Finian McGrath (Dublin North Central, Independent)

I thank the Leas-Cheann Comhairle for the opportunity to speak on this Bill. Before going into the details of the legislation, I commend and thank the vast majority of public servants and public sector workers generally who have served this State well. They always did their best for the country. I endorse what was said earlier by Deputy Buttimer on this issue.

In the current climate, it appears trendy to bash or attack public servants generally, but I will challenge that approach during this debate on pensions. I am sick to the teeth of some of the so-called commentators and some politicians having a go at decent hardworking bin-men, teachers and nurses. Most of the people throwing this abuse about would not last a minute in a bin lorry, an accident and emergency department or a classroom in a disadvantaged school. We have heard enough of this guff, so let us make our public service better and let us serve the public better. As a former public sector worker myself, that is something I know about. Let us also ensure that we look after our pensioners, although unfortunately this is not what the Bill is about.

It is a bad mistake to have a mass exodus of teachers leaving classrooms in February 2012 in the middle of the school year. It is bad planning and lacks commonsense. Imagine the hassle and trauma such an exodus will cause for parents and pupils just after Christmas. I urge the Minister and the Government to reconsider this matter. We cannot disrupt the flow of an academic year, particularly pupils who are studying for the junior and leaving certificate examinations. The Bill's principal purpose is to provide for a new single pensions scheme for all new entrants to the public service. The new scheme is the subject of a commitment in the EU-IMF programme of financial support for Ireland.

The Bill includes in Part 3 the necessary legislative amendments required to facilitate a reduction in pay rates for certain public servants and officeholders, including members of the Government and new members of the Judiciary, whose pay rates are determined in legislation. This is the essence of the Bill and what this debate ought to be about. That said, we must be very sensible and logical in dealing with the issue of pensions. I call for an independent professional evaluation of the figures of the Comptroller and Auditor General before the Bill is passed. It is wrong to make law on the basis of incorrect information. I will expand on this point.

Section 10 of the legislation deals with the single scheme pension for public servants which will reduce retirement income. The Trident report commissioned by the three teachers' unions shows many new teachers will pay more in than they will get out. Every Member of the House should have received a copy of this report from the INTO and it needs to be studied very carefully. It is independent and authoritative, and its author, Mr. John O'Connell, is one of the country's leading actuaries.

The single scheme proposals are based on flawed evidence. The Minister for Public Expenditure and Reform, Deputy Howlin, told the Dáil on 11 October: "To appreciate how the single scheme will continue to provide valuable pensions for teachers, it is instructive to look at the 2009 report of the Comptroller and Auditor General on public service pensions which estimated the annual pension cost to the State for teachers [...] to be 22.4% of pay". The Minister is wrong on three counts. First, the Comptroller and Auditor General's figure of 22.4% is not the cost to the State. Second, the single scheme relates to new entrants, while the figure of 22.4% does not. The Comptroller and Auditor General's report is not instructive; the figures are clearly flawed, which is why I call for an independent assessment thereof.

The Minister took the figure of 22.4% from page 29 of the Comptroller and Auditor General's 2009 report. As I said, this is not the cost to the State. As the table clearly shows, it is the gross pension cost to the State for teachers as a percentage of pay. Directly beside the figure of 22.4% in the table is the net pension cost, 9.6%, which is the true cost to the State of pensions for teachers.

With regard to new entrant costs, the proposed single scheme that the Minister has defended is for new entrants only. The figure of 22.4% takes account of teachers with different pension conditions. The cost of pension terms was reduced substantially by changes in 1995 and 2004. Any meaningful comparison with the report of the Comptroller and Auditor General requires the Minister to turn to page 30, on which Figure 2.10 sets out clearly new entrant contribution rates. The net cost in respect of a primary teacher is 7.2%. This is the Comptroller and Auditor General's figure for the cost to the State of a pension for a teacher under the conditions that obtained in 2004. The Comptroller and Auditor General's report is not instructive. It is widely accepted that the Comptroller and Auditor General has overstated the cost of public service pensions by using outdated assumptions. The most serious of his assumptions is that pay will increase every year by the rate of inflation plus 1.75%. The more realistic calculation used in the Trident report is that it will increase by the rate of inflation plus 1%. This indicates a new entrant cost to the State under current pension terms as low as 3.4% of salary, which is a long way from the Minister's figure of 22.4%.

The pension levy is not a pension contribution. The Minister is critical of the Trident report for including the pension levy as a pension contribution, although that is exactly what the Comptroller and Auditor General did in his report. While the levy is not legally a pension contribution, it is a pension-related deduction confined to public servants and is related to public service pension terms. It is a pension contribution in fact, if not in law. The Minister is critical of any presentation of it as anything other than temporary. The levy raised €944 million for the State in 2010. It is a matter of debate how soon it will forgo this income.

The Trident report commissioned by the three teachers' unions shows that, under the single scheme, many new teachers will pay more into their pension funds than they will get out of them. If the pension levy were to be cut in half, the cost to the State of teachers' pensions under the new scheme would be 1.5% of salary, or 4.9% if the levy were to be abolished immediately. Even a contribution of 4.9% is below the average private sector employer contribution where occupational pension schemes are still in place.

The Minister wants to discount the pension levy and cite the Comptroller and Auditor General's report but quotes as a pension cost to the State a percentage including teacher contributions, which is not the figure for new entrants and is based on flawed assumptions. The Minister states the teachers' unions do not reflect the true position. The calculation by Trident Consulting has not been undermined in any way in the debate on the single scheme. It would be more than regrettable if serious and long-term changes to pensions were based on inaccurate figures and flawed assumptions. That is why I call for an independent evaluation.

The INTO, of which I once had the honour of being a member, has called for a re-examination of pension costs to the State. This could be done quickly based on reworking the assumptions of the Comptroller and Auditor General. There might still be disagreement with the Government on policy, but major long-term decisions should not be based on wrong information.

There are other key points in the Trident report that I would like to address. Previous adjustments to the teachers' superannuation scheme and the public service schemes generally – for example, those in 1995 and 2004 – have reduced benefits and increased the proportion of retirement benefits funded by employees. With the pension levy established in March 2009, any new member joining the current scheme at the age of 21 years requires a salary contribution of only 3.4% from the State, as the employer, to help fund pension costs. A new teacher starting today at the age of 25 years requires an employer contribution of 5.7%, which is still less than the private sector average.

The proposed new scheme from 2011 – moving to career average, later retirement and CPI linkage – marks a drastic disimprovement in retirement benefits for new teachers and public servants generally. The value of teachers' contributions under the proposed new scheme will exceed the value of benefits, a set of circumstances that may be open to legal challenge, especially since membership is compulsory. The new scheme will be less generous than all private sector schemes and actuarially less valuable than having no pension provision whatsoever.

If the pension levy were to be cut in half or abolished from 2011, the employer contribution then required would be just 1.5% or 4.9%, respectively. The new scheme will result in a total pension of 44% of final salary after working for 43 years, compared to a 50% pension after working 40 years, as is the case at present. The lump sum will fall from 150% to 129%.

With changes in recent years, including 1995 and 2004, the existing pension terms for teachers are sustainable. Alternative approaches to cutting costs and especially to curbing the gains through final salary linkage for high earners on retirement are available. These include setting a maximum public service pension or a hybrid pension where final salary applies up to a certain threshold. A single pension scheme for all public servants will be complex to administer, especially where pay-roll facilities remain decentralised.

The assumptions used in the report are standard ones, with a conservative approach adopted to salary growth. The results are sensitive to the salary growth trend. If salary growth were to be significantly ahead of inflation, the new scheme would compare even more unfavourably to the current terms. The value of promotion, especially in later career, will be reduced substantially in pension terms under the new scheme. Among categories of teacher who would pay more in than they would get out of the new scheme are: aged 21 joiner, no promotion, unbroken service; aged 21 joiner, special duties posts at age 40, unbroken service; aged 25 joiner, no promotion, unbroken service; and aged 25 joiner, no promotion, five-year career break. All this material is from the Trident Consulting website and was posted yesterday. I raise these issues because they are an important part of the debate.

Section 13 deals with normal retirement age. Naturally, I agree that people should work longer in their jobs where possible. This has been proved to be beneficial from a health point of view. It is good for the person, the country and the person's lifestyle. At the same time I encourage people to move on if the opportunity arises and they should consider changing careers or changing movement within their career.

I was the principal of a small inner-city school for 17 years. When running a school in a disadvantaged area one gives one's best for the first ten or 12 years. Then one begins to realise that it begins to get difficult and that is when it is time to bring in fresh faces, new bodies, new ideas and fresh staff. This is something with which many people agree, especially in difficult, disadvantaged areas. Such people should consider these ideas and should consider ways to deal with the public service because it would make the public service more efficient.

Section 20 deals with the Office of President and provides that every person who, having held the Office of President of Ireland, ceases to hold that office for any reason other than death shall be eligible to receive a pension and, as is the case currently, no vesting period applies to presidential pensions. Those in high office should consider the idea of cutting costs of salaries. I am pleased some of the presidential candidates have stated that they were prepared to take a cut and some have stated they would be prepared to live on the average industrial wage. I take the opportunity to commend TG4 on the debate last night, one of the best I have seen. There was respect for all the candidates, all the difficult questions were asked and the programme did a great service to public broadcasting in the State.

Section 25 deals with a member of An Garda Síochána in a position that requires retirement, or gives an entitlement to retire, on attaining 55 years of age; a member of the Permanent Defence Forces in a position that requires retirement, or gives an entitlement to retire, upon attaining 50 years of age; a prison officer in a position that requires retirement, or gives an entitlement to retire, upon attaining 55 years of age; and a specified fire brigade employee or a retained firefighter. These are important as well. I have concerns in this area because there are many quality people in the Garda Síochána and the Defence Forces and fire officers who are leaving the service. I hope we are not damaging the service or losing good quality, experienced people because of the situation in which we find ourselves.

When discussing pensioners it is important to deal with them, to look after them and to treat them with respect. Let us remind ourselves that these people worked hard and deserve a decent pension. They have paid into their pension and this should be respected. These people, whether gardaí, nurses, teachers, firefighters or bin workers, have served the State well and they should be given a decent lifestyle when they decide to retire in the end.

I welcome the debate and the opportunity to put forward my views and those of many teachers and public servants in particular. I urge the Minister to read the Trident report and to listen to the views and proposals put forward by the Irish National Teachers Organisation. They contain some logical, sensible proposals. I urge the Government, especially the Minister, Deputy Howlin, to examine this issue seriously.

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