I thank the committee for the opportunity to present for its consideration the Supplementary Estimate for Vote 37 — Army pensions, which is for a net sum of €13 million.
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 €183.8 million. This includes a small provision of €2.3 million for the payment of allowances to the spouses of deceased veterans of the War of Independence. Committee members will be aware that the last veterans who had been in receipt of pensions from my Department died a couple of years ago.
Subhead B is the main subhead of the pensions Vote and covers expenditure on all superannuation benefits in the case of former members of the Defence Forces and their dependants. It accounts for well over 90% of all Army pensions expenditure, which is, of course, largely demand-led. The original provision of €178 million in this subhead will be inadequate to meet all requirements and the gross shortfall is estimated at €14.45 million. This will be reduced to €13 million net when savings in subheads C, D, E and F and additional appropriations-in-aid in subhead G are taken into account.
Of the total shortfall, some €6.7 million relates to the costs of the two general pension increases that were authorised and paid during 2008 on foot of the Towards 2016 pay agreement, as well as the underlying upward trend in the number of pensioners. In that regard, the number of pensioners under subhead B has increased from 9,962 at the end of last year to 10,060 at the present time.
The balance of €7.7 million will cover the cost of certain improvements in the pension terms of enlisted personnel who were recruited prior to 1 April 2004, which have recently been the subject of formal agreement with PDFORRA. The main improvement involved is a substantial increase in the level of retirement gratuity payable to personnel with not less than 22 years' service. This revision applies to personnel who have retired since 1 September 2005. No provision for the cost of these improvements was included in the original Estimate.
Under the previous arrangements, the retirement gratuity for NCOs and privates stood at 25 weeks' pay after 21 years' service, rising by increments of two weeks' pay for each subsequent year, up to a maximum of 45 weeks' pay after 31 years' service. Under the recent agreement, the gratuity of 25 weeks' pay after 21 years stands, but will increase by four weeks' pay per year thereafter to a maximum of 65 weeks' pay after 31 years' service. The other improvements relate to changes in the method of reflecting certain allowances in pension calculation as well as making a small number of allowances pensionable for the first time.
I am pleased to advise the committee that the agreement concluded with PDFORRA also comprehends the new pension scheme applicable to enlisted personnel recruited to the Defence Forces since April 2004. The new military pension scheme is fundamentally different from the existing arrangements applicable to pre-April 2004 personnel. It involves moving from the existing system of benefits payable immediately on retirement after relatively short periods of service and regardless of age, to one under which preserved benefits will be the norm in the case of personnel retiring before age 50. The new superannuation arrangements for enlisted personnel will be more in line with those applying to other public service groups.
The main features of the new scheme, which will have a defined benefit structure, include the following: benefits will be calculated by reference to total service and pensionable pay at retirement; the minimum pension age will be 50; preservation of benefits will apply where retirement is before the age of 50; maximum benefits will accrue over a period of 30 years; and benefits will be integrated with the social insurance system, as in other public service pension schemes generally.
These developments are part of the wider public service pensions reform package which has been implemented in recent years. In particular, the Public Service Pensions (Miscellaneous Provisions) Act 2004 implemented the age-related aspects of those reforms and followed from the Government's consideration of the recommendations of the Commission on Public Service Pensions. Chief among the age-related reforms were the removal of the compulsory retirement age for certain categories of new entrants to the public service on or after 1 April 2004 and the raising of the minimum pension age for most new entrants from that date. Specifically as regards the Defence Forces, the 2004 Act provides for the making of a new pension scheme to apply to new entrants from 1 April 2004; for a minimum pension age of 50 for new-entrant officers and enlisted personnel; and for the exclusion of the Defence Forces from the removal of the compulsory retirement age in other areas of the public service. It will be appreciated that the nature of military service requires the continued application of appropriate compulsory retirement ages. The way is now clear to make a statutory pension scheme for new-entrant enlisted personnel in accordance with the provisions of the 2004 Act.
Discussions regarding the superannuation arrangements applicable to commissioned officers are continuing with RACO. Without wishing to pre-empt the outcome, I am optimistic that it will be possible to achieve final agreement in the near future. I commend the Supplementary Estimate to the committee.
