Dáil Éireann Debate, Wednesday - 29 September 2004
305 Mr. P. McGrath asked the Minister for Finance if he will clarify and provide further details on his recent announcement concerning public service pensions; if he will give examples of benefits applicable under this package to specific grades; if he will give the timescale for implementation of these additional payments; and if he will clarify if pensioners must apply for these payments or if they will issue automatically. [22150/04]
View answerIn Budget 2004 I announced a package of public service pension reforms. I also indicated that further pension changes benefiting both serving and new entrant public servants, along lines originally recommended by the Commission on Public Service Pensions, were being considered. The recent announcement, to which the Deputy refers, provides for changes to take place in a number of key areas of public service pension delivery. The changes form another significant element in the modernisation and reform of the public service.
I also announced that a number of other recommendations of the Commission on Public Service Pensions are under active consideration, including the establishment of joint management-union working groups to consider the recommendations on SPEARS (a single AVC-type scheme for the public service) and proposed revisions to the spouses' and children's pensions schemes, including benefits for non-spousal partners.
The information set out below provides additional information of the most recent changes and gives examples where applicable.
Cost-neutral early retirement: This facility will allow public servants to retire early with actuarially reduced superannuation benefits. Workers whose current minimum pension age is 60 will be able to avail of the facility from age 50 upwards, while those whose minimum pension age is 65 will be eligible from age 55 upwards. This facility is being made available to serving staff and the option will be extended to staff who resigned with an entitlement to preserved superannuation benefits as and from 1 April 2004. Superannuation benefits in such cases will be based on pensionable service at the time of resignation reduced, appropriately, to take account of early payment. An outline of the table to be used for this purpose is set out below.
The table shows the values for each full year of age; adjustments based on exact age, i.e. years and days will be made when calculating actual benefits due. For example, an established civil servant who is a member of the non-contributory pension scheme, is earning €40,000 a year, is aged 54 and has 34 years reckonable service would, if s/he resigned, under the arrangements for preserved superannuation benefits, receive a lump sum of €51,000 at age 60 and an annual pension of €17,000, also payable at age 60. If s/he were to opt for actuarially reduced benefits, s/he would receive a lump sum of €45,339 payable immediately and an annual pension of €12,631, also payable immediately.
|
Minimum Age 60 |
Minimum Age 65 |
||||
|
Age Last Birthday |
Pension |
Lump Sum |
Age Last Birthday |
Pension |
Lump Sum |
|
% |
% |
% |
% |
||
|
50 |
62.4 |
82.2 |
55 |
58.2 |
82.4 |
|
51 |
65.1 |
83.9 |
56 |
61.1 |
84.0 |
|
52 |
67.9 |
85.5 |
57 |
64.1 |
85.6 |
|
53 |
71.0 |
87.2 |
58 |
67.4 |
87.3 |
|
54 |
74.3 |
88.9 |
59 |
71.0 |
89.0 |
|
55 |
77.8 |
90.7 |
60 |
74.8 |
90.7 |
|
56 |
81.6 |
92.4 |
61 |
79.0 |
92.5 |
|
57 |
85.7 |
94.3 |
62 |
83.6 |
94.3 |
|
58 |
90.1 |
96.1 |
63 |
88.5 |
96.1 |
|
59 |
94.8 |
98.0 |
64 |
94.0 |
98.0 |
Integration formula: Public servants with full social insurance get an old age contributory pension and their public service occupational pension is reduced to take account of this fact. This process, known as integration, can mean that lower-paid workers get only small public service pensions, or none at all. The calculation formula underlying integration is being adjusted to deliver a boost to the public service pension income of lower paid public servants. Accrual rates under the new formula are: 1/200th for pensionable remuneration below 31/3rd times OACP; and 1/80th for pensionable remuneration in excess of this limit.
This revision represents an improvement in rates of occupational pension for lower paid workers, without any requirement to increase contribution rate. The current salary "cut off point" below which workers and retired public servants will benefit from this revision is €557.67 per week or €29,099 per annum. Persons with remuneration above this level are unaffected. For an employee, therefore, on, say, €25,000 pa with maximum service at retirement, the annual increase in pension benefits would be in the order of €1,230 that is €23.57 a week.
The revised basis of calculation will apply to existing pensioners with effect from 1 January 2004 and all relevant retirees as and from that date.
"Pro rata" integration: "Pro rata" integration (as opposed to "full" integration which applies at present) will apply to part-time public servants (and relevant pensioners) with full social insurance, as and from 20 December 2001. The terms "full" and "pro-rata" integration refer to different methods of co-ordinating OACP with public service occupational pension in the case of part-time employees. The new method of pro rata calculation along with the new integration formula will be of significant benefit to part timers. For example, the value of the increase in the occupational pension of a part-time employee on, say, €15,000 pa, with maximum service at retirement would be in the order of €3,135 pa, €60pw. The revision to the integration formula (see earlier paragraph) may also further increase benefits payable to certain part-time employees.
Teachers' access to the revised spouses' &children's scheme: An option to join the revised scheme, available for a fixed period, will be made available to all primary and secondary teachers serving at 31 March 2004. This represents an extension of the original recommendation of the commission that is, those teachers who had opted not to join the original scheme will also be given the new option. Revised contribution rates of2%, periodic, and 1.5%, non-periodic, willapply.
Notional added years: Existing schemes of notional added years will be replaced for new entrants from a current date by a single "transitional" scheme which will be reviewed in 2015. The commission had recommended the abolition of such schemes. Following discussion with the unions however, the Government has decided to replace the existing schemes with a new interim scheme with a lower maximum award.
Reckoning of allowances for pension purposes: The calculation of pension on variable pensionable allowances will be based on "the best three consecutive years in the ten years preceding retirement", rather than on the three years immediately prior to retirement, as at present. The new system will apply to relevant staff who retire or have retired from the public service as and from 1 April 2004.
Compound interest rate: The current pension interest rate, which applies, in particular, to repayment of marriage gratuities, will be cut from 6% to 4% in respect of repayment due for periods from 14 November 2000 onwards.
Implementation of the various changes will commence as soon as detailed guidelines have been prepared and circulated by my Department. The preparation of these guidelines is being addressed, as a matter of urgency, by my officials. Public service pensioners who may have entitlement to benefit from any of these changes will have such benefit passed on to them, as soon as practicable. In general, there should be no need for individuals to make application in advance of payment.
