Ivor Callely
Question:280 Mr. Callely asked the Minister for Finance the progress made to implement the Commission on Public Service Pension Report; and if he will make a statement on the matter. [32965/06]
View answerTuesday, 17 October 2006
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Written answers
I am pleased to say that substantial progress has been made in implementing the recommendations of the Commission on Public Service Pensions as endorsed by Government. In 2001, the Government accepted the thrust of the Commission's Report and the period since then has been marked by the progressive implementation, in consultation with the public service unions, of individual Commission recommendations.
A milestone in this process was reached in March 2004, when the Commission's key cost-containment proposal, the raising of pension age from 60 to 65 years for new entrants to the public service, was implemented via the enactment of the Public Service Superannuation (Miscellaneous Provisions) Act 2004. This change is expected to lead to net savings of around €300 million per year (in constant 2006 pay terms) in about 40 years' time. The measure is well suited to Ireland's demographic position in term of timing, insofar as the savings which it will generate will become substantial in about twenty years time and will rise thereafter until about mid-century, and in so doing will keep in step with the anticipated significant increase in our dependency ratio and the related rise in occupational pension costs.
In September 2004, following discussions with ICTU, Government ratified an agreed approach to the remaining Commission recommendations. The key feature of the Government decision was the immediate authorisation for implementation of the following six Commission recommendations directed at modernising pension provision:
1. Introduction of cost-neutral early retirement: A facility to allow public servants to retire early (from age 50/55, as appropriate) with immediate payment of pension and lump sum, actuarially reduced to reflect the earlier payment.
2. Revised integration formula: New method of integrating social insurance and public service pensions to boost retirement income of lower-paid staff.
3. Integration "pro rata": A more favourable integration method ("pro rata" integration as opposed to "full" integration) to be used in calculating the pension entitlements of part-time public servants.
4. Notional added years: Existing schemes to be replaced for new entrants by a single "transitional" scheme (to be reviewed in 2015), the main impact of the change being to reduce gross awards from 10 to 5 years.
5. Compound interest rate: The rate on pension-related repayments such as marriage gratuity to be cut from 6% to 4%.
6. Reckoning of allowances for pension purposes: Calculation to be based on "the best three consecutive years in the ten years preceding retirement" instead of being restricted to the last three years of service only.
Five of these six reforms have been implemented (only the last, reckoning of allowances for pension purposes, is outstanding), by means of Department of Finance circulars issued to date.
As also provided for in the September 2004 Government decision, other Commission recommendations are being considered further, including, in particular:
1. Changes to Spouses' and Children's Schemes: The proposed Commission changes include the extension of benefits to non-spousal partners. The feasibility of implementing the changes is currently being examined by a management/union Working Group, whose work is at an advanced stage.
2. SPEARS: The Commission recommended the introduction of SPEARS; a single AVC-type pensions savings scheme for the entire public service. This is the subject of ongoing management-union discussion.