New arrangements for public service pensions will most impact upon those earning higher ‘Rolls Royce’ salaries and will benefit those on lower pay, Minister for Public Expenditure and Reform Brendan Howlin said.
The scheme for new employees is aimed at reducing the public service pensions bill.
Mr Howlin was speaking at the Oireachtas Select Committee on Finance, Public Expenditure and Reform, during the committee stage of the Public Service Pensions (Single Scheme) and Remuneration Bill 2011.
He said the changes will mean pensions will be calculated based on a monetary value for each year’s service, which would then be averaged out over the entire career. The changes meant people would no longer get a pension on retirement which was based on their final salary at the time of retirement.
Mr Howlin said those on flat career averages, such as nurses and gardaí would be “relatively unaffected” by the new scheme.
Those most affected would be the “high fliers”, such as those who went from administrative officer to secretary general or from garda to Garda Commissioner, he said.
He told Sinn Féin TD Mary Lou McDonald his department had done some profiling to assess the impact of the measures.
“It is immeasurably more advantageous for those on the flat career. In fact they are relatively unaffected by this, whereas there’s a very significant reduction for those who have a high trajectory.”
People Before Profit TD Richard Boyd Barrett asked the Minister to respond to the charge by some representing public sector workers that it was “theoretically possible” to put more into the scheme than one would get out of it.
Mr Howlin said this was “not right” and that teachers’ unions who were making that case were counting an exceptional pension levy as part of their fundamental pension contribution.
He said he had counselled the unions “as a trade unionist” that this was a “very dangerous thing” because the payment was an exceptional measure.
He disagreed with Mr Boyd Barrett that those on lower pay would be disadvantaged.
“By definition this new scheme is flatter. It is not related to your end-of-career payment and therefore people who don’t progress, who go in and spend the bulk of their career at a relatively stable level, who are not a high flier, their pension is determined by their career average.
“But the person who goes in and then ends up at the top of the tree, who can now get a ‘Rolls Royce’ pension because…it is determined by their end-of-career salary, will now have that moderated by a full 40-year perspective on what their contributions were.”
Fine Gael TD Olivia Mitchell said the whole benefit of having a pension based on a career average was that it would stop the practice of “promoting people in the last three months of their employment” which she said had been “widespread” in her experience of local authorities.
“So far from having seven years in a job…some of them hadn’t even got seven months and retired on a lifetime retirement pension of the salary that they got for…in some cases only three months.”
She said there would be “rapid promotion” in the last couple of years of their employment, whereas there was no such benefit for those on the lower scales.