SOS IRELAND - Public Sector Pay Cuts!

J

joejoe

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Is the government building up to public sector reform, starting with pay cuts? The news coming from public commentators is yes and seems to be around the 10% mark.

How much over the average private sector job, does the public sector earn and how much is reasonable to take back of them?

If there are any public sector employees reading this, how willing are you to take a pay cut and how much?

Joejoe
 
I think that getting rid of the surplus 40k administrators in the HSE would be a better way to tackle the public sector pay bill.
 
start by taking away the "state pension"......everyone in the real world has to pay for their own pension!
 
Most workers will receive a State pension.

More private sector workers (1.5m+) will receive State pensions than public sector workers (approx 300k).


Maybe you mean public service occupational pensions?

By the way, public servants contribute towards their pensions, in the same way as some private sector workers contribute to theirs.
 
yes but public sector workers are guaranteed a set ammount in their pension regardless of how the pension fund is actually performing in the markets
 
Protocol said:
By the way, public servants contribute towards their pensions, in the same way as some private sector workers contribute to theirs.
Click to expand...

Public sector works may contribute, but not in the same way as private works do....
 
limerickboy1 said:
yes but public sector workers are guaranteed a set ammount in their pension regardless of how the pension fund is actually performing in the markets
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So are private sector workers with DB plans

Most of the public sector do a good job, are not paid excessively and are not in a position to take big cuts.
 
Humdinger said:
So are private sector workers with DB plans

Most of the public sector do a good job, are not paid excessively and are not in a position to take big cuts.
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Over 50% of private sector pensions in Ireland are DB. May not apply to many employees hired in recent years as trend is towards DC.

The big issue with transferring the public sector to DC would be the hidden costs to the state of:

(i) allowing them to claim contributory old age pension - public service doesnt currently get this even though since mid 90s, they pay Class A PRSI.

(ii) the cost to the State of the employers contribution to the DC, which, like most private sector DC schemes, would have to match or come close to the basic employees contribution.

These 2 alone could increase the bill to the state considerably.

As I've pointed out on other threads in the past, while public service pensions are very generous for the management level grades, due to poor pay and the fact that they dont get the contributory OAP, pensions are very poor for clerical workers who are the majority of public servants.
 
i) allowing them to claim contributory old age pension - public service doesnt currently get this even though since mid 90s, they pay Class A PRSI.

Public servants hired since April 1995 do pay full-rate PRSI and will receive an OACP.


(ii) the cost to the State of the employers contribution to the DC, which, like most private sector DC schemes, would have to match or come close to the basic employees contribution.

A movement to a funded scheme would force the State to make explicit contributions to a fund.

Unlike the PAYG schemes that currently exist.

This would mean higher expenditure now, but with lower future liabilites.

It is an intergenerational issue.
 
limerickboy1 said:
yes but public sector workers are guaranteed a set ammount in their pension regardless of how the pension fund is actually performing in the markets
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There is no fund in public sector pension schemes. They are not funded.

They are PAYG scheme (Pay-As-You-Go).

Current contributions of 6.5% of pay are used to finance current pensions.
 
i) allowing them to claim contributory old age pension - public service doesnt currently get this even though since mid 90s, they pay Class A PRSI.

Public servants hired since April 1995 do pay full-rate PRSI and will receive an OACP.
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This isnt true. Public Servants, even those with Class A PRSI cannot claim the contributory old age pension in addition to their work pensions.
 
Public servants who joined since 1995 have what is known as an intergrated or co-ordinated pension.

They will receive 2 pensions - the State OAP at age 65/66 and an occupational pension.


See here:

[broken link removed]

See page 201 of the Green Paper on pensions:
 
Or see page 104 /105:

http://www.finance.gov.ie/documents/psp/part2.pdf

From the ASTI website:


Co-ordination is a common feature of public sector pension schemes and most private sector schemes where employees are on full
rate PRSI. The purpose of co-ordination is to ensure that the aggregate of the occupational and Social Welfare pensions approximates
to the occupational pension payable to a person who is not on full rate PRSI. The lump sum payable under the occupational scheme is
not affected by co-ordination because there is no equivalent under the Social Welfare code.​
 
The occupational pension will be reduced due to the integration.


Here is an example, say a person on 50k, with 40 years service. We assume OACP of 12k pa:

Non-integrated

Pension = 50% = 25k pa

Integrated

Pension = (0.50) (50k-2*12k) = (0.50) (26k) = 13k

13k work pension + 12k OACP = 25k pa.
 
I think we're on the same page here, just coming at it from different angles - your figures are correct. As things stand a public servant gets 50% of salary including COAP, but not 50% of salary plus COAP.


The point I'm trying to make is that while a defined benefit scheme can be coordinated, a defined contribution scheme cant, so if the public sector moved to defined contribution, then it would have to pay the COAP on top of the DC pension. I reckon that this could end up more expensive for the majority of public sector employee as due to their low salaries, they do not currently get any value for money for the 6.5% contribution they make as the COAP has eroded the % of the final pension that this pays for. From an acturial point of view, I reckon the government makes a profit out of these contributions in net present value terms.

You take a low paid public servant who received 50% of salary of 30k per annum = €15k. The COAP is 12k, so they pay 6.5% of their annual salary for 40 years i.e. 78k in total, in order to get only 3k net in return. They would need to live for 26 years post retirement for the government not to make a profit out of them. As life expectancy in this country is c.78 i.e. 12 years post retirement, the government is in profit out of these contributions.

If these contributions went into DC scheme, the Government would not make a profit out of the clerical staff pension scheme and would probably also have to match the contribution thus resulting in an even greater loss to the exchequer.
 
An important problem here is that the COAP is considered to be a fixed amount of the pension. Here 12k of a guaranteed 15k. In reality the COAP can be expected to shrink from relative to earnings from now on. Even now PRSI no longer covers SW pensions and will over the next couple years burn through reserves.

Let's say the COAP was only 6k or even 6c, would the public sector retiree on 15k care, no because he'll still get his 15k.

The idea that the taxpayer is making a profit on public sector PRSI+pension contributions is - ahem - interesting. And really only can be reached by assuming that COAP pensions will stay as relatively high as they currently are for the long term (I wish they would but sadly expect them to make a negligible contribution to my retirement income) - and are actually really funded by PRSI contributions, also handily ignores real world pension life expectancy at 65 estimates and cost of widow(er)s pensions and early retirement programs.

The 30k example is also not typical, for one thing I seem to remember a recent figure of something like 72% of public servants earn over 48k. Even ignoring that, with public sector salary structures public servants close to retirement are on their highest income. If public sector workers were only earning 30k typically, then the public finances might look a little healthier.
 
joejoe said:
Is the government building up to public sector reform, starting with pay cuts? The news coming from public commentators is yes and seems to be around the 10% mark.

How much over the average private sector job, does the public sector earn and how much is reasonable to take back of them?

If there are any public sector employees reading this, how willing are you to take a pay cut and how much?

Joejoe
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Who knows that the govt will do. They seem to act first and think later. Why 10% why not 50%? Why just the public sector. Who is willingly going to take a pay cut, especially considering the poor judgement the govt has shown, not just in policy, but in their own pay cuts and salaries. Taking a 10% hit when you're on a big salary is entirely different to being on an average wage.
 
Protocol said:
Most workers will receive a State pension.

More private sector workers (1.5m+) will receive State pensions than public sector workers (approx 300k).


Maybe you mean public service occupational pensions?

By the way, public servants contribute towards their pensions, in the same way as some private sector workers contribute to theirs.
Click to expand...

They just get unbelievable value and return for there investment.

Joejoe
 
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