Like many other European countries, Ireland has been faced with the question of how to deal with its public sector pension liabilities. However, as the Bill makes its way through Parliament Helen Morrissey assesses whether the proposed changes will prove to be the solution the government hopes for
In October, The Public Service Pensions (Single Scheme) Bill 2011 was put before the Dáil (House of Representatives) by minister for public expenditure and reform Brendan Howlin. Under the terms of the Bill the following changes have been put forward:
• Public sector pensions will shift from final salary towards career average.
• Minimum public service age will be increased initially to 66 to bring it into line with the social welfare state pension age and it will then rise on a phased basis to 67 and 68.
• The earnings-linking of public pensions will be linked to the consumer price index (CPI) as opposed to salary grade.
The new scheme will apply to new entrants only with existing public servants retaining their current benefits.
According to the Irish Association of Pension Funds (IAPF) director of policy Jerry Moriarty the changes are long overdue.
“It is clear something had to be done regarding public sector pensions as the current cost is unsustainable,” he said. “As of two or three years ago we had a €116bn ($162bn) liability in public sector pensions. We have also seen a huge rise in the number of public sector retirements and the fact pension payments are linked to salary grade is important.”
It is clear that savings needed to be made. According to estimates by the department for Public Expenditure and Reform by the middle years of the century the new scheme would have saved the government approx €1.8bn or 35%. However, while the changes have been praised in some sectors there are others who don’t believe they have gone far enough and could result in essentially a double tier public sector pension system. Many believe greater savings could be made if the changes were also rolled out to existing public servants while others point to the fact the current freeze in public sector recruitment means there will be no new joiners to the scheme.
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