Wednesday 22 November 2017

How cash value of the funds is calculated

ACTUARIES use an annuity rate or a multiplier to put a cash value on a pension.

When assessing the value of the teachers-turned-TDs' pensions, actuary firm Lane, Clark and Peacock arrived at a multiple of 30 by assessing the pension scheme for teachers.

While the figures were estimates, they were based on a number of factors, including time spent teaching, the level of pension increases and prevailing interest rates and an average salary of €63,000.

On retirement, a teacher is entitled to a pension of one-80th of salary for each year of service.

The lump sum is three times that pension.

For example, a teacher retiring after 20 years' service on a salary of €63,000 would be entitled to a pension of €15,750 and a lump sum of €47,250.

To calculate the cost of that pension for a private sector worker in the current market, an actuary would multiply the annual pension by 30, giving a figure of €472,500.

That figure, in addition to the lump sum, gives the pension pot a value of €519,750 in terms of today's money.

Irish Independent

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