The real injustice is private sector workers’ pensions
JUST pointing out that public sector pensions are very generous is enough to bring down wrath on your head.
Public servants, particularly those who joined before 2013, are highly sensitive to any focus on their retirement schemes.
And with good reason. They are truly fabulous pensions, and more luck to those people who have them.
The State is contributing the equivalent of 29pc of their salaries for their pensions, with even higher percentages for the likes of gardaí and judges.
If they have full service they get to retire on half pay, and get a tax-free lump sum equal to one-and-a-half times their salary at retirement.
Not so lucky are the teachers, nurses and firefighters who signed up after 2013.
The rules were changed in the depths of the downturn to give them a pension based on their average earnings throughout their career.
It is not nearly as good as the pre-2013 cohort, but it still beats most private sector pensions hands down.
Contrast this situation with pension coverage in the private sector. Around 1.1 million workers have no occupational pension at all.
And those who do have pensions in the private sector generally have inferior retirement plans to any of those in the public sector.
A new paper by leading actuaries Tony Gilhawley and Roma Burke argues that this is the real injustice in the pension system in this country, rather than the issue around tax reliefs for contributing to a scheme.
The rules were changed in the depths of the downturn
Leave well enough alone, they argue
There are constant calls for changes to pensions tax relief as some analysts argue it is not fair that those on lower pay get less relief than those who pay tax at the 40pc rate.
Under the tax relief system, a higher rate taxpayer gets a tax rebate of €400 for a €1,000 pension contribution. Those on the 20pc tax band only get €200.
But Mr Gilhawley and Ms Burke say that the tax relief system is a secondary issue.
They argue that changing the rules to ensure everyone gets tax relief for their pension contributions at 20pc would drive a further wedge between the public and private sector systems.
Opting for 20pc tax relief for all would hit both public and private sector workers paying into pensions, but public sector workers would demand, and get, a pay rise to compensate them.
Leave well enough alone, they argue, as changing the reliefs would have far too many unintended consequences.
It would be far better to speed up the introduction of the auto-enrolment system for private-sector workers with no occupational pensions. And public servants need to stop being so defensive and realise just how lucky they are to have some of the finest pensions around.