MINISTER HOPES TO DRIVE A STAKE THROUGH PUBLIC SERVICE PENSIONS, Sean Fallon ASTI
The following quotes from this year’s budget speech are very worrying:
“The Government has decided . . . by the end of the year . . . it will change the calculation of benefits so that pensions are based on “career average” earnings rather than final salary on retirement as at present.” As shown in a document I circulated recently by email and by hand to C.E.C. members, this change will reduce the value of pensions for new teachers and other public service workers by over 20% even if contributions remain the same. This is quite shocking!
“The link to earnings or ‘pay parity’ basis for post-retirement pension increases is a feature of Irish public service schemes. The recent special report by the Comptroller and Auditor General estimated that the present actuarial cost of public service pensions is €108 billion. A change to a CPI basis for post-retirement increases would reduce that cost to €87 billion, a reduction of 20 per cent.”* A reduction of 20% in pension pay-out for all teachers and public service workers is scandalous given their legitimate expectations after years of contributing to the present scheme. However, together with the first change, above, this would also mean a total reduction in pension for new teachers and public service workers of 40%, which is absolutely staggering!
This second change is currently “on hold” for serving public service workers only. This is because the Government believes that for the next three years it would cost less to tie the pensions to a 0% level of pay increase than to tie it to an inflation level (consumer price index) that may actually rise. (In taking this position it is contradicting its own claims that the cost of living is falling). However, legislation is still being processed so as to apply these changes to new public service employees including teachers from 2011. Given that the number of newly appointed public service workers will be quite small due to the embargo (despite recent announcements for education) the Government will save very little through this arrangement for many years. However, if it applies it to all public service workers it will make the 20% savings once the pay freeze ends. Might it even be used as a trade-off to end the pay freeze?
The Government promise that there will be no “salary cuts” in the next three years is very interesting. It can, after all, maintain the gross salary level to keep that promise while adding further levies, increasing present levies, increasing taxes, freezing increments etc. etc. It needs more money and has set its face against replacing the public service “pension levy” with general tax across all the currently working population so what do you think it will do?
The Government continues to give the impression that our pension contributions are about 6.5% p/a for 40 years, (give or take variations for certain groups like the defence forces, Gardaí etc.). There is no mention of the fact that since the P.C.W. (1998) and the Benchmarking exercises of 2002 and 2007 we are also paying at least another 7% in the form of pay cuts related to our pension arrangements. Its figures are completely wrong.
*(The enormous figures quoted are long term figures for pension commitments already entered into. The Comptroller and Auditor General Special Report 68: Central Government Pensions states: “The State’s accrued liability in respect of pensions for serving staff, pensioners and preserved pensioners was estimated at €108 billion at 31 December 2008.” Much of this may not be paid out as pension for many years. The €87bn figure is all that retired public service workers would be entitled to if the Consumer Price Index were used to guide/control pension increases in the future. The Minister is quite right. The difference is about 20%).
Sorry to depress you but you might as well know what we are up against. I wish all members had this information before voting on the Croke Park proposal.