Thursday, 11 July 2019

Questions (225)

Jackie Cahill


225. Deputy Jackie Cahill asked the Minister for Public Expenditure and Reform the number of public servants who retired after the imposition of FEMPI who received a lump sum as part of their pension that was reduced due to the impact of FEMPI; the average amount of the reduction; and if he will make a statement on the matter. [30484/19]

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Written answers (Question to Public)

Firstly I should clarify that public service lump sums payments were not directly reduced by the Financial Emergency Measure in the Public Interest (FEMPI) legislation. The FEMPI legislation introduced measures that directly reduced pay, and reduced annual pensions of public servants, subject to certain rates, thresholds and exemptions. As both the annual pensions and lump sum payments of members of pre- 2013 public service pension schemes are directly linked to salary at retirement, the reductions to the pay of public servants would have had a knock on impact on the lump sum payment they received at retirement.

However because of what is known as the first grace period, those who retired between 1 January 2010 and 29 February 2012 did not have the first FEMPI pay reduction (imposed 1 January 2010) reflected in the salary rate used to calculate their annual pension or their lump sum. A second round of FEMPI reductions was imposed in 2013 (imposed on 1 July on public servants with an annual remuneration above €65,000). However the second grace period meant that those who retired from that point onwards (assuming their pay was affected by those reductions while still serving) did not have those reductions reflected in the salary rate used to calculate their annual pension or lump sum.

Thus it is only those who retired from 1 March 2012 onwards whose lump sums are potentially, indirectly impacted by FEMPI, and it is only the first FEMPI reduction which could have had an impact. However salaries of all serving staff have been increased, and some restored to pre-FEMPI rates, through pay increase measures contained in FEMPI Act 2015 and The Public Service Pay and Pensions Act 2017, the first of these measures being applied from 1 January 2016. Thus the lump sums of those retiring since such pay increases were introduced are not affected to the same extent, or if the salary has been fully restored by the time they retired their lump sum is not affected at all. (As of June 2019, pay reductions have been fully reversed for all public servants earning up to €30,000 and this includes approximately 9,500 civil servants).

Due to the fact that there was no explicit measure to reduce lump sum payments contained in the FEMPI legislation, but rather an indirect impact, and to varying degrees, on certain lump sums, the information requested is not readily available and its compilation would involve a disproportionate amount of time and work.

However the following table illustrates an example of the impact on the lump sums of individuals who retired between 1 March 2012 (the date after the expiration of the first grace period) and before the date of the first pay increase, at different salary rates. It illustrates the difference between the lump sum that would have been received had the FEMPI reduction of 1 January 2010 not been reflected in the salary rate used to calculate their lump sum, and the lump sum received when this reduction is reflected in the salary rate used in the calculation.

Salary rate pre FEMPI pay reduction of 1 Jan 2010

Salary rate with FEMPI reduction of 1 Jan 2010 applied

Lump sum payment based on 40 years' service if pre-FEMPI rate used to calculate lump sum

Lump sum payment based on 40 years' service if reduced rate used to calculate lump sum

% difference