Dáil Éireann Debate, Wednesday - 25 March 2015
7. Deputy Sean Fleming asked the Minister for Public Expenditure and Reform his views on current public sector pension liabilities; the way pension entitlements can be secured across the full range of the public service into the future; and if he will make a statement on the matter. [11699/15]
View answerI ask the Minister to outline his views on the current public sector pensions liability. The bill for public sector pensions for many years to come is enormous. I also ask him to give his views on how pension entitlements can be secured across the public sector. I am not just referring to his own Department or the Civil Service but also to the entire public sector.
As part of the ongoing public service pension analysis, an actuarial valuation was carried out last year by the Department of Public Expenditure and Reform to estimate the accrued liability in respect of public service occupational pensions. The key result of the exercise is that the total accrued liability in respect of public service occupational pensions is now estimated at €98 billion, as at December 2012. This compares with the previous estimate of €116 billion for 2009 which was arrived at by the Comptroller and Auditor General. Therefore, in the three years 2009 to 2012 the liability fell by €18 billion or 16%. The main reasons for the reduction in the total accrued liability were the pay and pension cuts under the Haddington Road agreement and the financial emergency measures in the public interest, FEMPI, legislation. The figure of €98 billion represents the current value of all expected future superannuation payments to current staff and their spouses for service up to December 2012, plus the liability for all future payments to current and preserved pensioners and their spouses. The pension payments to discharge this liability will, therefore, be spread over the next 70 years or so. In particular, it should be noted that both the €98 billion and the €116 billion figures assume that future pension increases will be in line with pay parity. The Public Service Pensions (Single Scheme and Other Provisions) Act 2012 permits the Minister for Public Expenditure and Reform, with the approval of the Houses of the Oireachtas, to link future pension increases with the consumer price index. Were this to be done, the accrued liability would reduce by a further €16 billion to €82 billion.
The introduction of the single public service pensions scheme on 1 January 2013 is also of relevance when considering pension liabilities. While the new scheme does not have an immediate effect on the liability figure, it is expected over time to generate substantial long-term reductions in the annual cost of pensions for former public service workers.
I believe I understand everything the Minister has said, but I ask him to clarify that the legislation he introduced to set up the single public service pensions scheme which will link pensions with the CPI rather than pay increases will reduce the amount payable to pensioners by €16 billion, in addition to the €16 billion reduction since December 2012. This represents a further reduction in the pension payments people will receive. Under the Haddington Road agreement, pension reductions were agreed to, but the pensioners were not allowed into the room when the issue was being discussed. That was wrong and grossly unfair. The Minister recently met some of the people affected and I hope this mistake will not be repeated. The pension-related deduction introduced under the FEMPI legislation is resulting in a significant net saving to the Exchequer. Is it the Minister's intention to continue this? There are reports in several newspapers today on the Waterford Glass pensions fund and the fact that the State is having to come up with funds for it. In that context, I highlight the position of Bord na Móna pensioners whose pension contributions have been frozen for many years. In some cases, it is those waiting for their pension entitlements, that is, deferred pensioners and those in payment, who are suffering the most.
The Deputy has asked numerous supplementary questions. If the CPI provision was activated, it would have the effect to which the Deputy referred. However, it has not yet been activated. I have not commenced it and it is not my intention to do so in the near future. I left the provision in the legislation to be considered at a future date. Obviously, at a time when there are no increases it makes no difference whether one links pensions with pay increases or the CPI. The issue will fall to be considered in the future when we see normal increases.
Regarding pensioners, there was a formal, established process for the negotiation of a public sector pay deal which was followed in the way it had always been. However, as I was conscious that pensioners were not directly involved, I advised them to form an organisation and, in fairness to them, they did so. I have met that organisation twice, most recently earlier this month. I have assured pensioners that they will have a channel into the next round of discussions through my officials.
I am pleased to hear it. I ask the Minister to address the issue of pension-related deductions under the FEMPI legislation. As I understand it, the gross cost of pensions, as a percentage of pensionable remuneration, is about 20%, but the net cost to the Exchequer is only approximately 8.5% because of the superannuation payments made which amount to a figure of approximately 6% and the pension levy which also amounts to about 6%. The fact is lost on those outside the public sector that public servants are paying an enormous amount every week or month to fund their pensions. People give out about gold-plated pensions - admittedly there are some public service pensions which are excessive - but the vast majority are paying substantial amounts towards their pensions. Will the pension-related deduction be up for discussion and what implications would this have for the public sector pension liability down the line?
I am glad to hear the Deputy make that point because there is something lost in translation in the commentariat that does not understand the contribution public servants are making to their own pensions. That is not confined to people outside the House. There are individuals inside this House who also make assertions which are not based on reality. Current Exchequer annual pension contributions by public servants amount to approximately €500 million per annum. This figure does not include non-Exchequer pension contributions made, for example, in the local authority sector. It is a very significant contribution to the pension pot and Deputies are aware that pensions are paid from current income. The pension-related deduction, PRD, is part of the FEMPI legislation architecture and will have to form part of the discussions.
