NEW PENSIONS legislation which aims to cut the cost of the public sector pension bill by 35 per cent has been described as “larcenous” and illegal by the main unions representing teachers.
The secondary teachers union, the ASTI, said it was considering challenging the measures in the courts.
The legislation published by Minister for Public Expenditure and Reform Brendan Howlin fulfils a commitment made by the last government as part of Ireland’s bailout to put the public pensions system on a more sustainable basis.
However, it leaves intact many of the benefits provided for high-earners such politicians and judges, who will continue to enjoy accelerated accrual of pension rights, though new entrants will have to pay increased contributions.
The burden of reducing pension costs will also fall mainly on future generations of public servants, as the changes do not apply to current staff.
Savings will be small in the early years but the measures are expected to cut the cost of the public sector pension bill by €1,800 million in 2050.
Mr Howlin said his proposals provide for a single defined benefit pension scheme for all new entrants to the public service with no special terms for senior grades.
Under the Public Service Pensions (Single Scheme) and Remuneration Bill 2011, new entrants’ pensions will be based on an average of career earnings rather than their final salary at retirement, as at present.
Mr Howlin said this was a fairer approach to pensions of most benefit to lower grades in the public service. The current scheme favours those who have high earnings late in their careers.
Further savings will be made from raising the minimum public service retirement age from 65 to 68.
The Irish National Teachers’ Organisation condemned the Bill as “unfair, unnecessary and “probably illegal”. Teachers would end up contributing more to their pension scheme than they got out of it, the INTO and Association of Secondary Teachers Ireland suggested.
The president, Oireachtas members, judges, the attorney general and members of the uniformed and emergency forces will continue to accrue their pensions faster than other public servants. However, average contributions would be doubled for new entrants.
Currently, TDs acquire full pension rights after 20 years and ministers after 10.
Gardaí qualify for full pensions after 30 years and senior judges after 15.
The department says “fast accrual” of pensions for uniformed services “reflects operational needs”, a reference to the fact that early retirement is provided for gardaí and members of the Defence Forces in view of the physical nature of their roles.
Accelerated benefits for the president, Oireachtas members, the judiciary and the attorney general are justified by “special circumstances” because the post-holder is employed for a fixed period and would not be able to acquire full pension rights in the normal manner.
The legislation would see pension contributions for judges rise from 4 per cent to 13 per cent. Members of the Oireachtas would pay 13 per cent rather than 6 per cent at present, while the president, who is not required to make a contribution at present, would also pay the 13 per cent rate. Gardaí would have to contribute 7.5 per cent, up from 6.5 per cent.
Significant savings are also expected to accrue by linking future pension payments to consumer prices rather than pay.
Over the past 20 years, the link to pay is estimated to have resulted in increases twice as large as those which would have applied if pensions were linked to the inflation rate.
An enabling provision would allow the Minister to change the indexation of pensions of current staff to inflation rather than pay.
Basing pension on career-average earnings will save an estimated €1 billion in 2050, and linking pensions to prices will save another €500 million. The remaining €300 million in savings is expected to some from increasing the retirement age.
Mr Howlin said there was a clear need for reform of public service pensions.
“The new scheme will be fairer particularly to those on low and moderate earnings. Above all, the public service will be better able to manage the costs associated with the demographic and other changes which are coming,” said Mr Howlin.