Oireachtas Joint and Select Committees

Thursday, 28 November 2019

Select Committee on Foreign Affairs and Trade, and Defence

Supplementary Estimates for the Public Services 2019
Vote 35 - Army Pensions

Photo of Paul KehoePaul Kehoe (Wexford, Fine Gael) | Oireachtas source

I thank the committee for the opportunity to present for its consideration the 2019 Supplementary Estimate on the Army pensions Vote. The Vote makes provision for retired pay, pensions, allowances and gratuities payable to or in respect of members of the Defence Forces and certain dependants. The 2019 Estimate provides a gross sum of €249.1 million for the Vote. However, gross outturn this year is expected to be €251 million, which leaves a shortfall of €1.9 million. The additional amount needed is less than 1% of the original gross Estimate.

I will now set out the position regarding the relevant subheads of the Vote. Subhead A2 is the largest subhead of the Vote. It covers spending on all pension benefits for former members of the Permanent Defence Force and their dependants. It accounts for 96% of all military pensions spending, including retirement lump sums. It is demand driven and non-discretionary. The original provision of some €239.5 million for the subhead will not be sufficient to meet all requirements for the year. In the circumstances, the shortfall is estimated at €2.65 million. The main reason for the shortfall is the number of Defence Forces pensioners has continued to increase during the past year and, at end-October 2019, there were 12,640 military pensioners of all categories. This is a net increase of approximately 600 since the end of 2014. Based on available information, it is projected that 400 military personnel will retire with a pension and lump sum in 2019. Overall, this turnover rate during the year was greater than the 350 provided for in the original Estimate, with new retirees going on pension continuing to outnumber deceased pensioners by a ratio of about 2:1 on average.

In other areas of the public service, most people leave at a standard retirement age and their numbers and timing of departure can generally be predicted well in advance. However, the Permanent Defence Force is different, as the vast majority of military personnel who retire on pension do so voluntarily, that is, before reaching mandatory retirement age and at a time of their choosing. As these voluntary early retirements are not known in advance, this can contribute to greater than expected expenditure on military retirement benefits in any given year.

During 2018, some 75% of military personnel who retired on pension did so voluntarily and the picture is similar for 2019. In addition, many retirees qualified for the maximum retirement benefits, which also contributes to the ongoing increased expenditure. In any given year, forecasting of Defence Forces pensions expenditure and the exact numbers of retirements is difficult. The shortfall of €2.65 million under subhead A2 will be partly offset by expected savings of €750,000 on subheads A3, A4, A5 and A6.

The purpose of the Supplementary Estimate for Vote 35 is to seek additional funding of €2.65 million for subhead A2 and reallocate savings of €750,000 on subheads A3, A4, A5 and A6 into that subhead. This leaves a net Supplementary Estimate requirement of €1.9 million.

As the committee will be aware from previous Estimates debates, it has been my intention to seek additional funding for the Army pensions Vote as part of the overall budgetary negotiations. I am again pleased to report that solid progress continues to be made on funding.

As announced in budget 2020, an additional €10 million has been allocated in the 2020 Estimates for the Vote, which is a 4% increase. The higher 2020 allocation builds on the steady progress made over recent years in securing additional funding for Vote 35, with an increase of €6 million in the 2017 Estimates, an additional €9.5 million in 2018 and an additional €10 million in 2019. At the same time, the funding of Supplementary Estimates required for the Vote has fallen from €11 million in 2016 to an estimated €1.9 million in 2019, that is, 0.8% of the original Estimate.

As stated in the pensions briefing material provided to the committee for the debate, the level of funding needed by Vote 35 in the Estimates process each year, will be dictated by circumstances and the demand-led drivers that I have outlined. I commend the Supplementary Estimate to the committee. I will be happy to take any questions regarding the Vote.

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