Wednesday 14 November 2018

Lavish public sector pension payouts

Retired civil servants pocket more now than when they worked

DANIEL McCONNELL

RETIRED senior civil servants like secretary-generals, army generals, Garda commissioners and judges, are now earning more in lavish pensions than they were when they were working, the Sunday Independent can reveal.

As a result of the generous defined benefit pensions, the value of which are guaranteed and paid for by the taxpayer and are uniquely linked to the pay of current office holders, former holders of top civil service posts remain totally insulated from the turmoil of the stock markets and economic downturn.

In comparison, private sector workers have seen up to 40 per cent wiped off the value of their pensions since January.

The true extravagance of the public sector pension scheme can be revealed in the week that the Government has been embroiled in controversy over its decision to end automatic medical cards for the over-70s.

The huge spend on public sector pensions comes as it emerged the National Pension Reserve Fund has lost almost €2.5bn in value since the start of the year, meaning the Government will have to plough in even more taxpayers' money to fill the hole.

Lavish public and civil servant pensions, particularly for those who once held top positions add a "terrible and unnecessary" burden on the public finances as unlike in the private sector, their pensions are not based on the salaries when they retire -- instead the amount they receive is linked directly to the pay being received by the current holder of their former position -- and will benefit from each successive government pay deal.

While the Government has inflicted deep pain on the old, poor and sick in Budget cutbacks, figures compiled by the Sunday Independent reveal that over €1bn a year in taxpayers' money is going on meeting the rising burden of public sector pensions.

Jim Power, chief economist at Friends First, said private sector taxes being used to pay massive public sector pensions, has to be addressed. "At a time when the economy is being hammered, and job losses, pay freezes and pay cuts are being forced on workers, it's criminal to think those in the public sector are getting a six per cent pay increase and their pensions are protected and guaranteed."

Power was also heavily critical of the fact that public sector workers of all grades get pensions not based on their salary when they retired, but on current salary rates.

"What's worse is that their pensions are also index-linked to the current salaries of that position, which means many are earning more in their pension than when they were working," he said.

For example, despite being out of office for years, many of yesterday's politicians are receiving pensions over three times the industrial wage. Former taoiseach Albert Reynolds receives a pension of €103,454 as a TD, minister and taoiseach -- despite only holding the top job for less than two years.

According to Dept of Finance figures, former president Mary Robinson received a €146,443 pension in 2007. Former Fine Gael taoisigh Garrett FitzGerald and John Bruton (currently a highly-paid EU ambassador to Washington), receive €98,315 and €94,627 a year respectively. Other beneficiaries include ex-finance minister and EU Commissioner Charlie McCreevy, who gets a €70,710 pension while Bobby Molloy and Ray Burke get €64,818 and €54,353 respectively.

But some of our one-time leading civil servants are also major beneficiaries of the guaranteed state pension.

The former Comptroller and Auditor General Patrick McDonnell receives €113,867 a year in pension entitlements. A total of 59 retired Secretaries General of government departments currently share a pensions pot totalling a whopping €7m, or approximately €118,000 each per year.

Another beneficiary of the generous public sector wage and pension structure is the current Chief Justice, John L Murray. As Chief Justice, he receives an annual salary of €295,915 a year -- which is now greater than that paid to the Taoiseach. On retirement he will also be entitled to a defined benefit pension which will be worth up to 60 per cent of his salary a year and a lump sum of one-and-a-half times his final salary.

However, given his distinguished career, he is also currently paid a pension for his two stints as Attorney-General. Because that pension is linked to the current pay level for the position, €219,000, he received €69,042 in 2007 from the State as a pension. He also receives a pension entitlement from his time on the European Court of Justice.

It was estimated this weekend it would cost as much as €9.5m to fund his pension if he was in the private sector.

At present there are currently eight retired Army Lieutenant Generals in receipt of lavish pensions index-linked to the current incumbent Dermot Earley's salary of €211,362.

There are 17 retired Major Generals each receiving pensions linked to salaries of between €130,000-€150,000.

Both the Garda Press Office and the Department of Justice refused to disclose information about retired members of the State's police force. At present, the Garda Commissioner is paid €221,000 and his predecessors' pensions are based not on their finishing salary, but on the pay of the present Commissioner.

The protected public sector pension schemes are in stark contrast to what is happening in the real world.

In recent years most private sector firms have closed defined benefit pension Schemes and moved to the less generous and no-guarantee defined contribution (DC) schemes, where the onus is on the employee, not the employer, to ensure enough money is being invested.

All private pensions are exposed to the fluctuations of the stock market, and pension experts warn thousands of workers are heading for a major shock because they are unaware of how little they have in their pension funds because of the global crisis.

There is no doubt that public sector pensions are very generous and the fact they are insulated from the ravages of the stock market make them very valuable.

"Unlike before, many people aren't putting enough away. Some people are putting in 5 to 10 per cent of their salary, whereas to get even 50 per cent of their salary on retirement, they would need to be putting away double that," says Michael Madden, a pension expert with Mercer.

Given the collapse of the world financial markets this year, and the lack of guarantee to employers under the DC schemes, Ireland is heading for a major pensions crisis, say experts -- meanwhile the public service will continue to get increases, not only for working civil servants but also for the pensioners who also benefit directly from the pay deals which their successors negotiated on their behalf.

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