The Irish government has implemented a raft of contentious changes to its public sector pensions as it looks to reign in costs including raising the pension age and increasing contributions. Helen Morrissey talks to minister for public expenditure and reform Brendan Howlin about how the changes came about
Helen Morrissey: Why did you decide to go down the route that you did with regards to public sector reform? What alternatives did you consider?
Brendan Howlin: The new scheme was developed having regard to a number of reports including the work of the extensive Commission on Public Service Pensions (2000), the National Pensions Review (2005), the Green Paper on Pensions (2007) and the National Pensions Framework (2010). The latter two are paired (the Framework is effectively a White Paper) and were published with the aim of promoting adequate pension provision in a sustainable, modern and flexible manner. An extensive public consultation process was undergone; this has served to underline the difficulties we face in achieving consensus and understanding in this area. The National Pensions Framework included the Public Service single scheme among its objectives. The range of reforms recommended in this field included:
• raising the minimum Public Service pension age
• increasing the rate of pension contributions from staff
• modifying the earnings-linking of pensions
• adjustment of fast accrual terms, and
• moving to the calculation of pensions on the basis of “career average” earnings.
All of these recommendations have been reflected in the single scheme which is a far-reaching transformation of the public service pension system. The recently published Public Service Pensions (Single Scheme) and Remuneration Bill 2011 has as its main purpose the provision of a new single pension scheme for all new entrants to the public service which will significantly reduce costs to the taxpayer. It provides for a new approach which will modernise and standardise pension arrangements throughout the public service.
When looking at options it was decided that such an approach is fairer as your pension is determined based on your career average earnings as opposed to your end salary. This new scheme places Ireland at the fore-front of public service pension reform in Europe. Apart from the Exchequer savings which will be realised, we will be making sure that the public service uses this opportunity to stream-line pension administration and secure further savings.
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