John McGuinness (Carlow-Kilkenny, Fianna Fail)
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To ask the Minister for Defence if he will examine the rate of pension being paid to a person (details supplied) in County Tipperary; the way this rate of pension after 32 years service compares to a person retiring after 21 years service; if they would have had a better pension payment if they had retired after 21 years service; and if he will make a statement on the matter. [51539/12]

Alan Shatter (Dublin South, Fine Gael)
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The person referred to would not have received a higher pension if he had retired after 21 years service. The basic position is that an ‘additional increment’ is paid over and above the 21-year pension for each additional year of service above 21 years to a maximum of 31 years. However, this additional element ceases to be payable when an individual reaches social welfare State Pension age.

The detailed position is as follows: Under the pre-April 2004 Defence Forces Pension Schemes, the minimum service required for an immediate pension and lump sum in the case of NCOs and Privates is 21 years, regardless of age. Maximum benefits accrue after 31 years. The 21-year pension consists of the following elements:

(a)a basic flat-rate pension that varies according to rank (€12,913.19 p.a. for a Corporal as in the specific case of the person referred to); plus

(b)an addition in respect of military service allowance (MSA) equal to 40% of the MSA rate where discharged since August 1990 (equal to €2,536.16 p.a. in this case); and

(c)if applicable, fixed % additions to (a) in respect of certain other qualifying payments (e.g. 3% extra for Technician Pay in his specific case).

All of the above elements are payable for the person’s lifetime. However, an ‘additional increment’ is also payable at a flat rate for each year of service in excess of 21 years up to a maximum of 31 years. This increment is increased, where appropriate, by the top-up at (c). Where maximum pensionable service is 31 or more years, as applies in this instance, the MSA top-up is 50% of the rate of MSA (rather than 40%). In this specific case, his additional increment (inclusive of the top-up at (c)) amounted to €4,804.84 p.a. However, this ceases to be payable when the pensioner reaches the qualifying age of 66 under the Social Welfare code for a State Pension Contributory, or if they become entitled to a State Pension (Transition) at the earlier age of 65. At the same time, the 50% MSA top-up reverts to the 40% rate.

I am advised that these arrangements are in accordance with the long established principle of integrating occupational pensions with Social Insurance benefits of employees who are in full PRSI class. This includes NCOs and Privates, who are fully insured for the range of benefits under the Social Welfare Acts such as the State Pension. ‘Integration' means that a person’s entitlement to Social Insurance benefits such as the State Pension is taken into account when calculating the rate of occupational pension payable. In effect, integration results in a reduced rate of occupational pension than would otherwise be the case. In the public service generally, the practical effect of integration is that the maximum occupational pension is 50% of pensionable pay less the maximum personal rate of State Pension (Contributory) applicable at retirement date. The State Pension etc. is regarded as part of the overall pension package payable to the individual. The occupational pension integrated (combined) with the State Pension makes up the ‘total pension’ for full PRSI contributors in the public service. The integration principle applies right across the public service and, indeed, in many areas of the private sector as well as in other countries.

When the person in question retired on 1 February 2007 (at age 60) from the Defence Forces he had accrued the maximum pensionable service of 31 years and, on that basis, qualified for a significantly higher pension than if he had left after 21 years service. From that date up until the eve of his 65^th birthday (31 January 2012), his military pension included the additional increment for 31 years’ service and the corresponding MSA top-up, on that date giving a pension rate of €20,719.08 a year. On turning 65 (1 February 2012), he qualified for the State Pension (Transition). In accordance with the arrangements mentioned, the additional elements in respect of his service for 22 – 31 years ceased to be payable from that date. Since then, his revised military pension rate has been €15,606.55 a year, a reduction of €5,112.53. These are the gross rates in his case after application of the ‘Public Service Pension Reduction’ introduced under emergency legislation in 2011 (the actual amount of which itself has been reduced in this person’s case by virtue of his lower military pension rate).

The maximum personal rate of State Pension is currently €230.30 a week (if under age 80). This is considerably greater than the actual reduction of €97.98 a week in this person’s case under the pre-April 2004 Defence Forces’ pension arrangements on his qualification for the State Pension at age 65. Indeed, his current combined weekly pension of €529.39 (i.e. Defence Forces pension of €299.09 plus State Pension of €230.30) represents a one-third increase on what he was getting alone from his military pension before turning 65.

The method of integration for these military pensioners is considerably less severe than in other areas of the public service. This is because elsewhere generally, the integration mechanism begins from the time an occupational pension comes into payment and, as I have already indicated, it effectively caps at 50% of pensionable pay the combined value of the occupational pension plus State pension. In contrast, for retired pre-April 2004 enlisted personnel such as the person referred to, integration as outlined above does not actually apply at all until the social welfare State Pension becomes payable at age 65 / 66. This could be some (or many) years after the person concerned had retired on pension from the Defence Forces. Even then, at age 65/66, the Defence Forces pension plus State Pension actually exceeds the public service maximum of 50% of pensionable pay. In effect, these military pensioners have what amounts to a partial, and more favourable, form of integration.

The general issue of integration of occupational pensions in the public service was examined by the Commission on Public Service Pensions. Its final report, published in November 2000, was considered and broadly accepted by Government. The Commission accepted that integration is a fundamental component in the public service pension framework and was strongly of the view that it should be continued. It did not make any recommendations that would affect the current integration arrangements applicable to retired NCOs and Privates covered by the pre-April 2004 Defence Forces pensions schemes.