Q&A

Changes to public sector pensions

Why is the public sector pensions legislation being introduced?

The growing cost of public sector pensions – currently almost €3 billion a year – has been an issue of concern for some years. The issue has been brought into sharp relief recently by the handsome retirement packages paid to some senior civil servants, notably the €713,000 package obtained by Government secretary general Dermot McCarthy on his recent retirement. Under the terms of our bailout, the Government agreed to introduce changes for new entrants.

What are the changes?

The big change is that pensions will be based on career earnings rather than what you are earning on retirement. This will hit senior grades most as their high salaries on retirement will not be the only determinant of their pension. Further savings will be made by increasing the pensionable age from 65 to 68 and by linking pension increases to prices rather than pay grades within the public service.

I am a public sector worker. Will this affect my pension?

No. The proposals will only affect new entrants. The exception is that the Minister for Public Expenditure will have the power to change the index-linking, as outlined above, of current staff. However, at the moment public sector wages are static so there is currently no incentive for the Minister to do this.

How much will these measures save?

Not much in the short term, but by the middle of the century it should knock about one-third off the public sector pension bill.

Will future staff have to contribute less?

Sadly not. The standard contribution of 6.5 per cent of salary remains the same, except for some public servants who are allowed accrue pension entitlements faster than others.

Thus Oireachtas members, who currently contribute 6 per cent of salary towards their pensions, will in future have to stump up 13 per cent. The President, who at present is not required to make a contribution, will also have to pay 13 per cent.

What effect will these changes have on pensions for the secretaries general of departments?

Currently, their pensions stand at €142,000 per annum, but this will fall to €107,000 after February, when recent pay cuts take effect. A new entrant to the public service who becomes a secretary general would be paid a pension of €100,000.