Joe Carey (Clare, Fine Gael)
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Question 179: To ask the Minister for Finance his views on using the consumer price index as the basis for post retirement increases in respect of both existing and future pensions in the public service; and if he will make a statement on the matter. [12249/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I announced in Budget 2010 that, as part of the reform of the public service pension structure, I will review the current arrangements applying in the case of post-retirement pension increases and in this context will consider linking pensions to increases in the cost of living. The recent special report by the Comptroller and Auditor General estimated that the present actuarial cost of public service pensions is 108 billion euro. A change to a CPI basis for post-retirement increases would reduce that cost to 87 billion, a reduction of 20 per cent.

The cost implications of public service pensions have been borne out by successive recent studies including the National Pensions Review (2005), the Green Paper on Pensions (2007) and the Comptroller and Auditor General's report on Public Service Pensions (2009). The C&AG's report is especially telling as to the cost consequences if action is not taken. It estimates gross public service pension payments this year at 1.6% of GNP, and projects that this will rise to 2.4% by 2023, driven by fast growth in pensioner numbers. Thereafter costs are seen stabilizing at about 2.5% of GNP in the period 2023-2038, before accelerating again to reach 3.6% of GNP in 2058.

In this context, as the Deputy will be aware, the Government recently published a new National Pension Policy Framework (2010) to deal with these and other critical pension issues. The public service pension changes now being considered are within the scope of and firmly supportive of the broader reforms featuring in the framework.