Private sector workers paying €8 billion annually for public sector pensions

[David Cochrane]

Diaramiud Kelly from PIBA was on Morning Ireland this morning talking about how €8 billion was going towards public sector pensions from the private sector, despite only 40% of the private sector themselves having pensions. It reminded me of comments by Paul McDonnell who said on Matt Cooper a few months ago that for a private sector worker to get the same pension benefits as a public sector worker, they'd have to pay the maximum amount into their pension from the age of 18.

I've followed up with PIBA to get their press release, here it is below.

Private sector workers are paying a massive €8 billion a year to fund current public sector pensions before they can begin to put aside any money for their own pensions, a new study undertaken for PIBA, the country’s largest group of independent brokers, reveals.

This amount, the equivalent of €5,000 per year for the average private sector worker, includes €4 billion to fund social welfare pensions, €2.3 billion to fund retirement payments to public servants and a €1.7 billion contribution to the National Pensions Reserve Fund.

These figures do not even include the €5.4 billion a year accrual cost paid by private sector workers towards pensions for those currently working in the public sector.

PIBA Chief Executive Diarmuid Kelly said the report highlights the deep inequity that exists between the public and private sectors and he warned of the dangers of cutting private pension tax relief.

“This study highlights just how deeply inequitable pension funding is between the public and private sectors. And the gulf is growing, this report shows that the €2.3 billion currently paid to retired public servants has trebled over the last ten years.

“Cutting private pension tax reliefs would be madness. It would place private sector employees at an even greater disadvantage to workers in the public sector and would force more private sector employees into poverty and dependent on the State in retirement.” he said.

The report says that any such changes must take account of the hidden 25% per year, plus employer pension contribution, currently enjoyed by public servants.

It highlights the fact that less than 40% of private sector employees have private pension coverage while the figure for the public sector is 100%.

It also says that the payment of public sector superannuation benefits are guaranteed by the taxpayer while 90% of defined benefit schemes for private sector employees are underfunded with some even leaving members with little or no pensions. (Further comparisons are set out below).

The study says that the value of the public sector pension is equivalent to having a pension pot of about 17 times salary, a level of funding way in excess of what can be afforded by the private sector. Typically public servants are currently retiring on pension pots of over €1 million.

“The long term ramifications of such inequality are severe” adds Kelly, “and there is a huge disincentive within the current system for younger generations in the private sector to start contributing to a pension.

“Immediate action needs to be taken to address the imbalance. It would be very unjust for any Government to allow such inequity to either continue or, worse, to deteriorate further,” he said.

[Rebel CNC]

Some massaging of stats there by PIBA I'd say.
However, no doubt that the pension levy introduced by Lenihan was another typical FF dodging the issue.
The defined benefit pension scheme is an unbelievable perk and the levy introduced was only a fraction of what was required to reflect this!

[myksav]

Tis all lies, lies I tells ya.

[iartaoiseach]

I suggested on another thread last week that maybe the public sector workers could agree to lose their pensions as they are now and contribute to pensions lin the same way as private sector workers. the pensions levy could be abolished and the playing field would be levelled for all workers and then wage rates could be compared.
I am still waiting for takers.

[Jurisprudence]

Absolutely bloody seething at this. Is there anything in this god forsaken country which the private sector worker, even some of the lowest paid, are not paying public servants for. These figures are obscene. Almost foaming at the mouth with rage. It just gets worse doesn't it.

[DCon]

And people wonder why there is a Public/Private Sector divide..

[Mossy Heneberry]

What about those private sector workers who have lost a lot of their pensions because of the stock market crash. I know a lot of people who are near retirement age putting more of their salary into their pension so they won't be living oin poverty when they retire.

[TradCat]

Is someone from the public service going to urge us not to let "them" divide the workers. Because that is one hell of a dividing line right there.

[Conor]

€4bn to fund social welfare pensions? Public sector social welfare pensions?
And €2.3bn on top of that?
Are public sector pensions now 60% social welfare?

I'd love to see this report.

[Leftfemme22]

Private sector workers are paying a massive €8 billion a year to fund current public sector pensions before they can begin to put aside any money for their own pensions, a new study undertaken for PIBA, the country’s largest group of independent brokers, reveals.

This amount, the equivalent of €5,000 per year for the average private sector worker, includes €4 billion to fund social welfare pensions, €2.3 billion to fund retirement payments to public servants and a €1.7 billion contribution to the National Pensions Reserve Fund

Em, PS workers don’t get social welfare pensions, this is the state pension that every private sector worker gets.

In fact the only bit relevant to PS pensions is this €2.3 billion to fund retirement payments to public servants

So no, the private sector does not pay 8 billion annually to fund PS pensions.

The reason 60% of Private Sector workers do not have a pension is the fault of employers and no one else. This is a simple fact conveniently over looked by their mouth pieces in PIBA.