Public sector fury at €21bn pensions 'cut'
Published 12/02/2010 | 05:00
THE Government is looking to shave €21bn from the public-sector pensions bill by breaking the link to wage increases.
The move is set to be strongly opposed by the 300,000-plus serving public-sector employees and 100,000 retired civil servants.
Unions are already mounting a work-to-rule campaign against the pay cuts imposed in December's Budget.
Retired public servants currently benefit from pay rises given to those serving in their previous posts, with their pensions increasing by a proportionate amount.
But the Department of Finance is now planning to break this link. Instead, it wants to tie pensions to the cost of inflation, which would mean that future increases would be far less.
At the Dail Public Accounts Committee yesterday, Ciaran Connolly, public-service management secretary general at the Department of Finance, said that if public-sector pensions were linked to the consumer price index, the State's liability would be reduced from €108bn to €87bn.
He added: "Obviously we would have to have consultations with staff interests."
However, the Public Service Executive Union (PSEU), which represents higher-paid civil servants, said the Government would face a fight if it attempted to cut the link between pensions and wage increases.
"It would have a very dramatic disimprovement over time on pensions," said its general secretary, Tom Geraghty.
"If they are saying it will save 20pc of the cost, that means pensioners will lose 20pc of the value in the long run."
Mr Geraghty said unions would normally be willing to discuss changes to pensions -- but not after the public-sector pay cuts.
"If the Government hadn't spat at us and kicked us up the backside when they had made a deal with us, we would sit down and talk.
"It's in our interest to maintain a stable pension system over time," he added.
Finance Minister Brian Lenihan announced plans to look at breaking the link between pay increases and pensions in last December's Budget.
However, this is the first time the scale of the savings envisaged has been revealed. The legislation to introduce the possible changes is due to be passed by the end of the year.
The Public Accounts Committee also heard that the National Pensions Reserve Fund (NPRF) was now valued at €22.3bn, up from €16.1bn in 2008. But there was criticism of the fact that the State's return has been just €1.5bn from the fund, which was set up in 2001.
Labour TD Roisin Shorthall said the fund could have made a much better return if it had not been forced to invest €7bn in the recapitalisation of AIB and Bank of Ireland.
NPRF chairman Paul Carty admitted this was the case but said he was confident the banks would eventually "find their feet" and "rally back".
Staff at the National Treasury Management Agency, which is responsible for exchequer borrowing and managing the national debt, were exempted from the public-sector pay cuts.
However, there was an 8pc reduction in pay at the agency last year and staff also had to pay the pension levy.