Dáil Éireann Debate, Thursday - 14 October 2004
38 Mr. M. Higgins asked the Minister for Finance the main features of his proposals for further public service pension reform announced on 14 September; and if he will make a statement on the matter. [24650/04]
View answerIn budget 2004 my predecessor announced a package of public service pension reforms. He also indicated that further pension changes benefiting both serving and new entrant public servants, along the lines originally recommended by the Commission on Public Service Pensions, were being considered.
The recent announcement provides for changes to take place in a number of key areas of public service pension delivery. The changes concerned that form another significant element in the Government's modernisation and reform of the public service are as follows: cost neutral early retirement; integration formula; pro rata integration; teachers access to the revised spouses’ and children’s pension scheme; notional added years; reckoning of allowances for pension purposes; and the compound interest rate.
The cost neutral early retirement facility will allow public servants to retire early with actuarially reduced superannuation benefits. Workers whose current minimum pension age is 60 years will be able to avail of the facility from age 50 years and upwards. Those whose minimum pension age is 65 years will be eligible from age 55 years and upwards. The 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. For example, a person with a minimum pension age of 60 years who leaves service under this facility at 55 years would have their pension reduced to 77.8% of its value. Their superannuation lump sum would be reduced to 90.7% of its value.
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. The process, known as integration, is an arrangement whereby, in the case of public servants with full social insurance cover, the OACP is merged with the occupational pension to provide a combined pension which, at 40 years' service, is no greater than the pension would be with an occupational pension alone. This can mean that lower paid workers get only small public service pensions or none at all where their pensionable remuneration is less than twice the OACP, currently just under €17,500.
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: 1/200 for pensionable remuneration below 31/3 times OACP; and 1/80 for pensionable remuneration in excess of this limit. This will be of benefit to those whose pensionable remuneration is around €29,000 or less. The revised basis of calculation will apply to existing pensions with effect from 1 January 2004 and all relevant retirees as and from that date.
Pro rata integration, as opposed to full integration that 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 and the new integration formula will be of significant benefit to part-time workers.
Teachers will have access to the revised spouses' and children's pension 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. Revised contribution rates of 2%, periodic, and 1.5%, non-periodic, will apply. Existing schemes of notional added years will be replaced for new entrants, from a current date, by a singletransitional scheme which will be reviewed in 2015.
There will be a 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 present requirement of three years immediately prior to retirement. The new system will apply to relevant staff who retire or have retired from the public service as and from 1 April 2004.
The current compound interest rate that applies, in particular, to repayment of marriage gratuities will be reduced from 6% to 4% for repayments due for periods from 14 November 2000 onwards.
A number of other commission recommendations are under active consideration. They include the establishment of joint management-union working groups to consider the commission recommendations on SPEARS, a single AVC type scheme for the public service, and proposed revision of the spouses' and children's pension schemes, including benefits for non-spousal partners.
Implementation of the various changes will commence as soon as detailed guidelines have been prepared and circulated by my Department. My officials will carry out the work, as a matter of urgency.
