David Stanton (Cork East, Fine Gael)
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Question 247: To ask the Minister for Finance if he has satisfied himself that sufficient funds are in place to pay public service pensions into the future; the cost of same each year since 2000; the estimates required for the next ten years for each year; and if he will make a statement on the matter. [11783/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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As Minister for Finance I have primary responsibility for civil service pensions. Other Ministers have primary responsibility for pensions in their own respective areas.

The following figures show Net civil service expenditure for the years 2001 to 2006 and projected expenditure for each year to 2016.

The civil service superannuation schemes are funded on a pay as you go basis from monies voted each year by the Oireachtas during the Estimates campaign. Civil service superannuation payments are met from Vote 7, Superannuation and Retired Allowances. The vast majority of other public service superannuation schemes are also funded on a pay as you go basis from monies voted each year by the Oireachtas for the respective areas, such as the Education and Science Vote, the HSE Vote, the Justice and Defence Votes.

In general terms, expected increases in numbers of retirees and in life expectancy have highlighted a potential sharp rise in the cost of public service pensions in the decades ahead. Against this background, the Government set up a Commission on Public Service Pensions to examine and report on public service pensions having regard, amongst other things, to present and future costs of those pensions. The Commission published its final report in 2001.

Since then, and based largely on the recommendations of this Commission, the Government has embarked on a substantial program of public service pension reform.

The key cost-containment change in this reform program, implemented in 2004, was the raising of the general pension age for new workers in public service employment from 60 to 65 years. When fully realized around mid-century, it is expected that annual savings across the public service of some €350 million will flow from this change.

The 2004 legislation which implemented the pension age increase (Public Service Superannuation (Miscellaneous Provisions) Act 2004) also abolished the long-standing mandatory retirement age of 65 years for new-entrant public servants.

Ireland's demographic profile, with one of Europe's youngest populations, allowed the 2004 Act to confine these changes to new entrants. The savings which the pension /retirement age changes will produce are therefore timed to peak at the time of real need — towards mid-century — when we will have a large number of pensioners relative to workers, and a correspondingly large pensions bill.

An earlier measure to help make provision for the expected increase in pension costs was the establishment of the National Pensions Reserve Fund in 2001 under the National Pensions Reserve Fund Act 2000. The Fund was established in order to meet as much as possible of the cost of social welfare and public service pensions from 2025 until at least 2055. The Act requires the payment of 1% of GNP annually into the Fund until at least 2055. These moneys are invested by the National Pensions Reserve Fund Commission, which controls and is responsible for the investment of the Fund. The market value of the Fund at end-2006 was estimated to be €18.8 billion.

Finally, the future cost of public sector pensions is being considered in the context of the Green Paper on pensions policy, publication of which is expected shortly.