Sunday 4 December 2016

Decades to cut pension bill despite shake-up

Anne-Marie Walsh and Charlie Weston

Published 30/09/2011 | 05:00

STATE pensions face significant cuts but it will be decades before they lead to major savings in the €2.7bn-a-year bill.

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A new public service pension scheme is due to come into force but it will not affect the existing workforce of over 300,000 public servants.

Only new recruits to the public service will join the lower-cost scheme -- but there are few new recruits because of a ban on hiring that has been in place for over two years.

Even when recruitment begins again, it will be years before employees will draw down the cheaper pensions.

The new legislation will also end controversial perks for future heads of government departments, including "special severance payments" and extra years of service that they have not worked.

But this will not affect four secretaries general who have been appointed since the current Government came to power, or those hired before this.

Four recent appointees are on the same terms as retired civil servant Dermot McCarthy, who left with a €713,000 exit package last July.

Secretaries general Robert Watt, Martin Fraser, Brian Purcell and Jim Breslin were appointed on the same terms as Mr McCarthy, despite outrage at the payments.

They will still enjoy packages worth up to €500,000 and will still be entitled to added years of service to ensure they get full pensions.

The conditions enjoyed by existing staff contrast starkly with the terms that will be offered to public servants whenever recruitment begins again.

New recruits' wages have already been slashed by 10pc in a previous Budget.

The new scheme means their pensions will be based on their average earnings over their career, rather than their final salary, while retirement age has been increased from 60 to 65.

In addition, higher paid staff including judges, TDs, the Attorney General, and the President will have to start paying pension contributions of 13pc.

Currently, judges pay an average of 4pc, TDs 6.5pc, while the Attorney General and the President pay nothing towards their pensions.

However, the scheme is still far more favourable than many private sector schemes and is a Defined Benefit Scheme.

Spin

The Department of Public Expenditure and Reform admitted yesterday that savings to the pensions bill as a result of the legislation will only be reaped 40 years from now.

It estimated that "by the middle years of the century" expenditure on pension schemes would cost €5bn a year but the scheme would cut this by 35pc, or €1.8bn.

Minister for Public Expenditure and Reform Brendan Howlin said the new single scheme would significantly reduce costs to the taxpayer.

However, personal finance guru Eddie Hobbs said the changes would not make any difference to the public sector pensions bill.

"The changes to the pensions arrangements for new entrants are just spin," he said.

Irish Independent

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