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Time for capital gains tax on tax free retirement lump sums for public sector workers

patslatt

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Apr 11, 2007
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13,637
A business owner selling out before reaching the 50s age bracket has to pay a savage capital gains tax if s/he owned the business in inflationary times from the 1970s up to about 2003. The tax of 33% applies to phony inflationary gains, the effect of which could increase the tax on the real gain adjusted for inflation to 50 or 60% or more.

Contrast that with public sector tax free lump sums on retirement. For a typical public sector average worker on about €46,000 a year, the lump sum is 3.75% of that salary. If multiplied by 40 years service, that is €69,000. The latter figure is equivalent to €144,000 at top marginal tax rates plus PRSI of 52%.

So the public sector worker has a pension €23,000 a year and assuming a life expectancy of 80 from retirement at age 65, the lump sum is worth over €4,000 extra tax free and €9,000 if the tax equivalent figure is used. THe tax free lump sums are incredibly generous for the top half of the public sector pay scale with salaries of €100,000 qualifying.

In the interest of equality before the tax law, tax free lump sums should be taxed. There are no tax free lump sums for the Old Age Pension.
 


johnnypockets

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Joined
Mar 30, 2010
Messages
14,936
A business owner selling out before reaching the 50s age bracket has to pay a savage capital gains tax if s/he owned the business in inflationary times from the 1970s up to about 2003. The tax of 33% applies to phony inflationary gains, the effect of which could increase the tax on the real gain adjusted for inflation to 50 or 60% or more.

Contrast that with public sector tax free lump sums on retirement. For a typical public sector average worker on about €46,000 a year, the lump sum is 3.75% of that salary. If multiplied by 40 years service, that is €69,000. The latter figure is equivalent to €144,000 at top marginal tax rates plus PRSI of 52%.

So the public sector worker has a pension €23,000 a year and assuming a life expectancy of 80 from retirement at age 65, the lump sum is worth over €4,000 extra tax free and €9,000 if the tax equivalent figure is used. THe tax free lump sums are incredibly generous for the top half of the public sector pay scale with salaries of €100,000 qualifying.

In the interest of equality before the tax law, tax free lump sums should be taxed. There are no tax free lump sums for the Old Age Pension.
I would agree. Its never going to happen though.
 

firefly123

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Dec 8, 2009
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27,914
Just out of curiousity do Private pension schemes have lump sums included and if so are they taxed?
 

Uganda

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Aug 17, 2013
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Just out of curiousity do Private pension schemes have lump sums included and if so are they taxed?
You can take up to 25% as a tax free lump sum if you wish.

But you rpension is reduced by whatever the 25% would buy.

You see, its all about the cost a pension you can buy with the money you have. Not heres a pension, regardless of how much it actually costs.
 

Hans Von Horn

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Sep 4, 2015
Messages
1,594
A business owner selling out before reaching the 50s age bracket has to pay a savage capital gains tax if s/he owned the business in inflationary times from the 1970s up to about 2003. The tax of 33% applies to phony inflationary gains, the effect of which could increase the tax on the real gain adjusted for inflation to 50 or 60% or more.

Contrast that with public sector tax free lump sums on retirement. For a typical public sector average worker on about €46,000 a year, the lump sum is 3.75% of that salary. If multiplied by 40 years service, that is €69,000. The latter figure is equivalent to €144,000 at top marginal tax rates plus PRSI of 52%.

So the public sector worker has a pension €23,000 a year and assuming a life expectancy of 80 from retirement at age 65, the lump sum is worth over €4,000 extra tax free and €9,000 if the tax equivalent figure is used. THe tax free lump sums are incredibly generous for the top half of the public sector pay scale with salaries of €100,000 qualifying.

In the interest of equality before the tax law, tax free lump sums should be taxed. There are no tax free lump sums for the Old Age Pension.

There are several ways a business owner may legally avoid paying Capital Gains tax.
 

hammer

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Jul 6, 2009
Messages
58,180
Great idea for amounts over say €40,000

Also there is no reason whatsoever for someone in the PS to get an annual pension in excess of €40,000 per annum.

You could have a nice comfortable existence on that sum in retirement.

The pension timebomb needs to be tacked quickly are the recent recruits will not be getting a pension.
 

firefly123

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Dec 8, 2009
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You can take up to 25% as a tax free lump sum if you wish.

But you rpension is reduced by whatever the 25% would buy.

You see, its all about the cost a pension you can buy with the money you have. Not heres a pension, regardless of how much it actually costs.
So essentially a public sector pension is a 3/4 of final salary pension with 1/4 of that(the 25% you mentioned) being given in the form of a tax free lump sum? Is that correct?
Does the OP agree that all Pensions (public or private) should have their lump sum taxed so?
 

firefly123

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Dec 8, 2009
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Great idea for amounts over say €40,000

Also there is no reason whatsoever for someone in the PS to get an annual pension in excess of €40,000 per annum.

You could have a nice comfortable existence on that sum in retirement.

The pension timebomb needs to be tacked quickly are the recent recruits will not be getting a pension.
I couldn't agree more and have voiced this opinion on here many times. The idea of a PS pension is to have a comfortable retirement not to be wealthier than 90% of most workers out there. The lump should be capped at €100,000 and the yearly pension should be no more than average industrial wage.
What happens now is that in the upper echolons we are getting pension lump sums in the the half million bracket and annual pensions that are eye watering.
 

hammer

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58,180
Firefly what do you think about say Gardai being allowed retire after 30 years service, ie at about 50 years of age.

Is that the same with Fire Fighters ?

It`s way too young.
 

firefly123

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Dec 8, 2009
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Firefly what do you think about say Gardai being allowed retire after 30 years service, ie at about 50 years of age.

Is that the same with Fire Fighters ?

It`s way too young.
Any post 1995 firefighters are oblidged to retire at 55. We have been trying to fight it as anyone who joins over the age of 25 can't get a full pension. We looked for yearly medicals from 55 up to 60 to cover us but no joy yet. It is a statuatory instrument put in place on the pensions act.
 

hammer

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I was reading about your pet hate there last week :)

The number of Fire Chiefs in Ireland etc.........

Wow. What a feckin waste !!!
 

Watcher2

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Joined
May 2, 2010
Messages
33,894
A business owner selling out before reaching the 50s age bracket has to pay a savage capital gains tax if s/he owned the business in inflationary times from the 1970s up to about 2003. The tax of 33% applies to phony inflationary gains, the effect of which could increase the tax on the real gain adjusted for inflation to 50 or 60% or more.

Contrast that with public sector tax free lump sums on retirement. For a typical public sector average worker on about €46,000 a year, the lump sum is 3.75% of that salary. If multiplied by 40 years service, that is €69,000. The latter figure is equivalent to €144,000 at top marginal tax rates plus PRSI of 52%.

So the public sector worker has a pension €23,000 a year and assuming a life expectancy of 80 from retirement at age 65, the lump sum is worth over €4,000 extra tax free and €9,000 if the tax equivalent figure is used. THe tax free lump sums are incredibly generous for the top half of the public sector pay scale with salaries of €100,000 qualifying.

In the interest of equality before the tax law, tax free lump sums should be taxed. There are no tax free lump sums for the Old Age Pension.
Jeez Pat, I didn't know you had an interest at all, atall, in the public sector pay and conditions.
:roll:
 

Watcher2

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May 2, 2010
Messages
33,894
Never occurs to any of you that the aim should be to bring private sector workers up in standards, not to bring public sector workers down?
It didn't even occur to me to read the OP. More of the same. Bet it was about how poorly the public service are paid and treated, no?;)

Might as well read over any number of Pats previous threads.
 

gatsbygirl20

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Dec 1, 2008
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22,551
Great idea for amounts over say €40,000

Also there is no reason whatsoever for someone in the PS to get an annual pension in excess of €40,000 per annum.

You could have a nice comfortable existence on that sum in retirement.

The pension timebomb needs to be tacked quickly are the recent recruits will not be getting a pension.
I agree in principle. Although most PS pensions would not be as much as 40k

But there is a problem. PS pensions tend to be linked to the pension-paying years you worked, and how much you contributed.

So say a teacher retiring on 60k with a few years missing could have a pension of say 25K ......A teacher who worked and contributed to her pension for the full 40 years would have a full pension of 30k ( before recent cuts)

The reason the second teacher receives a higher pension is that she worked longer and, crucially, contributed more to her pension.

Likewise a Principal of a large secondary school could have been on 84K . His pension contribution is a percentage of his salary. He gets a higher pension because he contributed more to his pension.
But the cap fails to take that into account

That's always the problem with caps--including wage caps. Someone promoted, working longer hours, taking more responsibility, ends up being no better off than someone who didn't bother, because their promotional pay takes them over the cap.

Lump sums should be abolished or taxed
 

SeanieFitz

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Sep 13, 2010
Messages
12,011
Patslatt and his almost 17,000 posts on PS

"The definition of insanity is doing the same thing over and over and expecting different results."
 


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