Oireachtas Joint and Select Committees
Wednesday, 25 November 2015
Select Committee on Justice, Defence and Equality
Estimates for Public Services 2015
Vote 35 - Army Pensions (Supplementary)
We have not received apologies from anyone. I ask everyone present to please turn off all mobile phones or leave them in airplane mode. They should not leave them in silent mode as they still interfere with the recording system and the broadcasting of proceedings.
This meeting has been convened to consider the Supplementary Estimate for Vote 35 - Army pensions. A briefing note has been circulated. We will start with a short presentation by the Minister.
There will be an opportunity if members wish to ask broader questions about UN service, our current plans and so on. The issue is topical. I will try to be as open as I can, but we need to get through the Supplementary Estimate first. It is largely a budgetary and technical measure and I will answer questions members may have.
I thank the committee for giving me the opportunity to present for its consideration the 2015 Supplementary Estimate for Vote 35 - Army pensions. In the 2015 Estimate a sum of €215.6 million for Army pensions was provided. However, the net outturn this year is expected to be €222.1 million, leaving a shortfall of €6.5 million. The Supplementary Estimate will be met by an appropriate saving in the defence Vote and, as a result, there will be no extra demand on the Exchequer over what was initially voted for the overall defence Vote group in 2015. The required savings can be met without a detrimental impact on defence programmes.
Expenditure under the Army pensions Vote is provided for under a single programme entitled, Provision for Defence Forces Pensions Benefits. The Vote includes a provision for retired pay, pensions, allowances and gratuities payable to or in respect of members of the Defence Forces. The number of Defence Forces pensioners has continued to increase in the past year and currently stands at some 12,100 across all categories which is significantly more than the number of personnel in the Defence Forces.
Subhead A2 is the largest subhead in the Vote and covers expenditure on all superannuation benefits for former members of the Permanent Defence Force and their dependants. It accounts for more than 95% of all military pensions expenditure, including gratuities, and is essentially demand driven and non-discretionary. The original provision of some €211.4 million for the subhead will be inadequate to meet all requirements in the year. The shortfall is estimated to be €7.2 million. The principal reasons for the shortfall are the continued underlying increase in the number of retirement pensioners being paid from the Vote and the ongoing impact on pension payments of the high number of retirements on pension in recent years. In this regard, Defence Forces' pension requirements more than doubled annually in the five years to 2012, reflective of public service trends generally. In addition, many retirees continue to be in the long service category and are, therefore, entitled to maximum retirement benefits, which contributes to the increased costs. A further factor is increased longevity in the population generally. At the end of 2014 there were 11,536 retired pensioners, that is, retired members and dependants of deceased members. The current corresponding number is 11,612. By the end of 2015 it is expected that some 300 military personnel will have retired on pension over the course of the year.
Overall, the provision in subhead A2 will not be sufficient to meet projected costs. The overall supplementary requirement will be offset by expected savings of €710,000 in the non-superannuation subheads A3 to A6, inclusive. When all issues are taken into account, the shortfall in the Army pensions Vote is €6.5 million. Therefore, the intention of the Supplementary Estimate is to fund the shortfall of €7.21 million in subhead A2 by seeking additional funding of €6.5 million and reallocating savings of €710,000 in subheads A3 to A6, inclusive, to subhead A2.
While recruitment to the Permanent Defence Force is not provided for in the Army pensions Vote, members may wish to be aware of what is being done to fill positions left vacant through retirements and discharges. As I have told the committee previously, the Government will seek to maintain its existing policy of regular, ongoing recruitment within approved strength levels. As indicated in the White Paper, this brings in the new blood that a dynamic, modern, professional military force needs if it is to meet its obligations. This, in turn, helps to maintain the age profile of personnel as close as possible to the appropriate levels for all ranks. The average age of serving Permanent Defence Force members is 36 years across all ranks, while almost 70% of personnel are under the age of 40 years.
I am pleased to say overall recruitment levels this year have kept pace with those of the previous two years and are in line with the Government's objective of maintaining the strength of the Permanent Defence Force at 9,500 personnel, which was reaffirmed in the White Paper. A targeted recruitment campaign this year has seen the enlistment of 239 recruits, 49 cadets, 25 aircraft apprentices, five Naval Service mechanics and 19 instrumentalists for the military band, making a total of 336. It is envisaged that, with further general service recruitment, there will be an intake of more than 400 new personnel by the end of the year. In terms of ongoing manpower planning, a fresh recruitment campaign for general service recruits for the Permanent Defence Force was launched in August. The induction of successful candidates from this competition is expected to commence in early 2016.
I thank all retired military veterans for their valued public service during the years. I also reiterate that, as indicated in the White Paper, the Department and the Defence Forces will continue to work together to develop further in coming years the various supports available to existing personnel and veterans.
I commend the Supplementary Estimate to the committee and will be pleased to take questions. If members wish to sum up this measure, the amount in question represents 1% of the overall defence Vote and just under 3% of the pensions Vote which has been underestimated and needs to be corrected. That is what we are trying to do. The percentages are relatively small, but €6.5 million is still a considerable amount of money and we need to go through the appropriate process to ensure it can be provided.
I have a couple of general questions to ask and some comments to make.
I thank the Minister for his presentation and welcome the recruitment to which he pointed.
It is certainly something we all welcome enthusiastically. Equally I am sure everybody in the Houses will support the allocation of additional moneys to meet the pensions demand. It is a statutory requirement, but, in addition, we want to see Defence Forces pensioners being properly looked after.
The fact that we engaged in a similar exercise in 2013 and 2014 raises questions about how the Department of Defence conducts its business in respect of its annual Estimate. The Minister has indicated that for the third year in succession the number retiring from the Defence Forces has been underestimated. Will the explain the reason for this to us? We like to think the Estimates process has integrity and stands up to scrutiny. Sadly, we have seen the Department of Health come forward with bogus Estimates for several years. I am not suggesting that is happening in this instance, but there are questions about why it is happening again. The moneys are not enormous in the context of overall Government spending and, as the Minister has pointed out, represent 1% of defence spending, but measured against the background of the country’s spending far less on defence than many of our European colleagues the amount is quite significant. I can read and understand what the Department is doing in reallocating expenditure in subheads A3 to A6, inclusive, but from where is the €6.5 million in subhead A2 coming? What are the initiatives that might have been undertaken that are not being undertaken?
There are no initiatives that would have been undertaken that are not being undertaken. One of the problems in calculating an accurate figure for pensions is that it has been very difficult to secure increases in the pension budget at all from the Department of Public Expenditure and Reform because it holds a very tight rein and has needed to do so. We have to try to estimate how many will leave the Defence Forces each year. People can leave at a time of their choosing and it takes several months to replace them. If somebody leaves in January, it will be at least June before he or she is replaced. There are savings because if someone earning €40,000 or €50,000 leaves the Defence Forces, the replacement will probably earn significantly less, but there is a pension cost for the person who leaves. We could have one Vote to include pension and all other defence expenditure. I do not think, however, that that would be a good idea because we should try to have pensions as a separate line of expenditure in a separate Estimate. In most other Departments there would be a pay and pensions balance. We have a correction. Technically that is not happening because there is an Estimate, but the saving in one Vote can be used to cover slightly increased expenditure in another.
The management of staffing and numbers in the Defence Forces in the past few years has been quite difficult, particularly in the past 12 months where there were real opportunities for Defence Force personnel in the private sector and experts and specialists being headhunted. They leave because they can earn more in the private sector. We are reflecting on that issue to try to keep people who are valuable to the Defence Forces. We need them. The Deputy and others have raised some of these issues, but we had to calculate the likely Estimate figure. There was a realisation that it would always be tight on the pensions side and we are doing this year what we did last year. It is a similar sum of money, but in percentage terms, it is a relatively small adjustment.
I understand from what the Minister is saying the substantial part of the saving accrues from circumstances in which there is a time lag between retirements and the recruitment of new personnel and those coming in will be on a far lower salary than those leaving-----
What is the impact in 2015 or will be the likely impact in 2016 of the compromise arrangement arrived at on the 21 year rule? Will the Minister assure us that any expenditure which might properly be accounted for in 2015 will not be deferred to 2016?
I do not think that is the case. It is very hard to plan defence expenditure on an annual basis because in terms of much of the equipment used multi-annual planning is involved. We have just spent most of the €199 million for a ship replacement programme which involves three vessels, the third of which will arrive next summer. It is almost a five year plan. At times there is a carryover from year to year. In terms of savings in recruitment made because of the delay between retirements and recruitment, they can facilitate the provision of the extra money needed in the pensions Vote. We are fully funded to continue recruitment to increase the number to 9,500. The figure stands at just over 9,200. The White Paper on Defence is quite clear that we want 9,500 to be the base figure, not a target figure. We are fully funded to try to make that happen next year. As I understand it, the 21 year rule will not make a huge difference to our numbers. It has been factored in.
The Representative Association of Commissioned Officers, RACO, has stated one in ten officers has resigned from the Defence Forces in the past two years after becoming disillusioned with the job. It is stating the last reorganisation of the Defence Forces in 2012 and 2013 continues to place very significant demands on association members. Has the Minister engaged with it to discuss these concerns?
I attended the RACO conference in recent weeks. Of course, we will listen to it, just as we listen to the Permanent Defence Force Other Ranks Representative Association, PDFORRA. My job is to make sure we have a clear funding and policy platform for the Defence Forces because they have a complex job to do, particularly now. The nature of defence and threats to Irish interests and people has changed and continues to change. The Defence Forces are the last line of defence on which we rely. I do not want to over-emphasise it, but it is true. Sometimes in Ireland there is a view that nobody has an issue with us as a neutral country and that we do not need to invest in defence, White Papers and planning, but nothing could be further from the truth.
That is not to say, however, that we face significant threats, but we do need to prepare, plan and design strategies to ensure we have capacity. There are challenges in that regard and one of the big ones is that there is talent within the Defence Forces which many private sector companies would like to have and to whom they can offer higher pay packages than we can offer. People join the Defence Forces for different reasons and it is not just about money. I listened to what RACO had to state. We have active recruitment and training programmes in some specialist areas such as ordnance, whereby we have a number in training to ensure we keep numbers at the level necessary for what we need. I do not want to go into exact numbers because, for operational reasons, it would not be appropriate to do so, but in 2015 to date a total of 174 officers have been promoted. There were some 1,148 serving at the end of October, 15% of whom have seen promotions, but personnel have also left the force. I do not want to pretend, therefore, that it is a rosy scenario with no problems. We need to ensure a career in the Defence Forces, as an officer or in the ranks, is exciting and attracts the right kind of people. Part of the challenge in recruitment is attracting enough people of high enough quality . Money is not the big problem.
I remind the Minister and colleagues that we are focusing on the Supplementary Estimate. We are not focusing on policy but following the money. We are discussing where the money is being spent and why it is being moved from one area to another. We will be following it every year from now on. We can have a meeting about policy later, but for now I want to know how many fewer payments were made to achieve a saving of €77,000 in subhead A4 - payments to the spouses of deceased members from the War of Independence. Is it because the people concerned are no longer with us or is it because the amount was overestimated?
That is fine, but I must bring members back to the euros and cents because our focus is on where the money is coming from, where it is going out and why it is being moved from A to B or C to D. Policy is very important, but this meeting is about the Supplementary Estimate.
The reason we are here is that personnel are leaving in significant numbers and accessing pensions and we need to bring others in to replace them. There is a gap between the two and there are funding issues in terms of management.
I will give the figures for the past few years. A total of 65 officers have left so far this year. Last year the figure was 82; in 2013 it was 60; in 2012 it was 70, while nin 2011 it was 72. A total of 414 enlisted personnel have left so far this year. Last year the figure was 393; it was 400 the year before, 725 the year before that and 600 the year before that. Members will see what the turnover is in terms of numbers. We need to replace them as quickly as we can. There is a gap between the two, but we need to get the right type of people who will have to reach the necessary benchmarks in fitness tests and so on. Our recruitment campaign is quite successful and will continue to be. We have 92 cadets in training, a very high figure relative to the numbers in recent years. New leaders are being developed in the Defence Forces, as necessary.
One cannot predict with certainty the numbers who will retire every year. I understand enlisted personnel serve for a defined period and that as suh one can predict that they will retire on a certain date, but do officers have more flexibility? Will the Minister explain why he cannot predict with certainty the exact numbers who will retire in order that he can budget appropriately for a given year?
We try to estimate as know the numbers due to retire, but the Army pensions bill increased by 31% between 2007 and 2012. A lot of personnel retired and we could go into all sorts of reason that was the case, but we now see a different motivation for retiring. The private sector is really starting to take off which means that there is competition for talent and people are being headhunted. It is not just about numbers, it is also about rank and longevity. Depending on the numbers, the pension to which they are entitled or the package they will receive when they leave will be higher or lower. We have got the Estimate figure wrong by 3% and need to try to correct it. It is not as good as I would like it to be, but it is not 1 million miles out either.
The Minister is saying he has a sense of when the vast majority will retire from knowing the dates they joined and the number of years they have served but that he cannot predict when personnel will resign or retire early.
Yes. As indicated previously to the committee, the ongoing funding of Vote 35 will remain a considerable challenge in future years. The Department of Public Expenditure and Reform is aware of the position, but there are particular difficulties unique to the Defence Forces in predicting retirement and turnover patterns which can contribute to greater than expected expenditure in a given year. This is due, among other things, to the early payment of pension benefits immediately on retirement after relatively short periods of service, regardless of age, and the fact that the timing of a person's departure is largely of his or her own personal choice. For example, in the run-up to 29 February 2012, for every one NCO or private who retired with a pension on age grounds, 22 left voluntarily with pension benefits. The Defence Forces are quite different from other areas because when one retires, almost regardless of age, one accesses a pension. There are a huge number who leave before they are due to retire, for whatever reason. It is, therefore, more difficult to predict. As a career in the Defence Forces is tough, one can understand why that happens.
I do not have a major gripe with the Minister's explanation and understand one cannot predict what will happen with more than 97% certainty. However, as there has been a repeated overrun in the past few years, do other components of the Defence Forces lose out? The Department seems to be able to find the money to close the gap, but will there be an underfunding of other areas? Is it overextending budgets in other areas? How does it make the sums add up every year and what is the impact on other areas of the Defence Forces?
As I outlined in my opening statement, even with additional expenditure on military pensions, the overall group allocation - that is, the two Votes taken together - will not be exceeded in 2015, as there have been savings under Vote 36. The straight answer to the Deputy's question is "No." Essentially, we are funding the extra that we need. We could talk about the formalities of the Estimate where savings are made, but, essentially, nothing in terms of equipment and capital expenditure will be impacted by this. This is really about funding a slight shortfall in pensions with the money that is saved as a result of the time differential in terms of recruiting to fill the positions of people who are leaving. I would like to see our pension Vote increase slightly, but we need to negotiate that at budget time with the Department of Public Expenditure and Reform. I would like our pension Vote to be slightly higher than it is, but I think we did very well in the budget process this year and I think we have to take our overall Vote in terms of both Estimates in the round, which is what we are trying to do.
I thank the Chairman for his patience. We have a list here of the number of personnel that retired and the number recruited from 2008 to present. The discrepancy between the two peaked in 2009 and 2010. For example, in 2009, 499 retired and 47 were recruited; in 2010, 522 retired and 145 were recruited. The peak of retirements was in 2012, when 793 retired, which was a very large number, and 632 were recruited. From glancing at those figures, I estimate that there is a gap of approximately 1,000. What are the Minister's plans to address the shortfall in the Defence Forces caused by that period?
People will remember that period for all the wrong reasons because there was an effective recruitment ban right across the public sector in an effort to save money. That was not applied to the Defence Forces as rigidly as it was applied elsewhere, because we were allowed to recruit essential staff in terms of skill sets and so on, but it was still a real limitation. If one looks at more recent years, particularly 2013 and 2014, one will see significantly more people being recruited than in 2009 and 2010. My ambition is to get numbers in the Defence Forces up to a minimum of 9,500, as opposed to making that a target to be reached. We are at about 9,200 at the moment and there is a recruitment campaign which will push that figure up to close to 9,500. Over the next year or so, I would like to get that figure up to 9,500, to go above it slightly and then come back down, but to hover on that figure. That is difficult to manage, as people leave in numbers that are hard to predict. We are more than justified in ensuring that we are funding, managing and recruiting to have a floating figure of 9,500, as opposed to having that as a target at the end of the year.
I thank the Minister for coming today and for his opening statement. I acknowledge the work that the members of our Defence Forces do on behalf of the citizens of this country, particularly overseas. The Minister has answered the question I was going to ask. He said that a significant number of people have left or are leaving the Defence Forces. Is there a mandatory retirement age? How are the pensions calculated, for example, if somebody joined the Defence Forces at the age of 18 and then left ten or 15 years later? The Minister mentioned that when somebody leaves the Defence Forces, they get their pension straight away and it does not matter what age they are, which I think is very unusual. Will the Minister confirm whether the pension is paid as soon as they leave and that they do not have to wait until they are 60 or 65, as most people have to? It is certainly an incentive for people to join the Defence Forces if they know they will get a pension as soon as they leave. Is there a mandatory retirement age?
I will clarify that. There are minimum service periods before one gets a pension, but they are quite complicated. The mandatory retirement age also depends on rank and when one entered the Defence Forces. If it would be helpful, we could send quite a detailed note to the committee on minimum service age, how one qualifies for a pension and what ranks qualify for what, because we could probably spend quite a long time talking about it now. It is unique to the Defence Forces. There was a new agreement in 2013 on that. It might be helpful for us to send an information note on all of those issues. I thank Deputy Ferris for her comments on the role of the Defence Forces abroad. They are appreciated.
It depends on rank. The committee will remember that we had a debate on the 21-year soldier issue. That was an example of how complex the mandatory retirement age or period served is. There are issues on fitness tests - when one moves into a certain category, the fitness level and test changes. It is not as simple as saying it is the age of 50, 55, 60 or 65. It is a much more complex set of rules on mandatory retirement, but I will send the detail on that. I am not trying to evade the question.
I understand and I appreciate it fully. Does the Minister have any idea of the average age? He listed a number of people who have retired in the last year. I know the people who retired held different ranks - they were officers and other members - but what was their average age?
The average age in the Defence Forces is 36; 70% of the Defence Forces are under the age of 40. I am being told that the average retirement age is between 40 and 60. That is a pretty wide margin. I do not want to give the committee an incorrect figure, so we will send the figure to the committee.
Yes, we will do that. The big problem here is competition for talent. The numbers leaving the Defence Forces are in one way a compliment to the standards in the Defence Forces in terms of levels of training. Some people may try to spin that and say that people are leaving because they are unhappy in the Defence Forces. One could also say that people are leaving because they are being offered very attractive terms, conditions and pay packets in the private sector, because they are highly sought after. With all of these things, it is a mixture of lots of things.
I have one question before we move on to the next item. Subhead A4 shows that there has been a decrease of €77,000 in payments to spouses of deceased veterans of the War of Independence. Can the Minister tell us how many of these payments were envisaged at the start of the year and how many we ended up with in order to make that saving?
I have two questions. I apologise to the Minister for being late. I was speaking in the Dáil. He mentioned the numbers of people joining the Defence Forces. My impression, which may be wrong, is that there is a huge waiting list of young men and women who want to join the Irish Army.
We have active recruitment campaigns under way all the time. There may be lots of people who want to join but that does not mean that they meet the standards.
For example, we have a really active recruitment effort to recruit more women to the Defence Forces. Only 6.2% of the Defence Forces are women. That is not acceptable to me in a modern defence force infrastructure and with many of the things we want to do under the White Paper. We need far more gender balance in the Defence Forces. There are clear challenges. It just so happens there have been real challenges in terms of fitness tests and so on for women who are looking to join the Defence Forces. We need to look at how we deal with that without reducing standards and so on. The current figure is 558 women in the Defence Forces but I want to see this figure doubled. There are people who want to join the Defence Forces but the Deputy would be surprised in that something like one in three people who get called for interview do not even turn up.
Can I ask the Minister about subhead A4 - pensions relating to the War of Independence? I see that there are 92 recipients and the average payment is around €4,200. Is this figure not a bit low in 2015 for people who fought in the War of Independence? There is a small number of them.
Without raising expectations too much, we are looking at trying to do something for that group of people next year given the year that is in it. We will announce that at a later stage.
On that point, perhaps the Minister could inform me whether widows of individuals who were in receipt of those pensions are receiving them or whether they are specifically for the individuals who took part? What are the numbers?
I want to revisit the figure of €77,000. Could the Minister give us a breakdown on where this came from? He told us there were five fewer payouts at €4,200 each, which does not equate to €77,000. Are some of them getting more than others?
I am told they have different pensions and it also depends on the time of the year in which the pensioner may have passed away, so I do not want to be too crude about that. The actual figure is about 90 from 97, so it is seven fewer, not five. This is about widows of deceased military service pensioners. It is also about widows of special allowance holders and widows of service medal holders, so depending on what category one is in, one gets a different payment.
In respect of the issue of pensions and people retiring early, when someone retires early, he or stops paying his or her own pension contribution. How is that balanced out in the figures or where does that show up because the Department has overestimated at one end, so it will probably overestimate at the other end as well?
It is a much smaller amount. One is talking about an overall figure of €211 million. A very slight variation of well over €200 million will obviously be a bigger figure. When one is looking at a much smaller figure of €5.4 million, one can be more accurate.