Vote 37 - Army Pensions (Supplementary)

The purpose of this part of the meeting is to consider a Supplementary Estimate for Defence Vote 37 - Army Pensions. I remind members it is the Supplementary Estimate rather than the totality of the Estimates.

I thank the Minister, Deputy Tony Killeen, and his officials for attending and assisting our consideration of the Estimates. As regards the briefing providing details of the Supplementary Estimate circulated to members, if we are to adhere to a reasonably strict schedule, the Minister will address the committee for approximately ten minutes after which each of the Opposition spokespersons will have the same length of time to respond, and we can then have an open discussion. Is that agreed? Agreed.

In reminding members they are only considering the Supplementary Estimate, I stress that while they may discuss issues relevant to this under the individual subhead, they may not recommend increases or decreases in the Supplementary Estimate, and there are no votes. I invite the Minister to make his opening statement.

I thank the Chairman and the committee for the opportunity to present for its consideration the 2010 Supplementary Estimate for Vote 37 - Army Pensions, which is for a net sum of €9.5million. I am accompanied by my officials.

The Army Pensions Vote makes provision for retired pay, pensions, compensation, allowances and gratuities payable to or in respect of members of the Defence Forces. The original Estimate provided a net sum of €202.5 million to cover a total of almost 11,200 pensioners comprising some 8,960 retired members of the Defence Forces, some 1,760 spouses and children of deceased members and 380 spouses of deceased veterans of the War of Independence. However, the numbers of Defence Forces pensioners has increased during the past year.

Subhead B is the main subhead of the pensions Vote and covers expenditure on all superannuation benefits for former members of the Defence Forces and their dependants. It accounts for over 95% of all Army pensions expenditure and is largely demand-led. The original provision of €198 million in this subhead will be inadequate to meet all requirements and the gross shortfall is estimated at €10 million. This will be reduced to €9.5 million net when expected savings in subheads C, D, E and F are taken into account.

The shortfall arises from higher than anticipated numbers leaving the Permanent Defence Force during 2010. In that regard, the number of military pensioners under subhead B was 10,329 at the end of last year and the current figure is 10,483. This continues the underlying upward trend over the last few years in the number of military personnel leaving with entitlement to pension and retirement gratuity. This is reflective of the situation across the public service during 2009 and again in 2010, where higher levels of retirements continue to occur than previously was the case. In addition, most Defence Forces retirees continue to be in the "long service" category and therefore entitled to maximum retirement benefits. Overall, the provision in Subhead B was insufficient for what transpired in 2010.

I refer now to the issue of public service pension reform and, in particular, to the latest concerns at the long-term cost projections of public service pensions over the next 50 years. The committee will be aware that the process of public service pension reform has in fact been ongoing for some years. A 2004 reform package followed from the recommendations of the independent Commission on Public Service Pensions. Major changes to the pension terms of new entrants were introduced from 1 April 2004. These were essentially age-related reforms including the raising of the minimum pension age to 65 for most new entrants recruited from April 2004 onwards. Those changes will undoubtedly help contribute to the achievement of a more secure financial basis for public service pension schemes in the medium to long-term.

The 2004 reforms brought military pension arrangements more into line with those applying to other public service groups. This involved a move away from a system of the payment of pension benefits immediately on retirement and after relatively short periods of service, regardless of age. Arising from those changes, post-April 2004 Defence Forces personnel have a minimum pension age of 50 in the case of new-entrant officers and enlisted personnel. In other words, pension and lump sum will not ordinarily be payable immediately on retirement unless the person serves to age 50. Benefits will be preserved in the case of personnel retiring before age 50. These were fundamental changes in military pension arrangements. The removal in 2004 of the compulsory retirement age in most public service areas was not applied to the Defence Forces.

This general approach was in recognition of the particular operational and manpower policy requirements of the Defence Forces, which are widely acknowledged - by the pensions commission among others - as being different from all other public service groups. Key elements in that regard include the need for military personnel to maintain their levels of fitness for operational readiness at home and overseas, the maintenance of an appropriate age profile among military ranks and the dual requirement for regular turnover of personnel while also achieving the necessary balance in retaining experience and expertise, particularly at officer and NCO level.

The Defence Forces therefore require the ongoing application of specific terms and conditions of employment that support its operational and manpower policy objectives. This includes compulsory retirement ages that are considerably earlier than the public service norm of 60-65 and the capping of service in the case of the junior enlisted ranks. The committee will appreciate that the unique nature of military service requires the continued application of such provisions.

When formulating its recommended pension scheme terms for future military personnel, the pensions commission recognised the different and unique manpower policy objectives of the Defence Forces compared to all other public service groups. The commission also concluded that pension scheme design should be capable of supporting this policy.

Accordingly, based on the commission's recommendations, the agreed superannuation arrangements for post-April 2004 military personnel also include provision for fast accrual pension terms. This currently allows the accrual of full pension over a shorter period than the norm, in general over 30 years compared with 40 years usually. The concept of fast accrual is a key support of military manpower policy and operational requirements. Taken together, fast accrual and lower minimum pension age complement and support the military manpower objectives I have outlined, while also recognising the shorter career span of military personnel as a result of earlier compulsory retirement ages.

As indicated in the 2010 budget and the national pensions frameworkpublished in March, the Government has already embarked on the next stage of the pension reform process. The committee will, of course, be aware that the pensions debate applies to the overall State pensions bill including social welfare pensions. In the budget of 2010,my colleague, the Minister for Finance, drew attention to the very substantial current pension bill as well as the projected growth in our overall bill in the period to 2050.

Exchequer spending on public service pensions will be over €2 billion in 2010, while the State's overall pensions bill is expected to rise from about 5% to 13% of GDP by 2050. Two thirds of this increase in spending will go on social welfare pensions and the remainder on public service pensions. As the Minister for Finance said in his 2010 Budget Statement: "Cost increases on this scale cannot be ignored by a responsible Government determined to secure our economic future". Against that background, the committee will be aware that the Government has decided to introduce a new single pension scheme for all future new entrants joining the public service after 2010. As indicated in its national pensions framework:

The introduction of a single pension scheme will provide a standard, consistent and efficient structure for the future management and control of public service pensions. The aim is that, in time, all civil and public servants will have the same basic scheme, with an appropriate accommodation made for whatever particular terms and conditions might be required in exceptional areas, such as An Garda Síochána and the Defence Forces. The scheme will have a benefit structure aimed at providing adequate and fair pensions for public servants, while also safeguarding long-term Exchequer sustainability. The new scheme will bring public service pension terms more in line with private sector norms.

The main provisions of this new scheme will include the following: pensions for all new entrant public servants will be based on "career average" earnings rather than final salary as currently applies; for most public service groups the minimum pension age under the new scheme will be raised from 65 to 66; in tandem with the raising of the minimum pension age, maximum retirement age for the generality of post-2010 public servants will be fixed at age 70.

These represent further significant reform measures. Certain other aspects, including employee contribution rate and pension accrual rate, will be considered by Government in finalising the relevant legislation for the new scheme. As indicated in the National Pensions Strategy, the special service groups such as the Defence Forces "will retain early retirement ages which reflect operational needs and will continue to be paid their pensions at these early retirement ages where this is currently the position". This means the current minimum pension age of 50 will continue to apply to post-2010 new entrant military personnel. Defence Forces retirement ages or upper service limits - as the case may be - will also continue to be determined in accordance with military manpower policy and operational considerations. This approach is consistent with the stated views of the pensions commission.

As I mentioned, fast accrual terms are a key element of the pension arrangements of special service groups such as the Defence Forces. I support the retention of the concept of fast accrual pension terms for military personnel, given its importance to the maintenance of the most effective human resource capability in the Defence Forces. The specific pension accrual rate to apply to groups such as the Defence Forces will be carefully considered in the formulation of the new scheme. In the context of the normal representative machinery, there have been consultations on the new single scheme with the Defence Forces associations, PDFORRA and RACO. This has included discussions with the Department of Finance and at bilaterals with Defence management at departmental and military levels. I am aware that a key concern for the associations, as articulated in those discussions and their submissions on the matter, is the retention of fast accrual pension terms for post-2010 military personnel. Further discussions with the associations are scheduled to take place next week. I do not wish to pre-empt the possible outcome of these discussions or deliberations on the details of the new scheme that remain to be decided by the Government. The committee will appreciate that I cannot therefore comment on such matters in any great detail at this point.

I commend this Supplementary Estimate to the select committee.

I thank the Minister and his officials for attending this evening to brief us on this Supplementary Estimate. The Minister's speech dealt in the main with the pensions issue, and rightly so. I note that he has spoken about the fast accrual pensions and the fact that this accrues over a faster period. This obviously has to do with the need for having younger and fitter people in the Defence Forces. In addition, Defence Forces staff tend generally to retire earlier than the normal retirement age. That is all important. There have been changes during the past number of years in the way members of the Defence Forces have been recruited. I understand that prior to 1994, people could serve for periods from 12 to 21 years. I understand that currently they can serve for periods from three to 12 years. As such, there are many contracts in the mix. It is important to look at how these contracts will work out in terms of future pension arrangements and to what people will be entitled. Some people joined prior to 1994 and others joined after that. There are also other people who joined the Defence Forces after 2004, when further changes were made.

There are 40 recruits to be taken on before 31 December 2010. I am interested to hear if this recruitment will go ahead. If Garda clearance does not come through on time will they be taken on? This is a serious matter for these new recruits and the future of the PDF. It will also have implications into the future in terms of pensions. Obviously, if these people are not recruited pensions will not accrue. The Minister said more people than expected have retired, which is one of the reasons for this Supplementary Estimate. Perhaps he will give us a breakdown of the ranks of those who took early retirement. Is it true that people have been leaving the Defence Forces and other public service employment because they are concerned about lump sums being taxed and so on? I am interested to hear the Minister's views on this matter.

There are other subheads in the Supplementary Estimate in regard to which savings were made, including disability pensions, gratuities and so on. I will wait until the questions and answers session to put my questions in this regard to the Minister. I note the decrease in respect of spouses of deceased veterans of the War of Independence. We must not forget what these people went through. There will be fewer of them around as years pass. I pay tribute to the veterans of the War of Independence.

Go raibh maith agat. I welcome the Minister for Defence, Deputy Killeen, and his officials to the meeting. I have raised in parliamentary questions to the Minister the issue of Lariam in respect of current and retired members and what continuing adverse affects this drug may or may not have had on serving members. On invalidity provision, are there people in receipt of this allowance whose invalidity is connected with Lariam? It is important that this issue is clarified and that we deal with the situation as is. I continue to receive representations on this issue. Perhaps the Minister will clarify the matter.

It is extraordinary that 325 spouses of deceased veterans of the War of Independence are still living. The War of Independence ended almost 90 years ago. It would appear that male and female veterans' spouses tended to be considerably younger than them. It is great that so many people from that era are still living, an era which made great sacrifices in terms of our national freedom. While obviously this group is gradually fading and will eventually be gone, it is extraordinary that 325 of them are still alive.

I hope the Minister can clarify the position in regard to the current strength of the Defence Forces. From which branches did the people who have retired come? Did they tend to be at officer, NCO or ordinary recruit level? What group in particular is leaving the Army, navy and Air Corps? Are there any areas in regard to which there are concerns in terms of representation? Have any weaknesses arisen in this regard? I would like clarification on whether the age profile of the armed forces has been affected? Does the Minister believe, in lieu of today's announcements, that we may have further early retirements not alone from the Army but from the Civil Service by way of his Department? More important, the McCarthy report stated that in two to three years numbers in the Defence Forces would be reduced from 10,500 to 10,000. In the event of there being an exodus from the Defence Forces, has the Minister discussed with the Minister for Finance recruitment in the Defence Forces in terms of keeping numbers at the 10,000 level?

The Minister made the point that focus on a particular number may not be the best way of assessing whether the armed forces have the capacity to discharge all the functions for which they bear responsibility in support of the civil power. Perhaps the Minister would provide more clarification in this regard. There is a saving of €60,000 under the medical examinations heading. Is this because of the new configuration of the medical services? If not, what gave rise to this saving? For example, is it the reduced numbers? How well is the new structure for the medical corps working out in the context of the recruitment of medical personnel at various levels? Is the corps at full strength? What is happening in this area?

There were a number of questions from both Deputies. Deputy Stanton asked about the different accrual arrangements for people in the service. That has not presented any difficulty, as far as I can understand, in regard to the day-to-day operations but that was not suggested in any event. It will have an impact at various points when people who have joined under certain accrual arrangements will retire and my impression is that the burden on the State will lessen in those instances. However, there will be different numbers in various years. I do not know in what year we will see the highest number of retirees but I will check that out and come back to the Deputy on it. It will be from a period when there was a much larger number of personnel and there is a peak period. My guess is that this is at least a decade away. The first change the Deputy referred to took place in 1994.

The Deputy's next question was about the 40 new recruits to be taken in before 31 December. I admit that was something that never struck me and, therefore, I must follow that up proactively. I had assumed that would not arise but there is not much time left and I will examine that.

Deputy Stanton asked about the trend of people leaving. I will circulate a copy of the table. In 2000, 905 people left. The smallest number after that was 517 in 2009. There was only one year when the number exceeded 1,000, which was 2001 when 1,003 people left. In other years the number was 756, 613, 598 and it was 694 in 2007, 579 in 2008 and 517 in 2009. So far this year to the end to of October, the number is 383. That might not indicate a reduction because my suspicion is that the greatest numbers will leave in the final few months. That probably will increase a good bit in the final two months. The average number leaving since 2000 is 659 per annum. The ratio of officers to personnel is approximately 10%. There are some exceptions to that. There was a dramatic exception to that in 2009 when it was almost 20% - 81 officers and 436 men. Most other years, it is approximately 10%. I have only one copy of this interesting document but I will forward it to members.

Is that a list of people who left and those who retired?

It states, "The above figure reflects exits for all reasons, including those who did not leave on pension".

With regard to Lariam, no disability payment arises at this point. Any disability pension applications for disablement alleged to be caused by Lariam while participating in UN missions will be considered by the Department in consultation with the Army Pensions Board. We had a long discussion about this during last year's Estimate. Relatively small numbers of people were presenting with difficulties. I am sure the figures remain the same.

I share Deputy O'Shea's view regarding the wives of the War of Independence veterans. It is great that many of them are still alive and that we have a connection with a different era. He asked from what areas people are leaving the Defence Forces. That is outlined in the table to which I referred. In 2010 so far, 36 officers and 347 personnel have left. He asked whether weaknesses had been spotted in the current strength. In April I indicated I had some concerns regarding the Navy. We embarked on a recruitment campaign for a cadet class. I often thought it would be desirable to design a flexible recruitment process whereby the process could be undertaken over a long period with people on stand-by to come in. However, it was pointed out to me that the down side is that because of the strict entry age, competitions have to be held frequently. It is difficult, therefore, to recruit a number of batches from a single recruitment campaign. One must make a judgment on the number of personnel leaving versus the number joining. I understand there are no difficulties in key areas and the current recruitment process will deal with that.

A considerable number of civilian personnel remain in the barracks and that balance has changed dramatically over the years. There may well be further developments in that area.

The figure of medical examination savings relates only to pensioners. I had a request from ONE to devise a better system for the transfer of people who had retired from the military medical corps to the civilian corps. A new form is almost agreed through which all the relevant details will be passed on to the nominated GP for the person once he or she has left the Army. The veterans are pleased with that because there has been confusion and a lack of continuity in that area.

I do not know the current strength of the medical corps but it is bound to be difficult to recruit because of the specialised nature of the work and because younger medical professionals might not wish to make themselves available for such experience. There is the added complication of the likelihood of having to serve overseas. There are challenges in that regard but I examined the new arrangements carefully and considerable progress has been made in implementing them. While all the difficulties have not been ironed out, we are moving towards a considerably improved service in the Army medical corps.

Is there an arrangement with the Minister for Finance in the context of numbers dropping below 10,000 or is that threshold still valid? Is there a commitment to maintain the Defence Forces strength at 10,000 or above?

Our commitment is to maintain a force of 10,000 but we also have clearly to live within the allocations in our arrangements with the Minister for Finance. That presents challenges and it will present greater challenges in future years but I am confident we will be able to deal with that and have a Defence Force that is more than fit for purpose because, of all Departments, my Department is regarded as the leader in the modernisation process. One might even say it is the leader by fairly long odds. It is true that the quality of the equipment, for example, the provision in stores and so on is robust. As to whether one might anticipate difficulties, of course one might but there are mitigating factors because the Department has been extraordinarily proactive in dealing with the modernisation regime, and has been successful at doing it. I acknowledge that there are challenges and, ultimately, the recruitment process will have to reflect the available finances. That is the reason I have been concerned about having a proactive and flexible recruitment process. I thought it would have been possible to create one that ran for several years. That is inadvisable where there are strict dates for entry, therefore, having them frequently roll into each other would be the ideal in the future. It is cumbersome. It takes a great deal of time and energy, and it is expensive, but it is the ideal.

I thank the Minister for those responses. On the issue of the pensions, does the Department or the Minister have a projection on the cost of pensions into the future? I note the number of pensioners last year was 10,329 and the current corresponding figure, which I take it reflects the position right now and does not take into account the remainder of the year, is 10,483. Do we anticipate that there will be more people retiring between now and the end of December? That means that to date there were 154 extra people retired this year over and above last year. I hope my figures on that are correct. Is there a projection into the future with respect to the number that might retire each year and the cost of same?

With regard to the recruits coming in between now and 31 December, my understanding from reading the documents we got today is that there will be no more recruitment after December. It looks very harsh but if those people do not come in by then, can they be let in? If some of them had been cleared already by virtue of being members of the Army Reserve or the Defence Forces Reserve, does that mean they can get through? Am I right in saying that the Garda clearance is what is holding up the process in many cases?

Regarding wound and disability pensions for former members and so on, what would happen if a member was on leave and got injured? I draw the Minister's attention to something that is alleged to have happened in the Seychelles as reported in the Irish Independent on 24 October this year. An allegation was made that a small number of Irish soldiers worked while on leave for private security firms on lucrative contracts in the Seychelles. I do not know if the Minister would like to comment on that at this point but if that is true, and it is a serious matter in its own right, and if any of those people were injured while on leave, would the State have any form of liability in that regard? The Minister might be interested in making a comment on the wider issue also if he can do so.

On the question of medical appliances and travelling and incidental expenses, it has come to my attention that a new practice has developed from which two issues arise. First, it appears that potential recruits to the Permanent Defence Force, PDF, must undergo a private medical examination to show they are fit to take part in the fitness test. Regarding the application form they complete, it has come to my attention that a number of them did the test and arrived with this medical certificate in their hand stating they were fit to do the fitness test but it transpired they were over age. They were called to do the fitness test even though they were over age. There must be some way of screening that out before it happens. I am anxious to ensure that cannot happen again. It appears it was not clear from the documentation that they should reimburse the cost of the medical they had to undergo in the first place. I wonder about the legality of having to do a medical examination before they do the fitness test.

Second, we note that quite a number of young people who apply to join the Defence Forces fail the fitness test. I was told recently that quite a number of applicants could not do even one push-up. I am sure the Chairman could manage a number of push-ups, as I am sure could I and all of us.

I do not know how many.

These were people in their late teens and early 20s and they could not even manage one push-up. That is of great concern to me.

Also, we got the breakdown but would it be possible to get a further breakdown as to the ranks of the people who left?

I would also like to know the reason they left, whether it was on retirement or otherwise.

Regarding the recruits that come on in December, the Minister might not be able to tell us now but he might tell us at a later stage where they will be accommodated.

When Deputy Stanton asked a question about the 1 January recruitment I thought he was asking whether the terms under which people who start after 1 January might be different in respect of pensions or anything else, and I had not thought about that. My view is that we are in a recruitment process. I intend to recruit them before or after 1 January, preferably before that date. I have the money to recruit them and I intend to do so. That is my position, in case there is any confusion in that regard.

To answer Deputy O'Shea's part of that question, I cannot remember in which order the brigades are to recruit people but as far as I can recall they are to get 40 each over the next round of recruitment. The order might be Eastern Brigade, Southern Brigade and Western Brigade, or perhaps it is the other way around. The 40 in the Naval Service were the first in any event. It is also in the list to recruit 40 in the Eastern and Southern Brigades in December, and I am aware recruitment to the Western Brigade is under way.

If they do not get signed up by 31 December, will there be a problem in that regard?

I do not believe so. The problem I thought the Deputy was referring to was that they might be recruited under different terms.

That is a separate issue.

I do not know that.

The Minister answered that.

I do not consider there to be a problem in regard to recruiting them.

On the structural imbalance, that is a serious question. If we had a long lay-off from recruitment that would be likely or perhaps inevitable. There are very good reasons for that.

On the private medical and fitness test, I understand that may have arisen from committee proceedings or some other proceedings in regard to a previous recruitment campaign where people were not medically fit to present for the fitness test. One would have thought they might be able to do one press-up but if they were at that point I would be surprised that they got the private medical certification to attend.

I am aware of some difficulties about the age also. I followed some of the cases in some detail and came up with two different scenarios in that regard. There were different ages listed on the website for the Navy and the general recruitment. That appears to have caused some confusion. I believe the age for the Navy was a year or two older, and some people became confused by that. There were other cases where people did not complete the form properly. They wrote down their age but not their date of birth for which there was a space. There may well have been other cases where mistakes were made at personnel level in assessing the forms. I do not know of any at this point but there may well have been some.

On the medical test, if Deputy Deenihan was present he would strongly exhort us to ensure there was a better fitness regime in second level schools. I suppose we should all do that.

Deputy O'Shea asked the reason people left. The truth is that there are myriad reasons but we do have a breakdown as between officers and enlisted personnel. We will also be able to get a breakdown of the stages at which people left. Even with all that information, however, it will be difficult to come up with the reasons.

There is also a structural imbalance for the pensions, which is a serious problem for the Department of Defence that must be addressed jointly with the Department of Finance, and which is quite different from the manner we would address the issue of recruitment. For recruitment, as long as I have the financial provision and the need to recruit, I do so but there is a genuine structural imbalance for pensions that must be addressed. Some progress has been made but it must be acknowledged and dealt with and it may be more acute in future years.

It is difficult to anticipate the number of retirements for the last two months of the year. The numbers on pensions are also impacted upon by the number who died during the year and came off the roll. It is hard to judge what people may be thinking if they are within a short time of retirement, which applies also to us, teaching, nursing and the public service in general. Paradoxically, the more people who leave, particularly if they leave in a predictable pattern, the easier it is to address recruitment. All that needs to be done is to set the pace to do it in tandem, which is what we are trying to do.

There is a difference between someone being injured on holidays and on military service that is unusual, such as in the Seychelles. The person would not have any cover in that regard but since the issue was raised, I got the report from the Chief of Staff. Of the five personnel against whom allegations were made, two are currently serving and three are former members. I am advised that the investigation found no evidence to support the suggestion that Defence Forces equipment was utilised in any of the alleged activities. That was an important point. There was also no evidence of any illegal arms purchases or sales. The investigation undertaken by military authorities indicated that Defence Forces regulations were not breached.

I should confirm that I received a letter from the Minister for Foreign Affairs for the Seychelles, and the Chief of Staff received a letter from the Chief of Defence for the Seychelles. Both letters indicate the arms purchased for their state forces were fully legitimate and being serviced by authorised security personnel of the Government of the Seychelles. The letters confirm the Irish Defence Forces personnel only provided and facilitated lawful services for the Government of the Seychelles and in doing so made a significant contribution to the welfare and safety of the country. The letters also indicated that the character of Irish personnel who assisted in training the state police force was of the highest order. Those are important points.

Despite the fact the investigation found Defence Forces regulations had not been breached, after considering the report, the Chief of Staff concluded that because of the nature of the specialised training required for certain military employments, it may not be compatible with service in the Defence Forces for such training and skills to be employed outside the Permanent Defence Force. In this context, he has updated the Defence Forces policy on off-duty employment to provide, among other things, that certain PDF personnel cannot undertake off-duty employment that utilises the military training they acquire as part of their service in the PDF.

At what stage does the Minister intend to issue a statement? The report indicates that nothing untoward happened. There was publicity, albeit in publications in the Seychelles. The good name of our Defence Forces means there is a need to put this information into the public arena as soon as possible so people realise the outcome of the investigation and that the report indicates nothing untoward happened.

That is an important point and it is fortuitous that the opportunity to report to the committee and, through it, to the Oireachtas was available because I am of the view that these matters should be dealt with in the Oireachtas. I have also made arrangements for the information to be conveyed to the people who raised it. It was raised first with me by Joe Higgins, MEP, and by a number of Members. Deputy O'Shea is right that I should release a statement and I may do that tomorrow.