schemes where they'll get 66% of their salary when they retire. In fact only something like 12% of the work force are in private sector DB schemes - about 50% have no pension at all!
 
In addition to the 50% of final salary they also get a tax free lump sum of 1.5 times salary. In total this is approximately equivalent to a pension of 2/3rds of salary for private sector employees.

As do private sector DB members - that was why I ignored it.

Second point: public servants get guaranteed increases in their pensions in line with salary increases for the post/grade they were at when they retired. Private sector pensioners may get increases (stress may) but never in line with salary inflation and maybe, if they're lucky, in line with price inflation.

I was not aware that increases in Final Salary are not passed on to pensioners in private sector. I'm surprised private sector unions have not pursued this vigorously.

Third point: Slim makes it sound like all private sector workers are in DB schemes where they'll get 66% of their salary when they retire. In fact only something like 12% of the work force are in private sector DB schemes - about 50% have no pension at all!

Public servants are compelled to become members of the Superannuation Scheme. I was, of course, only referring to private sector workers who are members of pension schemes.

Slim
 
I was not aware that increases in Final Salary are not passed on to pensioners in private sector. I'm surprised private sector unions have not pursued this vigorously.
That’s the thing; (From a pensions point of view) in the private sector you get what you pay for, in the public sector you get what the private sector pay for as well :D
See [broken link removed] for details


Public servants are compelled to become members of the Superannuation Scheme. I was, of course, only referring to private sector workers who are members of pension schemes.
That’s a fair point but does anyone seriously think that a 6.5% contribution will fund a 50% pension that is indexed to final salary. If you do then consider that the cost of public sector pensions increased by 81% between 2001 and 2006. See here for details.
 
Public sector employees, who joined before Feb 1995, pay a reduced rate of PRSI, class D, and are not entitled top dental, optical benefits nor can they collect the state Contributory Pension [on the basis of this employment]. Those who joined post Feb 1995 pay Class A PRSI but have their pensions adjusted to remove the Contrib OAP.

Slim
 
Purple,

yes, I agree, the typical contribution of 6.5% of gross (pre-1995 staff), would not come near funding an index-linked pension of 50% of salary, plus lump-sum.

But then again, the employee isn't meant to bear the full cost.

I do think, though, that they should pay a bit more, say 7.5%.
 
Public sector employees, who joined before Feb 1995, ....

Strictly speaking we are talking about public service employees here as many of the benefits (indexation etc) do not neccessarily extend to the commercial semistate bodies. In addition public service superannuation is unfunded with pension benefits being paid out of governmnent current expenditure while the comercial semistate bodies have an approved pension fund which backs the DB scheme. This is an important detail as the employees of NET and Irish Shipping discovered.
 
Strictly speaking we are talking about public service employees here as many of the benefits (indexation etc) do not neccessarily extend to the commercial semistate bodies. In addition public service superannuation is unfunded with pension benefits being paid out of governmnent current expenditure while the comercial semistate bodies have an approved pension fund which backs the DB scheme. This is an important detail as the employees of NET and Irish Shipping discovered.
But these pension funds have been almost universally under funded by their members which is why when we sell off our state assets we us the money to plug the huge hole in the pension funds. It also shows that the members do not fund their own pensions.
 
That’s a fair point but does anyone seriously think that a 6.5% contribution will fund a 50% pension that is indexed to final salary. If you do then consider that the cost of public sector pensions increased by 81% between 2001 and 2006. See here for details.

Public servants DONT get a 50% pension that is indexed to final salary. They get 50% MINUS the Class A rate of old age pension (which they have paid into for 40 years).

Example:

Civil Servant earning 40k per annum.

Pension will be 20k (50% salary) MINUS the Old Age Pension (currently c.10k per annum, but due to jump to 15k) = Pension of ONLY 10k per annum = 25% of salary.

The aforementioned civil servant is therefore paying 6.5% for only 25% of salary.

Is worse for lower paid

Example 2: clerical grades earning 30k.

Pension would be 15k (50%) - 10k (OA Pension) = only 5K per annum (20% of salary) which is a paltry amount for a 6.5% contribution for 40 years.

In Net Present Value terms the clerical grade would have paid 78k into pension fund over course of 40 years. So s/he would have to live for 16 years beyond retirement (78/5k= 15.6) i.e. to 81 years old, before they would even get their net contributions back. As average death age is late 70s, the State makes a profit from lower paid civil servants pensions contributions.

Most clerical grade & even middle management grade civil servants would get much higher pensions from the exact same amounts contributed to private pension schemes, but unfortunately for them they have no choice. They have to pay into the State scheme and lose out.
 
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