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Pension bill soars by more than €630m in two years

THE public sector pension bill has soared by more than €630m in the last two years, the Irish Independent has learned.

Although the Government slashed €2.3bn off its pay bill in that time, the first figures to be sent to the IMF reveal the full extent of the burden on the Exchequer due to its incentivised early retirement scheme.

Payouts to public servants who retired early helped hike up the pensions bill by €633m since 2008.

New figures reveal the scheme introduced in 2009 pushed up the bill from €2.1bn at the end of 2008 to €2.73bn at the end of last year.

In contrast, €2.3bn was saved on public servants' pay in that time -- €1.4bn by cutting the workforce by 14,500 and introducing a pay cut, while the pension levy of February 2009 yielded another €945m.

Taken together, the gross pay and pensions bill now stands at €18.6bn, down from €19.3bn at the end of 2008.

The new figures will be sent to IMF and EU officials within weeks to outline the Government's position as it moves to meet targets set in the four-year bailout deal.

Savings on the pay and pensions bill -- which represents roughly a third of state spending -- will be closely monitored by the officials to ensure the conditions of the €85bn bailout are honoured.

Some figures will provide updates on targets in the agreement, the National Recovery Plan, that had already been partly met when the deal was struck. For instance, the deal that was struck before Christmas said 24,750 public servants should have gone between 2008 and the end of 2014.

Some 14,000 of these had already left when the agreement was reached.

The report, which is being compiled for the Department of Finance for the IMF, will show that the number of public servants has fallen from 319,440 at the end of 2008 to 305,000 at the end of last year. The target for the end of this year in the four year plan is 301,000.

The cuts in numbers were achieved mainly through a ban on hiring that was introduced in March 2009 and an incentivised early retirement scheme that began two months later.

Sources said the figures showed government cuts had yielded a significant reduction in the public service pay bill.

"The reason for the increase on the pension side is the significant increase in lump sums paid because of the rise in retirees, but it is a distortion," a source said.

"It was a one-off and the savings will be greater when this element falls out of the figures this year."

Irish Independent