'Black hole' in public sector pensions funding criticised
Published 15/05/2015 | 02:30
The Government has been accused of being "reckless" over the long-term planning for the ballooning cost of public sector pensions.
It will cost €2.4bn for public sector pension payments this year, 75pc higher than the figure before the financial crisis began.
The gap between what is being paid out in public sector pensions and the contributions made by staff is close to €1bn.
This money comes out of general taxation, with experts calling the lack of funding a "black hole".
Talks began this week between the Government and public sector unions on what has been called pay restoration, with unions demanding a cut in the pensions levy.
Public sector employee contributions to their pension averages 6.5pc, while there is also a pensions levy averaging 7pc.
There are 300,000 public servants. Another 140,000 retired public servants are in receipt of pensions, most of whom worked in health and education.
Head of the Irish Brokers Association Ciaran Phelan accused the State of regulating private pensions in a very conservative manner, but was "reckless" when it comes to long-term planning for the cost of public sector pensions.
He said the regulation of private pensions was overseen by the Government and the Pensions Authority, which it appoints.
The Government also oversees public sector pensions, he said.
"The Government is ultra conservative when it comes to private pensions, but when it comes to the long-term planning of public sector pensions, it could only be described as reckless," Mr Phelan said.
He said there had been little reform of public sector pension arrangements. These pensions were very generous, he said, but the cost was mushrooming.
There was a "black hole" as the pensions were not properly financed by the contributions being made by staff, Mr Phelan said.
He claimed the situation was so lop-sided that future generations would end up setting up a pensions tribunal to work out why the issues were not tackled.
This would focus on unfulfilled promises made to young workers.
Public servants with full service are entitled to half of their final salary in retirement and a lump sum of one-and-a-half times their salary at retirement. The pensions system has been changed for new entrants to the public sector, with their pension to be based on their average career earnings. The average pension payment is €26,000 a year.
A spokeswoman for Brendan Howlin's Department of Public Expenditure and Reform emphatically denied that public sector pensions had not been reformed.
"Changes to pension rules started as long ago as 1995 and now affect the majority of public servants," she said.
Pensions for public servants were now based on 2010 pay rates, and public sector pensioners had been hit by a special levy, the department said.