Public Service Costs - The Elephant in the Room


#1984

Except this is pretty much gone in the public sector too.

All new entrants since 2013 face career-average rather than final-value salaries.

It may surprise people that the monastic model of early entry to the public service, no gaps, and a 40-year career is largely gone too. Barring certain sectors like defence forces, prison service and the guards, people now enter at all ages and levels. Some have spent time abroad. Many now hit retirement age without having reached the maximum of the scale never mind 40 years service.


#1985

That combination is potentially quite attractive for someone moving from private sector mid-career with little existing pension provision, because the career average would be higher.

Like, average 80k for 20 years, retire on 20k pension (half of half average) + state contributory + whatever you have in DC from private sector.


#1986

Except it doesn’t work like that.

The state pension contributory (12k or so) is ‘integrated’ into your PS one in the jargon. You would have got this anyway had you stayed in the private sector on minimum wage

So in effect you are getting 20k-12k=8k of an annual pension in this example.

And of that 80k salary you would be paying 10k in pension contribution and pension-related deduction every year.

PS pensions are much better value if you have a long career.


#1987

Ah right, I didn’t know that was universally applied.


#1988

I looked at joining the CS at one point in my career. I would have taken a fairly hefty salary cut - about 30% - but wondered if the pension would compensate. I would have had an 18 year career but the calculations didn’t look strong enough - I might possibly have got promoted into the higher echelons but as this is service-based I would have been at a considerable disadvantage. The earlier retirement that I would have had looks pretty attractive now but I wouldn’t have earned as much as I have and my own DC plan should end up better than the half pension I would have got. At the time I was contemplating it I had very little in my DC pension. As you say you need to be in it for the long haul and you need to be in at a professional grade. Based on my parents (and their peers) experience (not civil servants but a good DB pension from a company) you actually only spend a lot of your pension in the period between retirement and about 80 years of age - after that you don’t/can’t travel as much and the state pension pretty much covers you. You might get a better class of nursing home though!


#1989

Compare Eschatologist’s hypothetical private sector worker joining up at 45 for 20 years on an 80k salary.

She pays 10k in pension-type contributions per year. With the hypothetical tax relief that is about 17k per year. Over 20 years her contributions are 340k. At 65 she gets an 8k entitlement above the state pension.

She would want to live for another 42 years to make that back - and that assumes 0% investment growth.

If similar-paying private sector employment was available she would be better off staying and contributing to a DC pension.


#1990

Don’t forget the lump sum of approx 60k in that scenario.

Also, if you had joined pre-2013, you would be able to retire at retirement age and receive your full pension, including the state pension element. The age at which people qualify for the state element is moving and will surely hit 70 at some stage.

Not to mention the fact that the pension levy is a recent phenomenon and not necessarily there for good.


#1991

Correct.

My example above should read 34 years, not 42 years.

Even still it is not by any stretch better than a private sector alternative.


#1992

Nope, it isn’t in that case. A 30 year career is probably more like it.

80k is a very unusual salary throughout most of the PS too.

Pre 95 entrants are decoupled from the state pension and paid a different PRSI rate.

Up to a decade ago, they could retire at say 58 and work a further 5 years in something that allowed them build up a PRSI history. Then they qualified for the state pension as well.*

  • This is somewhat anecdotal and may not be accurate

#1993

Ahh you got there first.

I was also about to point out that there the State Pension is not supplementary to the PS pension it is inclusive of the State Pension which should be also available to most.

Currently it is €12,391.60 pa


#1994

I think you could still swing this if you were say a pre-95 teacher who also worked regularly part time in a pub or the like.

Not available to post-95 entrants who by now constitute the majority of the public service.


#1995

I just took a look at cspensions.gov.ie

and threw in our notional employee.

Assuming 45 years of age and retiring at 65

That’s pretty good unless I’m missing something?

It seems they subtract the state ~12k from 40,000 and leave 28,000. As the person has half service, they end up with 14k of this?

So in total, a 26k pension.


#1996

You are unfortunately missing something.

You’ve chosen someone who was recruited pre-95

Try the ‘Established Civil Servants ‘New Entrants’ from 1 April 2004’ field.


#1997

That’s what I have.

Established Civil Servants Superannuation Scheme (Post April 2004) 

In the pre-95 case, you would have


#1998

As of now, this is not the case. The age for receipt of the state pension element has been moved up while mandatory retirement ages have not. Meaning that currently there is a year or perhaps more during which new pensioners, even those who joined post 1994 but pre-2013, do not get the state pension part of their pension.

I have no idea how many this has affected.


#1999

No, the personal pension part of the pension (that the employee contributed towards) is approximately 14k and the formula is set out here:

cspensions.gov.ie/Superannua … c20061.pdf

It is calculated as follows (Note that the annual rate of the SCP is incorrect on that site):

80k

Weekly SCP: €238.30
Annual SCP: €12,391.60
3.333333 times annual SCP: €41,305.33
1/200th of salary below 3.333333 SCP for 20 years: 41,305.33/200*20 = €4,130.53
1/80 of salary above 3.333333 SCP for 20 years: (80000 - 40438.66) / 80 * 20 = €9,673.66

€13,804.20.

The worker in that example “may” be entitled to a state pension at 66 now (67 in 2021 and 68 in 2028) that all depends on his PRSI contributions and whether he has enough contributions, but if he retires at 65 (and in a lot of cases this is compulsory), then he will have to sign on the dole and exhaust those entitlements before putting in for a supplementary pension as was brought up by Clare Daly in 2015 when the increase of the state pension age caused a problem with PS workers who have to retire at 65:

kildarestreet.com/wrans/?id=2015-09-22a.884

The pre 1995 pension is calculated very simply (they were never coupled with the state pension):

80,000/80x20 = 20k.


#2000

You could swing it if you were a Garda or Prison Officer who can retire at 50 and 55 providing they have full service.

A friend of mine (prison officer) retired about 2 years ago (pre 1995), he worked for 10 years in the private sector before he joined so he had a PRSI history, he then worked for 30 years paying the modified stamp. He went to the Social Welfare and they were able to tell him if he worked and paid PRSI for 26 months then at age 67 he would qualifiy for the minimum state pension which is about 95 euro a week.

The thing about this is that he will pay full tax on it because his work pension is about 600 a week.


#2001

And just to add, those new entrants “minimum retirement” ages are now linked to the state pension age:

per.gov.ie/en/single-scheme/


#2002

Here’s how I worked it out for my pension


#2003

Your annual pension payment is 1.5% of your gross salary, 3.5% of your net salary and your PRSI.

1.5% = 1,210.18.

Your net is your gross minus twice the annual rate of the State Contributory pension. 24,873.21 = 55,895.80
3.5% of which is 1,956.35.

Your PRSI is 3,227.16.

Total personal pension contributions:

6,393.69 or 7.91%

You also pay 1.5% for the spouse and children.

When you look at your payslip you should see 2 exact amounts reflecting the 1.5% gross and the 1.5% spouse and children and a third amount which is the 3.5% as set out above.

“Integration” begins when you get paid and the pension is calculated at the end as per my previous posts.

Those are your personal contributions.

To be fair in any comparison to a private sector pension, then you must deduct the state pension part from the benefit at the end.

What you will be getting from your employing department is 50% of 80,679 less the annual rate of the state pension.

In your case the calculation of your pension (based on the information you provided) is as follows:

80,869.00

Weekly SCP: €238.30
Annual SCP: €12,391.60
3.333333 times annual SCP: €41,305.33
1/200th of salary below 3.333333 SCP for 40 years: 41,305.33/200*40 = €8,261.06
1/80 of salary above 3.333333 SCP for 40 years: (80 - 39,563.67) / 80 * 40 = €19,781.83

Both added together:

**€28,042.89 **- Which is the personal part of your pension which you contributed to.

Your 50% entitlement is:

€40,434.50

The difference is 12,1391.60, which is the annual rate of the SCP that your PRSI contributed to.

I am assuming AP means “Assistant Principal”, here is a link from ASTI showing how your pension is calculated:

asti.ie/pay-and-conditions/r … r-pension/