Edit - this is an old thread - the new one can be found here: https://www.askaboutmoney.com/threads/the-single-public-service-pension-scheme.236839/
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Thoughts on the Single Public Service Pension Scheme (SPSPS)
- Thread starter Ent319
- Start date
One thing I didn't really take into account in the original post is the fact that pre-2013 pension benefits are increased on the principle of wage parity (at the discretion of the minister) whereas Single Scheme benefits are increased in line with CPI. It'd be interesting to know whether public sector workers wages have kept up (or surpassed inflation?) and whether these trends are likely to continue in the future.
Another way of expressing the effect of the ASC reduction for Single Scheme workers is by assessing its value as an equivalent salary bump. For the 50k worker this is a bit more complicated to work out but for the 80k and 100k workers the ASC reduction is effectively the equivalent of a €3885 and €5635 gross salary bump pa (assuming 52% tax rate). This works out to an approx 4.85% and 5.64% increased salary vs pre-2013 workers respectively.
Happy the post may be of some assistance. I'm a layman so if there's someone more informed about these issues it'd be a big help for them to chip in if I've gotten anything wrong! I've personally found it frustrating there's so little info out there about the Single Scheme so thought I'd take the punt.
It strikes me that the true value of having final salary pension lies in being a career public servant i.e. being someone who works in the public service all their life, banks the #years and sees a huge increase in salary over that time.
If you're someone planning on dipping into the public service for 5 / 10 years the Single Scheme could arguably leave you better off financially, particularly if you're doing it on a higher salary (AP / PO).
Another way of expressing the effect of the ASC reduction for Single Scheme workers is by assessing its value as an equivalent salary bump. For the 50k worker this is a bit more complicated to work out but for the 80k and 100k workers the ASC reduction is effectively the equivalent of a €3885 and €5635 gross salary bump pa (assuming 52% tax rate). This works out to an approx 4.85% and 5.64% increased salary vs pre-2013 workers respectively.
Happy the post may be of some assistance. I'm a layman so if there's someone more informed about these issues it'd be a big help for them to chip in if I've gotten anything wrong! I've personally found it frustrating there's so little info out there about the Single Scheme so thought I'd take the punt.
It strikes me that the true value of having final salary pension lies in being a career public servant i.e. being someone who works in the public service all their life, banks the #years and sees a huge increase in salary over that time.
If you're someone planning on dipping into the public service for 5 / 10 years the Single Scheme could arguably leave you better off financially, particularly if you're doing it on a higher salary (AP / PO).
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Edit - this is an old thread - the new one can be found here: https://www.askaboutmoney.com/threads/the-single-public-service-pension-scheme.236839/
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NoRegretsCoyote
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Average weekly earnings in the public sector (excluding overtime) are up 13% 2008Q3 to 2021Q3. That's as long as the series goes back. Comparable private sector earnings increased 19%.
HICP is up 6% only over the period.
Edit - this is an old thread - the new one can be found here: https://www.askaboutmoney.com/threads/the-single-public-service-pension-scheme.236839/
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NoRegretsCoyote
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The 2009 pension levy was not recorded as a "pay cut" by the CSO believe it or not!
Private sector wage growth was very flat but really took off about 2017 to date.
Sunnygirl69
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Thank you @Ent319 You are certainly correct about one thing, the amount of info given to us 'new entrants' about Single Pension scheme is practically nil!
I can't help but feel the joiners post 2013 are very much shafted. Many 'old timers' get a promotion very close to end of their career & it is worth phenomenal amount of money for them in their pension. They are very often not the best person for the job but sure the unions stand over all this.
I can't help but feel the joiners post 2013 are very much shafted. Many 'old timers' get a promotion very close to end of their career & it is worth phenomenal amount of money for them in their pension. They are very often not the best person for the job but sure the unions stand over all this.
Hi @Sunnygirl69 glad you found it helpful.
It's not all bad for Single Scheme Members imo. "Lifers" on pre-2013 schemes can of course get away with murder by getting promotion later in their career. However, the maths above suggests that if you're in the single scheme and have an AP's / HEOs salary and are clever about how you invest in an AVC you can end up not too far off the capital value of a person with a pre-2013 pension for similar amounts of contributions. Additionally, if you're a non-lifer and only want a short 5-10 year career in the public service, you can be better off by miles by being in the Single Scheme because you're paying much less ASC.
There's advantages to having a portion of your pension pot in a private AVC as well. A pre-2013 member's entire pension effectively dies with them, subject to paying of spouse's benefit and children's benefit. If you croak and have a big AVC that can go to your family, and they get spouse's benefit / children's benefit too.
Also, I'd say that as a greater proportion of the unions' members become SPSPS members, you'll find them pushing for more favourable options for SPSPS members.
Finally, I'd also point out that since I made the post above inflation has been absolutely rampant, and as a Single Scheme member the pension benefits I've banked will be uprated much more than my pre-2013 colleagues. Funny how things can change in a year!
It's not all bad for Single Scheme Members imo. "Lifers" on pre-2013 schemes can of course get away with murder by getting promotion later in their career. However, the maths above suggests that if you're in the single scheme and have an AP's / HEOs salary and are clever about how you invest in an AVC you can end up not too far off the capital value of a person with a pre-2013 pension for similar amounts of contributions. Additionally, if you're a non-lifer and only want a short 5-10 year career in the public service, you can be better off by miles by being in the Single Scheme because you're paying much less ASC.
There's advantages to having a portion of your pension pot in a private AVC as well. A pre-2013 member's entire pension effectively dies with them, subject to paying of spouse's benefit and children's benefit. If you croak and have a big AVC that can go to your family, and they get spouse's benefit / children's benefit too.
Also, I'd say that as a greater proportion of the unions' members become SPSPS members, you'll find them pushing for more favourable options for SPSPS members.
Finally, I'd also point out that since I made the post above inflation has been absolutely rampant, and as a Single Scheme member the pension benefits I've banked will be uprated much more than my pre-2013 colleagues. Funny how things can change in a year!
Sunnygirl69
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Feeling bit more optimistic keep up the good work posting updates.
This is a great thread, thanks Ent.
With inflation currently so high, SPSS retired members are doing a lot better than pre-2013 retirees:
-SPSS is inflation linked with no cap. For Dec 2022 it was 8.2% per CSO
-Pre-2013 retirees have their pension linked to those in their grade they retired at (so looking at 5% increase for 2022, that was 1% 1 Feb, 4% backdates to 2 Feb and 1% Oct)
The current SPSS bill for the State for anyone retired since 2014 will be low (as you'd have max 9 years of service 2014-2022), so an 8.2% increase will still be small.
But as more members retire on SPSS into the future, having no max inflation cap could be extremely costly in the future.
With inflation currently so high, SPSS retired members are doing a lot better than pre-2013 retirees:
-SPSS is inflation linked with no cap. For Dec 2022 it was 8.2% per CSO
-Pre-2013 retirees have their pension linked to those in their grade they retired at (so looking at 5% increase for 2022, that was 1% 1 Feb, 4% backdates to 2 Feb and 1% Oct)
The current SPSS bill for the State for anyone retired since 2014 will be low (as you'd have max 9 years of service 2014-2022), so an 8.2% increase will still be small.
But as more members retire on SPSS into the future, having no max inflation cap could be extremely costly in the future.
NoRegretsCoyote
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That's true for the last six months but I doubt it in future.
Over the long term public sector wages have increased above inflation. The de facto linkage of pre-SPSS pensions to wages means that in general pensioners will do better than SPSS pensions to inflation.
To summarise, if you join the public service and have an existing private pension, generally it seems the better option to maintain that private pension (with no further contributions) until close to retirement and then decide whether it is worthwhile purchasing Single Scheme benefits?
Are there any particular requirements if one wants to make AVCs while part of the single scheme? Can you use any AVC provider?
Are there any particular requirements if one wants to make AVCs while part of the single scheme? Can you use any AVC provider?
I don't think so. Uprating for people under the old scheme is determined by the wages paid to people in equivalent grades who are currently working.
This was true in the past but may not always be the case. The war in the Ukraine's showed how fragile global supply chains are and the impact this can have on inflation. Also, maybe as single scheme members become the majority in unions they'll negotiate better deals for single scheme members (e.g. via bonuses, which may not count as salary and may not lead to uprating for old scheme members!)
This is my take, yes. That pension will grow tax free for decades. If it's in a good fund it could grow at 8%.
Compare that to spending the money now to buy an annuity. The annuity will only ever grow at the rate of inflation. So if you think the stock market can beat inflation it makes sense to keep the pension / invest in AVCs and decide whether to transfer over later.
There aren't any particular requirements if one wants to make AVCs as part of the single scheme. Most orgs will be signed up to an AVC scheme. Many are on the Forsa Scheme sold by Cornmarket. It's got decent rates. 0% contributes fees and an AMC of 1% on 0-40,000, 0.75% on 40,000 to 140,000, and 0.5% thereafter. Cornmarket's default funds are crap - you can select the other Irish life funds.
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NoRegretsCoyote
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I simply do not believe that over the course of decades that public sector wages will increase at a rate below inflation.
Here is euro area real wages since 1996. For sure the last 3 years has been a collapse due to inflation but if you look over the long term you see an upward trend.
If I had a choice at 65 between wage-linked and inflation-linked retirement income I would take the former.
You're right it's probably a safer bet and if I had the choice I'd probably choose the same. Inflation linking is very valuable though and who's to say how things will work out.
