Paschal Donohoe to seek significant reforms of public sector pensions
Public servants will take a huge hit from widescale reform of their pensions, calculations show.
Changing the way pensions are calculated could see even modestly paid public servants losing up to €100,000 over the course of their retirement.
This works out at around a quarter of the pension payments they could expect.
The Government is seeking significant reforms of public sector pensions as part of the upcoming pay deal for the sector.
It is expected to offer a pay rise to some 300,000 public servants, but seek changes to their pensions which are regarded as "gold-plated" arrangements.
This is particularly the case for the 85pc of public servants who joined before 2013.
They get a pension based on their final salary and the number of years they have worked.
These pensions increase every time there is a pay rise for the grade or position they retired from, so-called pay parity.
But people who joined the public service since 2013 get a pension calculated off the average they earned over their entire career, known as a career average system.
It is understood that one of the more radical options the Government is looking at is moving all public servants to the "inferior" career-average pension system.
Actuarial calculations for the Irish Independent show that moving from the final-salary defined benefit pension to a career average for all public servants would see pre-2013 workers taking a massive hit.
A modestly paid worker would get a quarter less in income over their retirement.
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Based on someone starting work now on €25,000 the loss in pension payments works out at €100,000 over the course of their retirement.
This is based on life expectancy to 90 and the example strips out inflation, but includes general pay rises.
The calculations show that a final-salary pensioner would end up with a pension over €442,000 over their retirement. A career average pensioner would get €328,000, the calculations show, a difference of 26pc.
This underscores just how generous public pensions are, especially for the 85pc of State workers who are on the old final-salary schemes.
Unions said they would resist tooth and nail any attempt to impose inferior pensions on the majority of older public servants with final-salary retirement arrangements.
Tom Geraghty, of the Public Service Executive Union, has pledged that his members would fight any move to reduce pension entitlements.
The sheer size of the hit that would have to be borne by most Government workers means the proposal is unlikely to be implemented.
But the threat of such a change is likely to be used as a way to weaken the final-salary pension arrangements in other ways.
This is likely to see the Government try to move away from paying final-salary pensioners' increases based on what is paid for the position or grade they retired from, to a system where pension rises are based on the consumer price index.
A recent report from the Controller and Auditor General said this would lead to savings of €16bn over 70 years.
The Government spends around €3.3bn a year on paying pensions to public servants, a figure seen as unsustainable.
The generous "gold-plated" pensions enjoyed by public sector workers have long been the envy of private sector workers.
Private sector arrangements have been drastically watered down, as companies decided they were no longer affordable.
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.