Written answers

Tuesday, 17 February 2009

Department of Finance

Pension Provisions

9:00 pm

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 142: To ask the Minister for Finance the distribution of employees in the public service by range of gross earnings and the estimated contribution they will make to gross and net receipts from the new pension payment. [5620/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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The pension related deduction entails a deduction of 3% on the first €15,000 of annual income, 6% on the next €5,000 and 10% on the balance. This amounts to an average deduction of around 7.5% although the effect varies at different income levels. This produces a total gross saving of €1.35 billion when applied to the relevant part of the public service pay bill (excluding employers PRSI).

The following table sets out an estimate of the numbers of public servants in a range of salary bands. The recently announced public service pension related deduction will apply to all earnings, not just salary. The numbers at different bands vary from time to time depending on matters such as incremental movement, retirements etc. It is not possible to produce similar information on overall earnings as the incidence of payments such as overtime is a variable. The table does not include employees of the local authorities who are not within the public service pay and pensions bill, but who are covered by the pension related deduction.

The net amount of the pension deduction depends on individual circumstances but as a broad rule of thumb it is estimated that the tax forgone will be about one third of the overall gross amount. Information is available on my Department's website which allows the approximate impact on individual public servants to be calculated.

Salary RangeEst. Nos in range
up to 25,00022,000
25,000-30,00033,000
30,000-35,00038,000
35,000-40,00036,000
40,000-45,00033,000
45,000-50,00036,000
50,000-55,00030,000
55,000-60,00027,000
60,000-65,0009,000
65,000-70,0005,000
70,000-75,0003,000
75,000-80,0006,000
80,000-85,0004,000
85,000-90,0003,000
90,000-95,0003,000
95,000-100,0003,000
greater than 100,0009,000
Total300,000

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 143: To ask the Minister for Finance the number of persons in the public service who are paying a 5% pension contribution towards their pension entitlement and the number who do not; and if he will provide details of their distribution across the main categories of public service employment. [5621/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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The Minister for Finance has statutory responsibility for civil service pensions. Statutory responsibility for public service pension schemes outside the Civil Service rests in the first instance with the relevant Ministers in other Departments, as appropriate.

The number of civil servants in 2008 is estimated at 38,572 in whole time equivalent terms. The number of civil servants making pension contributions in 2008 on a co-ordinated basis is estimated at around 25,000.

Photo of Áine BradyÁine Brady (Kildare North, Fianna Fail)
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Question 144: To ask the Minister for Finance the estimated actuarial cost of providing a pension for a public servant post their normal retiring age of 65, assuming that they had 35 years service, and had a salary at retiring of €35,000, €60,000 and €120,000; and if he will make a statement on the matter. [5626/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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While the actual payments to a person after retirement will depend on the actual salary at retirement the actuarial costs for public servants are not generally derived for different pay rates. The actuarial costs of public servants pensions are generally expressed as a percentage of pay over the working life of a typical employee of the group in question. These costs depend not just on final pay but on other factors such as pay at entry and pay progression throughout a person's career. The latest estimate in this regard is taken from the Report of the Public Service Benchmarking Body. This report estimated the total cost in the case of a typical person entering the Civil Service after 2004 to be 26.1% of pay. This figure includes the contribution paid by employees which was estimated, on average, to represent 4.8% of pay. Therefore the estimated cost to the employer was 21.3% of pay. In arriving at their actuarial cost figure for a civil servant the Body made the following assumptions:

age at entry: 26;

age of retirement: 65;

pay at entry: €25,000;

pay at retirement: €61,000.

Photo of Paul GogartyPaul Gogarty (Dublin Mid West, Green Party)
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Question 145: To ask the Minister for Finance if his attention has been drawn to the anomaly whereby the new pension levy will bring certain workers' salaries marginally under the standard tax rate band of €36,400 which effectively means that they will only receive relief on their pension levy contribution at the 20% rate while a person earning up to €10,000 more will not pay as much on the levy due to the fact that they will receive 41% relief of their pension levy contribution; if there are plans to address this anomaly or if it has been addressed; and if he will make a statement on the matter. [5629/09]

Photo of Paul GogartyPaul Gogarty (Dublin Mid West, Green Party)
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Question 146: To ask the Minister for Finance if, in view of the fact that some pensions are calculated on the basis of number of years service over 80 less twice the social welfare pension, which means that those on lower pay do not qualify for a Government pension in addition to their social welfare pension, there are measures that will be provided to recognise the increased contribution being paid; and if he will make a statement on the matter. [5630/09]

Photo of Paul GogartyPaul Gogarty (Dublin Mid West, Green Party)
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Question 151: To ask the Minister for Finance if he will introduce a pension entitlement for those public service workers who are not entitled to a pension but have been hit with the levy; and if he will make a statement on the matter. [5644/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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I propose to take Questions Nos. 145, 146 and 151 together.

The approach to the pension related deduction is that it applies generally given the fact that all public servants enjoy the benefits of a public service pension which provides for greater security and more favourable terms than the generality of private sector pensions. The graduated approach to the payment is to ameliorate somewhat the impact on lower paid public servants.

Due to the availability of tax relief at the marginal rate for pension contributions, in certain circumstances an individual on a higher gross income may incur a lower net loss than an individual on a lower income as a result of the new pension deduction.

This situation also applied before the deduction was introduced. However, it must be stated that the income tax, PRSI and health levy system is highly progressive. Those on higher incomes pay higher rates of tax. Across the entire public service, on all grades and on all pay scales, the total deductions (which include income tax, PRSI, health levy and the new pension deduction) will be higher as a percentage of gross pay as pay levels increase.

Integration takes into account the value of the Contributory State Pension (CSP) in calculating occupational pensions. Following a recommendation of the Commission on Public Service Pensions, a new system of integration was introduced, with effect from 1 January 2004, for public service pension schemes. The revised system improved the position for people on lower rates of pay and ensured that every person who meets the requirements of the pension scheme gets an occupational pension, regardless of income. It is proposed that the deduction will confer no additional pension benefit.

Photo of Paul GogartyPaul Gogarty (Dublin Mid West, Green Party)
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Question 147: To ask the Minister for Finance the rationale behind the recent decision to introduce a public service pension levy; the reason this step is justified as opposed to a general fiscal measure that would affect all the workforce equally; and if he will make a statement on the matter. [5639/09]

Photo of Paul GogartyPaul Gogarty (Dublin Mid West, Green Party)
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Question 148: To ask the Minister for Finance the advantages he contends that are enjoyed by the lower paid in the public sector versus their private sector counterparts that would justify the recently announced pensions levy in view of the fact that public sector workers tended to benefit less from the economic growth that took place over the last 15 years than the private sector; and if he will make a statement on the matter. [5640/09]

Photo of Paul GogartyPaul Gogarty (Dublin Mid West, Green Party)
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Question 149: To ask the Minister for Finance the evidence in place to show that the advantages of working in the public sector at present, with a relatively secure employment prospect versus the private sector outweigh the disadvantages in terms of earnings potential experienced during the boom times; and if he will make a statement on the matter. [5641/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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I propose to take Questions Nos. 147 to 149, inclusive, together.

Public servants at all pay levels have access to public service pension schemes. These schemes are superior to the generality of such schemes applying in the private sector, both in relation to security and the terms on offer. It is appropriate, therefore, that a deduction should be made to reflect this reality at a time when significant savings are needed from the public service pay bill.

I would not agree with the seeming implication in the Deputy's question that public service earnings lagged behind the private sector during the years of economic growth or that lower paid public servants did less well than their private sector counterparts. The second report of the independent Benchmarking Body (published as recently as December 2007) which evaluated the pay and jobs of grades in the public service, by reference to comparators in the private sector, concluded that 'in general public service salaries compare well with the private sector' and 'in general, where remuneration was found to be below private sector levels this arose in the case of some of the more senior grades examined'.

Photo of Paul GogartyPaul Gogarty (Dublin Mid West, Green Party)
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Question 150: To ask the Minister for Finance if he will compare and contrast the average pension entitlement among the lower paid, middle income and higher income groups at retirement age in both the public and private sectors; the estimated pension as a proportion of income paid before and after the pension levy; and if he will make a statement on the matter. [5643/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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The Minister for Finance has statutory responsibility for Civil Service pensions. However, statutory responsibility for public service pension schemes outside the Civil Service is a matter in the first instance for the relevant Ministers in other Departments, as appropriate. Policy responsibility for the oversight of private sector pensions is a matter for the Minister for Social and Family Affairs.

As regards pension entitlements of civil servants, they are based on length of service and final pensionable remuneration. The maximum number of years of reckonable service is 40. The maximum pension payable is 50% of final pensionable remuneration. The calculation of pensions will not be affected by the proposed new deduction.

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