Simon Coveney (Cork South Central, Fine Gael) | Oireachtas source

I just wanted to make the point because I know that an hour has been allocated for each. I am in the hands of the committee if anyone wants that timeline changed.

I thank the committee for the opportunity to present for its consideration the 2022 Supplementary Estimate on the Army Pensions Vote.

The Army Pensions 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 2022 Estimate provides a gross sum of €270.65 million for the Army Pensions Vote. However, gross outturn this year is expected to be some €272.72 million, excluding Building Momentum, which leads to a gross shortfall of €2.07 million. It is also anticipated that there will be a shortfall in receipts in appropriations-in-aid of some €0.037 million. This leaves a net shortfall of €2.1 million before the impact of the extended Building Momentum agreement. The additional amount needed, excluding Building Momentum, is less than 1% of the original gross Estimate.

I also need to address the additional funding requirement for the implementation of pension increases arising under the extended Building Momentum agreement. In line with other Votes, and with the relevant Government decision on these increases, funding has been made available in 2022. The additional amount being made available is €7.224 million.

Work is under way to implement these increases. However, the Defence Forces pension scheme arrangements and payroll structures are atypical and of a complex nature. Consequently, paying out the moneys before the end of the year will be a significant challenge. Given this complexity, it may not be operationally possible to pay the entirety of these increases in the current year, and payment - or a part thereof - may slip into early 2023. That being said, however, absolutely every effort is being made to ensure payment of some level of the increase can be made before the end of the year. My Department will, of course, be communicating directly with the veteran's associations on the payment timelines.

On a combined net basis, the additional amount requested for the Vote is €9.324 million. I will now set out the position regarding the relevant subheads of the Vote. Subhead A2 is the largest subhead of the Army Pensions Vote. It covers spending on all pension benefits for former members of the Permanent Defence Force, PDF, and their dependants. It accounts for 90% of all military pensions spending, including retirement lump sums. It is demand-driven and non-discretionary. The original provision of €261.1 million for subhead A2 will not be sufficient to meet all requirements for the year, including the impact of the extended Building Momentum agreement. In the circumstances, the shortfall on this subhead is estimated at €9.27 million, as mentioned earlier.

The main reasons for the shortfall in subhead A2 are as follows. Over recent years, there has been an ongoing net upward trend in the number of military pensions. During the past year, the number of Defence Forces pensioners has continued to rise in line with this trend, and at the end of October there were 13,065 military pensioners of all categories. This is a net increase of about 380 over the past three years since the end of 2019. Based on available information, it is projected that 430 military personnel will retire with a pension and lump sum in 2022. Overall, this level of turnover during the year will be greater than the 400 provided for in the original Estimate, with new retirees going on pension continuing to outnumber deceased pensioners by a ratio of approximately 2:1 on average.

In other areas of the public service, most people leave at a standard retirement age and, therefore, their numbers and timing of departure can generally be predicted well in advance. However, the PDF 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 own 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 2021, over 70% of military personnel who retired on pension did so voluntarily and the picture is very similar for 2022. 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 very difficult. Furthermore, as indicated earlier, the impact of the extended Building Momentum agreement will add an additional €7 million to the supplementary ask for subhead A2.

Subhead A3 of the Vote provides for the payment of disability pensions granted to former members of the Permanent Defence Force, disablement gratuities in certain cases, and allowances payable to dependants of deceased members. These pensions will also be impacted by the extended Building Momentum agreement. An additional amount of €224,000 is being sought to cover the cost of the increases arising from this.

If the Chair agrees, I can move on to questions. Most members of the committee will be reasonably familiar with what I am outlining. I am anxious to move on to questions because it is relatively straightforward.