Brendan Howlin (Wexford, Labour)

I thank all Deputies who have contributed to the debate, which has been useful. For the periods of time when I was not present in the House a careful note was made of all the comments, suggestions and observations. I look forward to a more detailed engagement on the issues during the remaining Stages, in particular Committee Stage, when we will be able to deal with the Bill line by line, and also when it goes to the other House.

The Bill is important, reforming legislation. Deputy Browne is correct that its gestation was in the previous Administration, although it was crafted by us and was not approved by the Government until last month. It has also been approved by the troika. The new pension scheme for the public service will cover approximately 300,000 people. The Houses must have the opportunity to consider, debate and make an input into framing this complex legislation and, in that spirit, I invite Deputies to bring forward amendments for me to consider fully on Committee Stage. As it is essential that the Bill clearly implements this important policy change, the Government has decided that we will be open on Committee Stage to the views of all Members of this House. Once the result of the referendum on the remuneration of judges is known, consideration will have to be given to the implications, if any, of this Bill. It will not be possible to bring forward the necessary amendments until the will of the people has been discerned.

I welcome this debate as an opportunity to begin the process of clarifying the issues arising. Deputies raised issues which will be considered in detail and I also want to address a number of principles which underlie the new scheme.

Deputy Fleming asked for clarification about what might happen to new scheme pensioners over the longer term if pay increases are greater than the CPI. He pointed out that inflation has risen in recent years, while salaries in the public service have decreased, and indicated that he may table amendments on Committee Stage to provide for a hybrid scheme that would offer a middle ground between these positions. The linking of pensions to average career earnings rather than final salary is at the heart of these new arrangements and is fundamentally fair. Under the new scheme, the pension received on retirement will be a fixed percentage of pensionable remuneration and is accrued each year. If pay increases are agreed for serving staff, they will be reflected in the pension benefits they accrue. Following retirement, the legislation makes clear that pension increases will be linked to changes in the consumer price index rather than the pay of the relevant serving officer. This measure will ensure the value of the pension in real terms, adjusted annually under the CPI, will be maintained. I do not see anything wrong with that approach. A pension should offer retirees a decent and inflation proof income. It should not necessarily be forever linked to the position a person once occupied.

In discussing the schedule of bodies excluded under the legislation, Deputy Fleming asked if nationalised banks or financial institutions will be included, presumably on the grounds that the staff of such organisations might be regarded as public servants. The Schedule to the Bill lists Anglo Irish Bank as an excluded body. This is being done because it is a nationalised financial institution.

Deputy McDonald raised the possibility that the new scheme might apply to serving staff and asked me to outline any legal or practical reason this should not be done. The Deputy is correct in saying that the introduction of the new scheme will mean that staff working in the same jobs at the same rates of pay will be members of different pension schemes. That is an unavoidable consequence of the introduction of a new scheme. I am advised that, in and of itself, having staff in two separate schemes will not create particular difficulties. In fact, this practice is becoming increasingly common in the private sector, where some companies have introduced significant changes to their pension terms for new staff. There should be no reason for confusion on anyone's part once this new scheme is introduced. The terms of the new pension scheme will be made clear to all new staff on recruitment and they will apply for their jobs in full awareness of the pension arrangements that will be available to them on retirement.

In regard to the legal and practical position on changing the pension terms of serving staff, the legal advice available to my Department makes it clear that changes to the accrued pension rights of serving staff would be very problematic. I do not intend to take that route because people have property rights over their existing pensions and in many cases they opted to stay in the public service rather than seek more lucrative alternatives in the private sector for the sake of their pension entitlements. It is important that the bargain is maintained.

Given the major changes that have been made in the Bill to the pay and pensions of serving staff, enough has been done. Deputies will recall that existing pensioners have experienced reductions in their pensions and from the end of February 2012 the grace period will end and pension benefits of retiring staff will be calculated on the basis of reduced pay rates. That will also apply to the Members of this House. Deputy Browne spoke about being part of the new pension scheme but all existing staff of the public service will be part of the existing scheme.

Deputy McDonald raised the issue of the top level appointments committee, TLAC, terms and the future pension arrangements applying to senior staff. Members on all sides of the House have serious difficulties with senior civil servants walking away with enormous pay packages at the end of their employment. The Bill does not offer any special arrangement for senior staff and all staff will be dealt with alike under the new scheme. It will apply to all new entrants at whatever level they join the public service. This was a deliberate decision on the part of the Government to give us the opportunity to consider properly the arrangements which should apply to staff at these grades within a legislative framework that applies equally to all new public servants.

I am reviewing the current TLAC arrangements. I confess that I did not know about them even though I have been a Member of this House for a very long time. I believed these particularly generous arrangements were only available to Secretaries General on retirement. The review of the arrangements is coming to a conclusion and I hope to bring the results to the Government next week, but until the Government has discussed and decided the issue, I cannot provide details on it to the House. I assure Deputies that the new arrangements will take full account of Ireland's changed economic circumstances, will be introduced immediately and will apply to all new senior level appointments. As regards the concerns expressed by several Deputies that new Secretaries General would get the TLAC terms, the Government will address this issue at an early date and all new appointments will be subject to the new arrangements.

Looking beyond these immediate issues, the terms of the new scheme will apply equally to those on the lowest pay rates and those at the top of the scale. The pension benefits available to new entrants at senior levels will be those accrued under the scheme. There are no special benefits, added years or special severance packages. Prior to the commencement of the new public service single pension scheme, I intend to bring further proposals to the Government on the terms applying to senior level appointments in light of the changes the new scheme makes to pension and retirement ages for new entrants, as well as the decisions the Government will take on the existing TLAC terms.

Deputy Fleming asked about the estimates produced by the Oireachtas Library and Research Service in regard to the likely effect on various pensions. As the document was only published yesterday, my Department has not yet had an opportunity to examine the figures in detail. I can, however, confirm that the estimates of the likely effect of the new scheme on the pensions of lower paid staff are broadly in line with those prepared independently by my Department. Staff who are not promoted during their careers will receive approximately the same pensions under the new scheme as they do at present, ranging from 95% to 100% of the current pension. However, the estimates suggest that in respect of senior staff, such as Secretaries General, the new scheme will offer a pension of approximately 90% of the present remuneration. I am not sure how that figure was arrived at because my Department's estimate indicates that the pension available for senior grades under the new scheme will be approximately 50% of the pension typically available under the current arrangements. That is our calculation. We will clarify the position with the Library.

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