Wednesday 18 October 2017

Pensions, not pay, may be the thorny issue in talks

With the bill at €3.3bn and rising, retirement could be key battle, says Katherine Donnelly

(Stock picture)
(Stock picture)
Katherine Donnelly

Katherine Donnelly

Jobs in the public service are traditionally characterised as permanent and pensionable. Permanent, because employees are generally protected from compulsory redundancy and pensionable, because they come with the guarantee of a retirement income, with links to salaries of active workers.

There are no such universal certainties in the private sector.

In terms of pensions - where they exist at all - events of recent years have led to many private sector schemes, previously regarded as robust and generous, unable to meet commitments and scaling back their provisions.

The structure of pension schemes has also been changing rapidly.

The best schemes, known as defined benefit, are comparable in nature to what has traditionally been available in the public sector.

Increasingly, they have given way to less generous, defined contribution schemes.

That change in the external environment, along with a rising public service pensions bill, currently put at €3.3bn, is why pensions will form a key element in the upcoming pay talks.

Although not on a scale that compares with what has happened in the private sector, there have been changes to public service pensions too in recent years.

These include the career average pension scheme introduced in 2013, rather than one based on final salary.

There is also the public service pension levy, introduced in 2011, which costs employees an about 5pc.

There are also differences between the level of State contribution to the pension pots of different groups.

A Government document, prepared for the upcoming pay talk, puts the average State contribution at 29pc for pre 2013 employees, compared with about 11pc by private sector employers.

For gardaí and judges, who accrue their pension entitlements over a shorter period, the pre-2013 figures are 53pc and 71pc, down to 14pc and 39pc for those appointed after 2013.

Controversy

Centralised pay deals always give rise to controversy over the fairest way to apply an increase, to ensure the gap between higher paid and lower paid workers doesn't widen further.

With the variety of pension arrangements now applying, we can expect the same arguments and rows - and that's within the union side - over the treatment of pensions.

For instance, in their submission to the Public Service Pay Commission, two teacher unions, the INTO and TUI - already engaged in battle over two-tier pay scales - argue that their new entrants have been disproportionately impacted by the 2013 scheme, partly because they have a lengthy, 27-year pay scale and so not as many years on maximum salary as others.

Pensions, not pay, may be the big issue in the talks.

Irish Independent

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