Will Public servants be able to join auto-enrolment scheme?

Just wondering will those in the public service be able to join to put their AVC’s into and get contributions? Or will their unions look for the marching contributions in the future from the state. Most public servants pay the full PRSI rate currently, therefore why wouldn’t they.

I don't think so, the scheme is intended for employers who don't already have a pension scheme.

I'm not sure what the connection with the full PRSI rate would be? The auto-enrolment system is unrelated to the PRSI scheme.

The whole point of AE is to enrol people into a pension, who otherwise don't have a work pension.

The vast majority of PS are already in occupational pension schemes.

I don't think that's correct. The documentation suggests that those in existing occupational pension schemes will not be automatically enrolled:

"* Current and new employees aged between 23 and 60 years of age and earning €20,000 gross or more per annum across all employments will be automatically enrolled.
* New employees will be enrolled with effect from their first day of employment with an employer.
* People earning below €20,000 per annum across all employments and those employees aged under 23 and over 60 will be able to opt-in to the system if they so choose.
* Employees who are existing members of an occupational pension scheme sponsored by their employer will not be automatically enrolled for the employment to which that pension relates."

Anyone with an existing public service pension should be able to opt-in to the system then, right?

The docs also say "Existing customers of occupational pensions where employers are contributing to the system will not be enrolled in the Auto-enrolment system."

If members of existing occupational schemes weren't also allowed to benefit from the auto-enrolment system, you could end up with a perverse incentive for employers to set up crappy occupational schemes without contribution matching to avoid having to fork out the 6% match amount available via auto-enrolment.

I guess the real question is whether you'll be able to be a member of a PS Pension Scheme and the Auto-Enrolment Scheme at the same time.

Ent319 said:

I guess the real question is whether you'll be able to be a member of a PS Pension Scheme and the Auto-Enrolment Scheme at the same time.

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The answer is surely… NO
No PS employer will contribute to an AE scheme when the employee is also a member of a PS scheme. And if the Employer doesn’t contribute I doubt you can have an AE scheme with only employee contributions. Thst would be similar to the employee paying AVCs which they can do as a member of the PS scheme.

Well, they might not have a choice depending on how things turn out in the legislation?

It'd be extraordinary if you ended up in a situation where the basic auto-enrolment package is better than the Single Scheme. This would be more likely to be the case at lower salary levels.

For example, the following tables sets out total contributions / total benefits on retirement for members of the Single Scheme at lower salary levels (Inflation-Neutral):


At €30,000 salary, a gross contribution of €1040 to the Single Scheme over 40 years would get you €2,000 pension and a lump sum €45,000 lump sum on retirement. Accounting for rises in inflation at 2% PA this would be the equivalent of €4415 gross pension and €99400 lump sum

The same contribution to auto enrolment would be €832 (employer) + €832 (employee) + €277 (State) = €1941 contribution PA. Assume a 6.5% annual return and you're looking at a pot of circa €400,000k after 40 years. A very optimistic 8% would get you circa. €600,000k. Assuming the same lump sum was taken, on the 6.5% scenario you'd be able to fund for a pension of €4415 for 68 years! (edit: I didn't math good)

This is all back of the envelope math but I think the point is illustrated fairly well.

Ent319 said:

Well, they might not have a choice depending on how things turn out in the legislation?

It'd be extraordinary if you ended up in a situation where the basic auto-enrolment package is better than the Single Scheme. This would be more likely to be the case at lower salary levels.

For example, the following tables sets out total contributions / total benefits on retirement for members of the Single Scheme at lower salary levels (Inflation-Neutral):

Salary	Annual Contribution (Gross)	Annual Contribution (Net)	Pension on Retirement after 40 Years	Lump Sum on Retirement After 40 Years	Pension Benefits Capital Value (Male, Married, NRA 66) (40 Years)	Total Contributions (Net) (40 Years)	Capital Value Efficiency Of Contribution (i.e. Total Capital Value of Benefits / Net Contributions over 40 Years)	Total Gross Contributions After 40 Years
€30,000	€1040	€832	€2,000	€45,000	€91,800	€33,280	2.8x	€36,000
€35,000	€1,382	€1,105	€4,500	€52,500	€157,800	€44,200	3.6x	€55,240
€40,000	€1,873	€1,124	€7,000	€60,000	€223,800	€44,960	5.0x	€74,920
€50,000	€2,587	€1,714	€12,000	€75,000	€355,800	€68,560	5.2x	€114,280

At €30,000 salary, a gross contribution of €1040 to the Single Scheme over 40 years would get you €2,000 pension and a lump sum €45,000 lump sum on retirement. Accounting for rises in inflation at 2% PA this would be the equivalent of €4415 gross pension and €99400 lump sum

The same contribution to auto enrolment would be €832 (employer) + €832 (employee) + €277 (State) = €1941 contribution PA. Assume a 6.5% annual return and you're looking at a pot of circa €400,000k after 40 years. A very optimistic 8% would get you circa. €600,000k. Assuming the same lump sum was taken, on the 6.5% scenario you'd be able to fund for a pension of €4415 for 68 years! (edit: I didn't math good)

This is all back of the envelope math but I think the point is illustrated fairly well.

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It certainly would be extraordinary if a scheme that pays 1.5% of salary for 3 years and take 10 years to get up to 6% will be worth more than a defined benefit pension. It won't.

Members of existing pensions schemes will not be eligible to join the AE scheme as well.

You are not able to make AVC's into the AE scheme.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

Even where a DB pension scheme - like the Single scheme - doesn't have a final salary element and provides an absolute pittance of a pension at lower salary levels?

edit: Also I thought the phasing applied to the scheme as a whole i.e. after 10 years of the scheme being in operation everyone entering AE gets the 6% match from day 1 of entry

Great insights. Any further information on this and the comparative benefits of the SPSPS vs the AE scheme?

Ent319 said:

Even where a DB pension scheme - like the Single scheme - doesn't have a final salary element and provides an absolute pittance of a pension at lower salary levels?

edit: Also I thought the phasing applied to the scheme as a whole i.e. after 10 years of the scheme being in operation everyone entering AE gets the 6% match from day 1 of entry

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Great insights. Any further information on this and the comparative benefits of the SPSPS vs the AE scheme?

Tadhg22 said:

Great insights. Any further information on this and the comparative benefits of the SPSPS vs the AE scheme?

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Hi Tadhg. I posted some thoughts in this thread here: https://www.askaboutmoney.com/threa...e-public-service-pension-scheme-spsps.225922/

Take it with a pinch of salt because I don't have the financial chops of most of the people that post here but you may find it helpful. The post doesn't cover AE in particular but does covers the benefits of the single scheme in some detail.

Having listened to all of the Oireachtas debates so far, there has been no mention of public servants joining AE.

AE is really targeting those people who are not members of an Occupational Pension Scheme. Civil and Public Servants are members of Occupational Pension Schemes, so they would have no need to join AE.

Conan said:

AE is really targeting those people who are not members of an Occupational Pension Scheme. Civil and Public Servants are members of Occupational Pension Schemes, so they would have no need to join AE.

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But would you not want to have an AE account alongside your DB pension, even to just get the free match?

e.g. after 10 years with 80K cap, you can per annum contribute 6% (4,800), and get another 6% free (4,800) from your Public Service employer and another free 2% from Govt (1,600).

Cons
You could avoid 40% higher rate income tax had you paid it into an AVC.

Pros
-While this is from your after tax income, you receive the 6,400 free straight away per annum. A guaranteed immediate return, that will then compound.
-Far lower annual fees than you pay for your AVC provider.
-Likely to be more AE investment options than your current AVC provider has, so more chance pick a find one that best suits your risk profile.

TheJackal said:

But would you not want to have an AE account alongside your DB pension, even to just get the free match?

e.g. after 10 years with 80K cap, you can per annum contribute 6% (4,800), and get another 6% free (4,800) from your Public Service employer and another free 2% from Govt (1,600).

Cons
You could avoid 40% higher rate income tax had you paid it into an AVC.

Pros
-While this is from your after tax income, you receive the 6,400 free straight away per annum. A guaranteed immediate return, that will then compound.
-Far lower annual fees than you pay for your AVC provider.
-Likely to be more AE investment options than your current AVC provider has, so more chance pick a find one that best suits your risk profile.

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They won't be eligible to join as they are already in a DB scheme.

Steven Barrett said:

They won't be eligible to join as they are already in a DB scheme.

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Haven't seen it mentioned anywhere Public/Civil servants will be excluded completely or can they opt in?

Some maths I did

The State as employer will hardly contribute to two pension schemes for an employee.

TheJackal said:

Haven't seen it mentioned anywhere Public/Civil servants will be excluded completely or can they opt in?

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Do they really need to expressly mention they won't be joined? Is it not obvious?