Comments on: A “career average” pension scheme?

By: EddieL

EddieL — Fri, 11 Dec 2009 17:59:47 +0000

Emer is absolutely right. 6.5 billion in capital expenditure, houses rented to the health boards, our so-called educated workforce, the education service, the health service, the quangos, is there anyone who is not dependent on the state.
Why then pick on those who work for the state. The obvious answer is privatisation. Then we will have 166 T.D.s twiddling their thumbs in Dail Eireann able to say that it has nothing to do with them like Ms Harney is already saying about the health service.
Don’t say you weren’t warned.

By: emer

emer — Thu, 10 Dec 2009 17:49:37 +0000

@BigFredi

“ok, leave the public service and come to the real world, the one that generates the profits that by paying taxes generate the revenue that pays for those demoralising low salaries and low pensions.”

So private sector businesses run entirely without public sector input? Without clients from the public sector? Or without public services like water, electricity, policing? They make no gain from the education system? Business owners teach themselves to add and subtract? (After they’ve taught themselves to read the ‘basic arithmetic’ manual?) The health of private-sector staff churning out all that profit owes nothing to state health provision?

This inane “I pay your salary” argument needs a bit of chicken-and-egg reflection.

By: Eddiel

Eddiel — Thu, 10 Dec 2009 15:51:29 +0000

Eoin: So even “Career Average will be unsustainable”. Once upon a time there was the barter system where the family business or farm was left to the eldest son. Then the parents were able to live comfortably with their family. Now we live in boxes in cities and you tell us that an assured reasonable comfort in retirement is unsustainable even though we are constantly being told that Ireland was never as well off.
Where is all this leading to? We all know that some pensions, public and private, are way above the earnings of most of those now entering the “minimum wage” work force due to an endles supply of cheap foreign labour.The obvious question then is are pensions overpaid or are wages underpaid? You obviously believe that pensions are overpaid but one simple fact is that low wages mean poverty.
I expect the answer to that question will be provided in the next five years.

By: Eoin

Eoin — Thu, 10 Dec 2009 14:40:36 +0000

Gareth, you are correct.

My description of Career Average is only to give an overview and visualise what’s going on.

In reality on retirement a member’s entire salary history is converted into “today’s money” with inflation factors. This is then averaged to determine Final Pensionable Salary.

Career Average is a fairer pension system. There is now a direct link between contributions and the portion of the pension to which that contribution relates to.

In a final salary scheme a member could hypothetically pay a contribution on say a salary of €40,000 for their entire working life then lets say jump to €80,000 in the year before they retire. Under a Final Salary scheme the pension would be based on the €80,000 despite contributions having been paid on €40,000 for the majority of the members working lifetime.

Career Average avoids this with the pension being based on the average salary on which contributions were paid.

However in the long run Career Average will have to be replaced by either pure Defined Contribution or a Hybrid Defined Contribution / Defined Benefit scheme.
As individuals continue to live longer and the balance between working members of the population and retirees shifts even Career Average will be unsustainable.
A sticking plaster for what is potentially a bigger sore than two Nama’s.

By: Gareth

Gareth — Thu, 10 Dec 2009 14:09:06 +0000

Slight Point:A current full Civil service pension is over 40 years. That is you gain a 1/80th fraction for each full year of service. up to a maximum of 40 years. I am going to assume the new one is the also going to be over 40 years!

By: Mark

Mark — Thu, 10 Dec 2009 12:53:21 +0000

Cheers Eoin, good round up of what exactly it entails. Will lift a link to your comment into the post.

Mark

By: Eoin

Eoin — Thu, 10 Dec 2009 11:20:19 +0000

Career Average is a progressive pension system that will drive down the cost of pensions in the long run.

The easiest way to understand Career Average is to view it as instead of getting 1 pension when they retire an individual will receive 40 “mini” pensions:

1/80 * Sal at age 25 plus allowance for inflation to retirement date +
1/80 * Sal at age 26 plus allowance for inflation to retirement date +
…..
1/80 * Sal at age 65 plus allowance for inflation to retirement date +

If the Government decided to close down the Public Sector pension scheme tomorrow it would cost them 108 billion to pay out everyone (current Pensioners and the value of what current employees have accrued) what they are due.

This is clearly unsustainable. The current market cost of a public sector pension of €50,000 is nearly a million Euro – check http://www.pensionchoice.ie for projections.

You mention a lack of incentive to higher paid General Secretaries. If they feel that their pension entitlements are inadequate they can make Additional Voluntary Contributions. With the switch to Defined Contribution in the public sector the Career Average scheme may actually be viewed as relatively generous in 40 years time. The pension’s landscape will be radically different come 2050. Projections at the moment indicate that a 65 year old male will live to 88 come 2050 and this may actually be understating mortality

By: EddieL

EddieL — Thu, 10 Dec 2009 10:10:21 +0000

Proposition Joe: “Darned licks, with their qualifications and work-ethic … ruining it for everybody else.”
We never had more “qualified” people in this country than we had in the last ten years. Proof of the pudding is in the eating and the result could not be clearer – an economy that had been built up in very harsh times with the sacrifice of many within and outside the country over about 80 years frittered away in the last 5-8 years.
This proves that there is one thing worse than a fool and that is a fool with “qualifications” and “work-ethics”.

By: EWI

EWI — Thu, 10 Dec 2009 01:22:15 +0000

I will get when retired the average of whatever I save for my pension scheme and it will be quite less than most public servants.

I would be in favour of a mandatory (better) universal pension for all – part-fund it by scrapping the pension contribution tax-break of the rich! I suspect that there’d be others who’d think the same way.

IBEC and ISME would fight it tooth and nail, though. You might want to think on that, and why that is.

By: BigFredi

BigFredi — Wed, 09 Dec 2009 23:12:45 +0000

I will get when retired the average of whatever I save for my pension scheme and it will be quite less than most public servants.

No incentives? ok, leave the public service and come to the real world, the one that generates the profits that by paying taxes generate the revenue that pays for those demoralising low salaries and low pensions.

I don’t expect many to leave public services, so I guess they are still better than most.