Alan Shatter (Dublin South, Fine Gael) | Oireachtas source

I thank the select committee for the opportunity to present for its consideration the 2012 Supplementary Estimate for Vote 35, Army pensions, which is for a net sum of €30 million. I also thank the committee for agreeing to meet at 10 a.m. rather than 9.30 a.m. as I had another meeting in which to participate.

The 2012 Estimate provided for a net sum of €207.9 million. Net outturn this year is expected to be approximately €238 million, leaving a shortfall of €30 million. I must emphasise this Supplementary Estimate for the Army pensions Vote will be met by an appropriate saving on the defence Vote. It is, therefore, a technical Supplementary Estimate with no extra demand on the Exchequer over what was initially voted for the Department of Defence for 2012.

Following the move by the Government to the new performance budgeting format, expenditure under the Vote is now provided under a single programme entitled provision for defence forces pensions benefits. The Army pensions Vote makes provision for retired pay, pensions, allowances and gratuities payable to or in respect of members of the Defence Forces. The original Estimate provided a net sum of €207.9 million to cover a total of over 11,600 pensioners in all categories, the majority of whom are Defence Forces pensioners.

The number of Defence Forces pensioners has continued to increase during the past year. There are almost 12,000 pensioners of all categories paid by the Department of Defence. This includes 10,047 retired members of the Permanent Defence Force, 1,666 spouses and children of deceased members and 212 spouses of deceased Old IRA veterans. Subhead A2 is the main subhead of the Army pensions Vote. It covers expenditure on all superannuation benefits for former members of the Defence Forces and their dependants. It accounts for over 95% of all military pensions expenditure and is primarily demand-led as well as non-discretionary. The original provision of €204 million for this subhead will be inadequate to meet all requirements. The gross shortfall on this subhead is estimated at €29.9 million. A shortfall of €500,000 is also expected in appropriations-in-aid. The overall supplementary requirement will be offset by expected savings of €400,000 in subheads A1, A3 and A4 to A6, inclusive. When these are taken into account, the net shortfall is €30 million.

The principal reasons for the shortfall in subhead A2 are: the full-year pension impact in 2012 and related carryover costs of the large number who left the Defence Forces on pension in 2011; there were higher than anticipated numbers who retired on pension from the Permanent Defence Force during the first two months of 2012, that is, ahead of the end of the grace period up to 29 February; and many Defence Forces retirees continue to be in the long service category and, therefore, entitled to maximum retirement benefits. Overall, the provision in subhead A2 was not sufficient to meet the costs actually incurred in 2012.

During 2011 and in early 2012 the numbers who retired from the Permanent Defence Force with an entitlement to pension and a retirement gratuity were considerably higher than anticipated. Up to the end of 2011 a total of 498 military personnel of all ranks retired on pension compared to 427 at the end of 2010. However, a total of 559 military personnel have retired on pension so far this year. The bulk of these, 514, did so in the first two months of the year. These early 2012 departures far exceeded expectations, considering that retirements in 2011 were already above average.

The personnel turnover rate in the Defence Forces is among the highest in the public service. As a matter of policy, the regular recruitment of young soldiers is an absolute necessity to ensure a pool of fit personnel.

The level of retirements in 2012 has placed an additional burden on individual members of the Permanent Defence Force during the year. I acknowledge this and thank them for their efforts. At the end of August the strength of the force was 8,838. Therefore, the recruitment of some 600 personnel is required to maintain the agreed strength of 9,500. The intake of personnel will take place in several tranches before the end of the year. This process commenced in late September. To date, 349 recruits have been enlisted, of whom 22 are instrumentalists. In addition, a medical officer was appointed in July and a military judge in September. There was also an intake of 37 cadets who commenced training in October. An Air Corps apprentice competition and a competition to recruit engine room artificers for the Naval Service were recently advertised, from which it is proposed to enlist 20 and 11 personnel, respectively. At the end of September the strength of the force was 9,028 and is currently in the order of 9,100. All of this recruitment will be achieved within the resource envelope allocated to the Department of Defence to maintain the Government-approved strength of the Permanent Defence Force of 9,500.

That is a brief résumé of the overall position and why the Supplementary Estimate is before the committee. I commend it to the committee and hope it will be supported by it.