Oireachtas Joint and Select Committees

Thursday, 6 December 2018

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach

Estimates for Public Services 2018
Vote 12 - Superannuation and Retired Allowances (Supplementary)

10:00 am

Photo of Peter BurkePeter Burke (Longford-Westmeath, Fine Gael)
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I remind members to ensure their mobile phones are switched off. This is important as it causes serious problems for broadcasting, editorial and sound staff. Apologies have been received from Deputies Michael McGrath and Pearse Doherty. I welcome the Minister of State at the Department of Public Expenditure and Reform with special responsibility for public procurement, open Government and eGovernment, Deputy Patrick O'Donovan, and his officials. On 21 November 2018, the Dáil ordered that Vote 12 - superannuation and retired allowances be referred to this committee for consideration. I invite the Minister of State to make his opening remarks.

Photo of Patrick O'DonovanPatrick O'Donovan (Limerick County, Fine Gael)
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I thank the committee for facilitating us. This is a minor and somewhat technical Vote we would like to get approved by the committee. I am here this morning to present the committee with a proposal for a net Supplementary Estimate of €1,000 in respect of Vote 12 - superannuation and retired allowances. The Supplementary Estimate in respect of this Vote will bring the 2018 Estimate for the Vote to €584.9 million gross and €366.2 million net. The Supplementary Estimate arises from higher than forecast costs for the year under the pension scheme for established civil servants. There were also balances payable to former civil servants who retired in 2009 under the incentivised scheme for early retirement.

Pensions and lump sums paid under the pension schemes for established civil servants make up just under 90% of the total gross expenditure on the superannuation and retired allowances Vote. The main driver of the annual cost is the number of established civil servants who retire in the year. It is particularly difficult to estimate the number of retirements from one year to the next for a number of reasons. These include that the majority of established civil servants may choose to retire within a five year window between the ages of 60 and 65. In addition, a number of people aged under 60 retire each year under the cost neutral early retirement scheme or on the grounds of ill-health. Each year, a number of former employees 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 will depend on the grades and years of service of that specific cohort of retirees.

The 2018 gross Estimate for Vote 12 was €569.9 million, based on a forecast of 1,585 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 the expenditure variants on the Vote in any given year. To the end of October, €88.5 million was expended from subhead A4 compared to the original 2018 full year estimate of €94.2 million. It is now estimated the gross expenditure of the Vote for 2018 will be in the region of €584.9 million, €15 million in excess of the gross Estimate of €569.9 million as voted previously by the Oireachtas.

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

The figure for appropriations-in-aid for 2018 was estimated at €203.8 million. To end October, receipts of €191.8 million have been received and with receipts with regard to the single public service pension scheme ahead of profile year to date total appropriations are now projected at €218.8 million by year end, which is €15 million more than expected. I am seeking the committee's approval for the use of this excess to reduce the net effect of the gross Supplementary Estimate.

I am satisfied that the appropriate Supplementary Estimate of €1,000 net will confer the necessary legal authority to meet the pension entitlements of the civil servants expected to retire at the end of 2018. I commend the Supplementary Estimate to the committee.

Photo of Jonathan O'BrienJonathan O'Brien (Cork North Central, Sinn Fein)
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I am happy with the proposal.

Photo of Jack ChambersJack Chambers (Dublin West, Fianna Fail)
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My apologies for being late. It appears this is a procedural matter.

Photo of Peter BurkePeter Burke (Longford-Westmeath, Fine Gael)
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It is. I thank the Minister of State for assisting the committee in its consideration of the Supplementary Estimate.