Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank the Chairman and members of the committee for taking these Supplementary Estimates today.

I will present to the committee a proposal for: a net Supplementary Estimate of €1,000 resulting in a gross Estimate of €34 million in respect of Vote 12 – superannuation and retired allowances; and a Supplementary Estimate of €3.665 million in respect of Vote 17 – PAS.

The Supplementary Estimate in respect of the superannuation Vote will bring the total 2021 Estimate for that Vote to €700.3 million gross and €339.9 million net. The Supplementary Estimate arises mainly due to higher costs than forecast for the year under the pension scheme for established civil servants as a result of a higher than expected number of retirements for 2021. The Supplementary Estimate in respect of the PAS Vote will bring the total gross allocation for the Vote to €20.455 million in 2021.

The additional allocation of €3.665 million sought for Vote 17 includes €800,000 of additional current expenditure to enable PAS to provide additional recruitment services to the HSE; and an increased capital allocation of €2.865 million in 2021 to allow for facilities upgrades, which have been carried out over a quicker timeframe than was originally envisaged. This increased capital expenditure in 2021 will not increase the overall cost of the project, but it will enable works to be concluded over a shorter timeframe. I understand that further detail on this request for Vote 17 has been provided to the committee.

On Vote 12, pensions and lump sums paid under the pension schemes for established civil servants make up 91% of total gross expenditure and, therefore, the main driver of the annual cost is the number of established civil servants who retire in the year. However, it is particularly difficult to estimate the number of retirements from one year to the next for a number of reasons, including the following: the majority of established civil servants will have a compulsory retirement age of 70; a number of people under age 60 retire each year under cost neutral early retirement or on grounds of ill-health; each year a number of former employees become eligible to claim a preserved pension entitlement; and the average pension benefits of lump sum and pension that will fall to be payable to new retirees in any given year will vary depending on the grades and years of service of that specific cohort of retirees.

The 2021 gross Estimate for Vote 12 was €666.3 million, which was based on a forecast of 1,650 retirements from the established scheme. As a general rule, for each person who retires, the once-off lump sum paid out is three times the size of the annual pension. Accordingly, increases in retirement levels have a particular effect on subhead A4, which provides for the lump sum payments to established civil servants. Subhead A4 is, therefore, a key driver of expenditure variance on the Vote in any given year.

At end October 2021, €118.6 million has been expended from subhead A4 compared to the original 2021 full-year estimate of €109.8 million. Further expenditure of up to €23.2 million by the end of the year is expected, resulting in an overall projected excess of approximately €32 million on the subhead. It is now estimated that total gross expenditure on the Vote for 2021 may be in the region of €700.3 million, some €34 million in excess of the gross Estimate of €666.3 million as voted previously by the Oireachtas.

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 2021 were estimated at €326.4 million. Receipts with respect to the single public service pension scheme are ahead of profile year to date. Total appropriations-in-aid are now projected at €360.4 million by year end, which is €34 million more than originally expected. This excess amount will act to reduce the net effect of the gross Supplementary Estimate.

In conclusion, I am satisfied that approval of the Supplementary Estimate of €1000 net will confer the necessary legal authority to meet the pension entitlements of civil servants expected to retire up to the end of 2021. Approval for the Supplementary Estimate - Vote 17 will also enable the PAS to deliver additional demand-led recruitment services to the HSE and conclude an upgrade of their offices in a shorter timeframe than previously envisaged. I commend the Supplementary Estimates to the committee and I look forward to our discussion.