David Stanton (Cork East, Fine Gael)
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Question 221: To ask the Minister for Finance the changes that have been agreed with the social partners regarding public service pensions; when these changes will come into effect; and if he will make a statement on the matter. [39921/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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In "Towards 2016", the social partners agreed that work should continue on outstanding public service pension reform issues. These issues form part of a programme of actual and proposed changes over recent years which is largely based on the recommendations in 2000 of the Commission on Public Service Pensions, which were accepted in principle by Government.

As indicated in my reply to Question number 32965/06 from Deputy Ivor Callely on 17 October 2006, this reform process has already accomplished substantial change in public service pension provision in Ireland. In this context the major cost saving measure has been the implementation, via the Public Service Superannuation (Miscellaneous Provisions) Act 2004, of the Commission recommendation to raise the general minimum pension age of new entrants to the public service from 60 to 65 years.

In September 2004, following discussions with ICTU, it was announced that Government had ratified an agreed approach to the remaining Commission recommendations. The key feature of the Government decision was the immediate authorisation for implementation of the following six Commission recommendations directed at modernising pension provision:

1. Introduction of cost-neutral early retirement: A facility to allow public servants to retire early (from age 50/55, as appropriate) with immediate payment of pension and lump sum, actuarially reduced to reflect the earlier payment.

2. Revised integration formula: New method of integrating social insurance and public service pensions to boost retirement income of lower-paid staff.

3. Integration "pro rata": A more favourable integration method ("pro rata" integration as opposed to "full" integration) to be used in calculating the pension entitlements of part-time public servants.

4. Notional added years: Existing schemes to be replaced for new entrants by a single "transitional" scheme (to be reviewed in 2015), the main impact of the change being to reduce gross awards from 10 to 5 years.

5. Compound interest rate: The rate on pension-related repayments such as marriage gratuity to be cut from 6% to 4%.

6. Reckoning of allowances for pension purposes: Calculation to be based on "the best three consecutive years in the ten years preceding retirement" instead of being restricted to the last three years of service only.

Five of these six reforms have already taken effect, having been implemented by means of Department of Finance circulars issued in 2005. It is hoped that the outstanding item, the reckoning of allowances for pension purposes, will also be implemented shortly by way of a Department of Finance circular. The September 2004 Government announcement also provided that other Commission recommendations would be considered further. In particular it identified the following two issues for active consideration:

1. Changes to Spouses' and Children's Schemes: The proposed Commission changes include the extension of benefits to non-spousal partners. The feasibility of implementing the changes is currently being examined by a management/union Working Group, whose work is at an advanced stage.

2. SPEARS: The Commission recommended the introduction of SPEARS; a single AVC-type pensions savings scheme for the entire public service. This is the subject of ongoing management-union discussion.

In "Towards 2016" theses two areas are specifically noted as being priority issues.