The situation is that established civil servants recruited prior to 6 April 1995 do not pay a personal pension contribution, though in most cases they are required to pay a contribution towards dependant benefits amounting to 1.5% of pay.
Established civil servants recruited on or after 6 April 1995 do pay a personal pension contribution, amounting to 1.5% of pay and 3.5% of net pay (defined as pay less twice the rate of Contributory State Pension). They are also subject to a 1.5% contribution towards dependant benefits.
The introduction in 1995 of contributions towards personal pension benefits for new-joiner established civil servants (appointed on or after 6 April 1995) carried an entitlement to being fully-insured under the Social Welfare system (i.e. they pay full PRSI). This means their pensions are integrated with the State contributory pension (meaning in particular that the calculation of their civil service pension reflects an offset in respect of assumed entitlement to the State contributory pension). By contrast, pre-1995 civil servants who in general pay a lower modified rate of social insurance, do not qualify for most social welfare benefits and receive occupational pensions which are not integrated with the State contributory pension.
USC is charged on all occupational pensions, both public and private sector, whereas social welfare pensions are exempt. While the State contributory pension portion of the post 1995 civil servants pensions is exempt from USC, the same rules apply to the occupational portion of their pension that apply to everybody else in receipt of an occupational pension.
As you may be aware, delivering on a commitment in the Programme for Government, the USC was reviewed by the Department of Finance in the lead up to Budget 2012. The report is available at www.finance.gov.ie. As a result of the review of the USC, the Government decided in Budget 2012 to increase the entry point to the Universal Social Charge from €4,004 to €10,036 per annum. It is estimated that this removed almost 330,000 individuals from the charge.
The review also examined the impact of the USC on public sector pensioners and set out a number of options to address this matter, including an option to apply USC to the State pension which it was estimated would have yielded €330 million at a time when the public finances were under severe pressure. It was also estimated that to treat non-integrated public sector pensions as exempt from USC would have cost €90 million. On consideration it was decided that to implement the latter would undermine the principle of USC being applied to as wide a base as practicable and that the cost would have to be made up elsewhere at a time when other sectors of society were already being asked to accept a series of onerous expenditure cutbacks.