PUBLIC SERVICE PENSIONS:THE McCARTHY report calls on the Government to examine how it could take an "appropriate contribution" from the pensions of retired civil and public servants to help tackle the crisis in the Exchequer finances.
“The group observes that the burden of budgetary adjustment, both in terms of the measures introduced over the past year and of the measures proposed in this report, will be borne broadly across most areas of society, with the exception of those people currently in receipt of public service pensions,” the report says.
“Bearing in mind that such pensioners in many cases have earnings-linked pensions at present, the group believes there is a case for the Government to consider how best to secure an appropriate contribution from this sector of society.”
Calling for measures to reform pensions, including an unspecified increase in the minimum public service pension age, the group says the cost implications current system are a matter of a concern.
“The real annual cost of providing public service pensions is some €7.7 billion each year, made up of an annual accrual cost of €5.4 billion each year over and above the €2.3 billion cash cost of existing pensions in 2009 (on the assumption of an accruing pension cost of, on average, 30 per cent of nominal salary.”
Several proposals in the 2007 Green Paper on pensions should be pursued and implemented, the group says. These include increasing the rate of pension contributions from staff and modifying the earnings-linking of pension. The group backs proposals to remove “fast accrual terms” and favours moving to the calculation of pensions on the basis of “career average” earnings.
The group calls for several other measures, among them a “prudent” reinstatement of a mandatory retirement age so the public service would not “run the risk that low-performing members of staff would end up retained indefinitely”. It says there should be a move away from the full earnings-linking of pensions to included an element of inflation-indexing, as seen in other EU states. An increase in qualification age for occupational and social welfare pensions should take account of increases in longevity, it says.
Arguing that better transparency should be brought to bear on the true cost of accrued pension arrangements, it also says accelerated pension arrangement should be scrapped.