Brendan Howlin (Wexford, Labour) | Oireachtas source

I welcome the opportunity to contribute briefly to what is a very important debate. Pensions are an important public policy issue, and it is useful and important that we debate them frankly, openly and honestly in this House.

There are misconceptions or worse about public service pensions in particular and the steps the Government has been taking to limit the cost of such pensions to the taxpayer. The first misconception is that public service pensioners are all on massive pensions. The truth is that about 1% of public service pensioners are in receipt of a pension in excess of €60,000 and only a few hundred have a pension in excess of €100,000. The Minister of State, Deputy Brian Hayes, indicated what constituted that category of people. In fact, about one third of Civil

Service pensioners have a pension of €10,000 a year or less, while around half have a pension of €20,000 a year or less.

The second misconception is that public service pensioners - former teachers, nurses and civil servants - represent an unaffordable burden. I have heard that repeatedly. The 2009 report by the Comptroller and Auditor General is often used to make this point as it estimated an overall public service pension liability of €116 billion. This figure must be properly understood. It is an actuarial assessment of accrued pension liabilities for existing staff which will be paid over many years. Above all, it must be stressed that this 2009 estimate assumed that there would be a real increase in public service pay over the long term. It is quite clear that a very different assumption would have to be made if the assessment were carried out today. The estimate also made assumptions about the indexation of pensions which need to be re-examined. The actuarial exercise indexed pensions to pay. If this was not done and it was assumed that pensions would instead track the consumer price index over the long term, the figure could fall to about €80 billion. In light of these and other considerations, I understand the Comptroller and Auditor General is re-doing this exercise. I am sure a very different picture will emerge, especially when account is taken of the new single public service pension scheme for new entrants which I introduced, and this House voted on, this year.

The third misconception is that public servants are not paying for their pensions. I have heard some echoes of that since coming to the House tonight. The position is that significant contributions are paid, generally 5% for main scheme benefits and 1.5% for spouses' and children's benefits for all staff in place since 1995. In addition, as we all know, public servants pay a pension related deduction, or PRD, which saves some €950 million annually. If the PRD is taken together with the pension contributions, current public servants make a significant input of well over 50% of today's annual public service pension outflow, which itself amounts to €2.9 billion. Therefore, on average, there is a pension related deduction of 7%. Ministers pay 10.5% at the marginal rate as a contribution their pensions.

A further misconception is that public service pensioners have not taken a cut to their pensions and that only private sector pensioners have seen reductions. The fact is that public service pensioners have had their pensions cut. Unlike many private sector pensioners, public service pensioners have been subject to the financial emergency measures legislation which imposed significant reductions of up to 12% on public service pensions in payment.

On assuming office last year, and arising from my concern about large public service pensions, some of which have been rightly referred to by Members in the debates, I amended the financial emergency measures in the public interest, FEMPI, legislation to levy a reduction of 20% on pensions in excess of €100,000, and this levy is on top of all other taxes and reductions. That was the advice I received from the Attorney General. That is as far as I could go.

The next misconception is that higher paid public servants and public service pensioners have been unduly protected. Pay cuts, including those made by this Government, operate progressively, with higher earners taking the largest cut, which means reductions in pensions will also be progressive. While the average reduction arising from the pay reductions will be around 7%, this extends to nearly 20% for the highest earners, of whom officerholders are clearly one part. For those pensioners in receipt of pensions calculated before the pay reductions, the public service pension reduction applies a progressive reduction, with rates of up to 20% for those with the highest pensions.

The new Public Service Pensions (Single Scheme and other Provisions) Act 2012 will calculate future pensions on the basis of career average earnings, not final pay. This, too, will have a progressive impact, protecting pensions for lower paid workers and flattening pensions for those at the upper echelons.

The final misconception I want to deal with is the idea that here in the Oireachtas we have a general or unfettered power to pass laws that would effectively confiscate property. I have just heard that said again. Despite the rhetoric, we in this House understand full well that the Oireachtas legislates within the Constitution and that legal issues concerning property rights are important. Reflecting constitutional rights and general public policy, the financial emergency measures Acts reduce public service expenditure in a proportionate and progressive way. The preambles to the FEMPI legislation clearly establish the measures in the context of the emergency financial measures currently pertaining in this country. There are also significant safeguards built into each statute, including an annual review and report, which must be laid before the Oireachtas in June of each year, as well as provision for me as Minister to examine cases for full or partial exemption if considered fair and reasonable in all the circumstances.

It is broadly accepted that further public service pension cuts could only be justified in the broad public interest. They would, therefore, have to make a meaningful contribution to the fiscal adjustment and would likely have to be designed in a similar fashion to the existing reduction. In other words, one cannot focus constitutionally on one category of people for exemplary treatment.

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