Brendan Howlin (Wexford, Labour) | Oireachtas source

I am here this evening to present to the committee a net Supplementary Estimate of €22.25 million, gross €33 million, in respect of Vote 12 - Superannuation and Retired Allowances, and €200,000 in respect of the Public Appointments Service. The Supplementary Estimate in respect of the superannuation Vote arises from the fact that there have been approximately 250 more retirements than we had forecast at the beginning of the year, which is around 280 more than the 2013 full-year outturn. The additional €230,000 for the Public Appointments Service, PAS, arises from increased activity as a result of additional recruitment that has now begun.
In net terms, the full cost of these Supplementary Estimates is covered by savings elsewhere in the public expenditure and reform Votes, so no additional money is required.
The superannuation and retired allowances Vote provides primarily for pension and lump sum payments for civil servants and pension payments for dependants. Vote 12, as the Chairman will appreciate, is a demand-led Vote. This makes it difficult to estimate expenditure from one year to the next, having regard to a variety of changeable circumstances. I will give some examples of things we can only estimate and the variables that cannot be exactly forecast at the beginning of a year. These include the number of established civil servants who will opt for voluntary retirement having attained the minimum pension age but before reaching the compulsory retirement age; the number of persons who will opt to take cost-neutral early retirement; the number of persons who will retire on grounds of ill-health; the number of former employees who will become eligible to claim a preserved pension entitlement; the average pension benefits - lump sum and pension - that will fall to be payable to new retirees in any given year, depending on the grades and years of service of that specific cohort of retirees; and the number of cessations of pensions in any given year.
The 2014 gross Estimate for Vote 12 was €444.8 million. This represented an increase of €17.096 million, or 4%, over the 2013 outturn of €427.7 million. The Estimate anticipated a level of 850 retirements against the 820 actual retirements that took place in 2013. As noted, however, the interaction of a range of variables that I have set out will determine the expenditure on the Vote. This means that each year is unique in terms of expenditure and there is no direct correlation from one year to the next. By way of illustration, a significant saving arose on the Vote in 2013, when we overestimated what we would need by €46 million.
While the 2014 Estimate anticipated 850 retirements, around 1,100 people have retired to date, an increase of some 30% over what we anticipated. The impact of higher than estimated retirement levels may or may not have a marked impact on subheads concerned with pensions in payment, in that expenditure on each subhead is a function of both the level of new pensions coming into payment each year and the level of cessations of existing pensions in payment during the same year. Clearly, we cannot anticipate the numbers who will pass to their eternal reward.
This is not the case with lump sum payments. Increases in retirement levels have a particular effect on subhead A4 and to a lesser extent on subhead A5 in the context of increasing the number of associated one-off lump payments that must be made. Subhead A4, which provides for lump sum payments to established civil servants, is therefore the key driver of expenditure in any given year. By late November, more than €75 million had been expended from subhead A4, for which the 2014 Estimate was €58.18 million - an excess to date of some €17 million. Further expenditure of €10 million by year end is estimated, resulting in an overall excess of about €27 million on the subhead. By late November, €21.4 million had been expended from subhead A5, which covers the payment of lump sums, pensions in payment and the pensions of spouses of unestablished civil servants. In the 2014 Estimate, we had an allocation of €20 million. Further expenditure of €1.5 million is anticipated, giving an overall excess of €3 million.
It is now estimated that gross expenditure for 2014 may be in the region of €476 million - as I have said, some €31 million more than the gross Estimate of €444.800 million as voted by the Oireachtas on 18 December last year.
In the context, however, that a number of Departments pay pension lump sums directly to the individuals and then recoup the money from my Department via Vote 12, it is considered prudent to provide for a sum in excess of €31 million to cater for the possibility that Departments have underestimated the level of lump sum payments payable before December.

In order to ensure that the required funding is voted before excess costs associated with the additional retirements accrue to Vote 12, a Supplementary Estimate of €33 million gross is now being sought.

The committee should also note that the level of the gross Supplementary Estimate being sought will be mitigated by anticipated increased levels of appropriations-in-aid.

Appropriations-in-aid for 2014 were estimated at €82.25 million. Any additional receipts over the 2014 estimate - that is, if we get more than the €82.25 million in appropriations-in-aid - will have the effect of reducing the gross Supplementary Estimate further. To date, there have been receipts of some €95.4 million. Clearly, the appropriations-in-aid are larger than we have anticipated, so the gross amount will be mitigated to the degree I have said.

As expenditure on this Vote is influenced by the number of persons who exercise the option to retire before reaching compulsory retirement age, it is not possible to estimate the numbers who might choose to exercise that option over, say, a four-month period between September and December 2014 and the associated level of pension benefits that would be payable. It is therefore only now, towards the end of the year, that an accurate assessment may be made and an appropriate level of additional funding sought.

It must also be recognised that while some additional funding is being requested for the Vote in 2014, the fact that more people than had been anticipated have opted to retire this year has an impact on the drive to reduce numbers in the Civil Service, which is part of the overall strategy too.

We are also seeking a Supplementary Estimate of €230,000 under Vote 17, the Public Appointments Service. This is a small enough additional amount in respect of this year. Following the easing of the moratorium, as I explained to the House during the previous two Question Time debates, a number of traditional large-volume recruitment campaigns have, thankfully, been launched this year and will continue next year. The absence of opportunities in recent years to recruit new applicants has ensured that this year, when we reopened the recruiting campaigns, there was a very high number of applicants. By way of indication, the Public Appointments Service anticipates that in excess of 90,000 applications were received by it this year. The Supplementary Estimate is made up of non-pay costs covering the testing and general assessment costs associated with that increased level of activity.

I am happy to answer questions from the committee on those two Votes.