Pensions, perks and payouts tax public purse
Civil servants get guaranteed lump sums, as private sector get the dole
HE may have been the watchdog who didn't bark or bite, and his golden handshake of €630,000 might have outraged members of the Government, with Green Party Senator Dan Boyle, for example, describing it as "staggeringly generous", but former Financial Regulator Patrick Neary isn't alone when it comes to benefiting from the largesse of the public purse.
For while he deftly negotiated the receipt of a special €202,000 pay-off after stepping down in the wake of the Anglo Irish Bank debacle, the other small matter of the €428,000 retirement lump sum given to Mr Neary was gifted to him under the terms of legislation dating back 100 years.
According to the 1909 Superannuation Act, and regulations introduced by successive governments, all retiring civil servants are automatically entitled to a lump sum payment to the tune of 3/80th per year of service up to a limit of 40 years of service.
While those fractions might appear insignificant at first glance, a cursory examination of the amounts payable in lump sums to the various grades of civil servant is enough to make any worker in the private sector weep.
At the highest echelons of the public service, for example, a secretary-general in a government department retiring after 40 years on basic earnings of €221,929 is entitled to a lump sum of €332,894 or 1.5 times their final salary. After that, the same retiring mandarin is entitled to an index-linked annual pension of €110,964.
Immediately below the level of secretary-general, a retiring deputy secretary with 40 years service would be entitled to a lump sum payment of €266,320 and an annual pension of €88,774 based on their final salary of €177,547.
But it isn't just the upper reaches of the public service who find themselves eligible for big payouts on their last day on the job.
Even principal officers in the civil service receive substantial sums upon retirement after 40 years. According to the Department of Finance's calculations, these individuals are entitled to a lump sum payment of €106,582 on the day they leave the public service, and a pension of €53,291 a year thereafter.
Higher scale administrative officers with 40 years' service earning a salary of €61,082, meanwhile, are currently entitled to a lump sum of €91,623 and a pension of €30,541.
And for anyone who thinks the pension benefits of the public service couldn't get any more generous, they do, at least for those employees who joined the civil service prior to April 5, 1995. Under the existing rules, these fortunate individuals are entitled to receive their public service pensions on top of their State pensions.
To make matters even better, the retirement lump sums paid to public sector employees upon retirement are -- unlike their peers in the private sector -- not deducted from their pension pot.
With the economy in crisis, the spotlight has unsurprisingly been thrown on the spiralling cost of the public service wage bill, and more lately, on the growing pensions bill.
While pensions will continue to be paid -- with or without the pension levy proposed by the Government -- the future provision of retirement lump sums could well come under serious threat.
Asked if any discussion had taken place on the matter of lump sums paid to retiring public servants, a spokesman for the Department of Finance pointed to the recent publication of the Government Green Paper on Pensions as the first step in a broad discussion on the future development of pensions generally.
Commenting on this, the spokesman said: "The Government's objective is to put in place a pension system which is financially, economically and socially sustainable. In response to the Green Paper process, the Government is now developing a new and comprehensive pension framework which is expected to be brought forward in the near future."
Looking at the pension costs detailed in the Government's most recent report on the matter published in 2001, that process will need to be expedited if the yawning gap in the public finances is to be addressed.
According to the Report of the Commission on Public Service Pensions, in 1997 alone the State paid out €807m in pensions to 77,200 civil service pensioners.
A further breakdown of that figure shows that €646m was accounted for by the payment of pensions, with the other €161m taken up by the payment of gratuities and lump sums.
And in predicting the future cost of the public service pension scheme, the report's authors estimated the cost to the State would go from the €807m spent in 1997 to €1.737bn in 2012, before rising to €3.058bn by 2027.
A significant number of top civil servants pay nothing for their pensions and gratuities received on retirement.
However, in a reply to a Dail question by Labour finance spokeswoman Joan Burton, Minister Brian Lenihan admitted that, up to now, pre-1995 civil servants enjoy the unique perk of not having to pay for their personal pension entitlements.
In contrast, civil servants who joined after 1995 pay a small proportion of their salary towards future pension benefits.
Deputy Burton said this differentiation was certain "to cause anger amongst hard-working frontline staff who already pay a great deal more for a much smaller pension''.
- RONALD QUINLAN
