It's a purely notional exercise with no practical benefit to you unless you're in the unlikely position of being near the SFT.. I have so far built up a lump sum of approximately €15,000 and an annual pension of €2,500 per annum. Assuming I left the public sector tomorrow and retired later in life at age 65 to 68, what is the present value of my pension?
I want to estimate my net wealth, notional or otherwise. If I work in the public sector for any significant length of time, then the pension will be a significant component of my wealth. Even if it cannot be put up for sale and it's enjoyment is restricted in many ways.It's a purely notional exercise with no practical benefit to you unless you're in the unlikely position of being near the SFT.
A notional value is not very meaningful as you can't draw down a PS pension more quickly or more slowly and (unlike an ARF) your children can't inherit it on your death.
I am essentially being given an annuity for every year I work in the public sector. They all start paying off at the same time and we call the payoffs a 'pension'. As we should know the prices of annuities, I think it can't be too hard to approximate the market value the of pension in today's money.A PS pension and an ARF are indeed both a form of wealth, but it is hazardous to try and make a monetary comparison of them.
You can put a capital value on it by discounting using an annuity rate for an index-linked annuity (I don't know what these rates are).I want to estimate my net wealth, notional or otherwise.
Two points.I have seen in other threads that Revenue will sometimes generate a notional pension pot value by multiplying the recurring annual pension payment by 20 and adding the lump sum. In my case, 15,000+(20*2,500)=€65,000. This looks like a reasonable starting point, but I would like to improve on this estimate if I can.
This is a good suggestion.You would uplift the value somewhat for the fact that your spouse could get a survivivor's pension. But that's offset to some extent by the fact if you die single before retirement age no one gets anything.
I think this must not be not fully right because the lump sum and annual pension amount are CPI-linked for the full 30 years before I retire.That €65,000 is an estimate of the future value of the pension, i.e. when you are 65. To find the current value it should be discounted by the appropriate rate over the number of years until you are 65.
Using 2.5% as a discount rate and 30 years until you are 65 that gives
€65,000 x (1-0.025)^30 which is €30,412.
This is so full of assumptions as to be meaningless, but the method should be correct.
I don't know the rules around post-2013 entrants very well.This means that the future value of the pension in 30 years time should be calculated on the basis of something like a (15000*(1.02^30))=€27,170 lump sum and (2500*(1.02^30))=€4,528 annual pension.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?