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Written answers

Wednesday, 15 February 2017

Department of Public Expenditure and Reform

Public Sector Pensions Levy

Photo of Éamon Ó CuívÉamon Ó Cuív (Galway West, Fianna Fail)
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177. To ask the Minister for Public Expenditure and Reform the reason public servants in receipt of a public service pension have the pension levy deducted from their pensions; the rate at which it is deducted; his plans to reduce the pension levy in the coming years; and if he will make a statement on the matter. [7598/17]

Photo of Éamon Ó CuívÉamon Ó Cuív (Galway West, Fianna Fail)
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178. To ask the Minister for Public Expenditure and Reform the reductions that have taken place in public service pensions since 2008; his plans to reverse these reductions in line with the reversal of reductions in public service salaries that is proposed; and if he will make a statement on the matter. [7599/17]

Photo of Éamon Ó CuívÉamon Ó Cuív (Galway West, Fianna Fail)
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179. To ask the Minister for Public Expenditure and Reform the details of the relationship that exists between increases in public service wages and a consequential increase in public service pensions; if this connection has been broken; the basis on which public service pensions are now increased; the frequency of same; and if he will make a statement on the matter. [7600/17]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 177 to 179, inclusive, together.

The Public Service Pension Reduction (PSPR), which was introduced on 1 January 2011, is the only measure which has decreased the pay-out value of public service pensions since 2008.

PSPR applies as a progressively structured imposition on public service pensions under terms set out in the Financial Emergency Measures in the Public Interest (FEMPI) Act 2010, as amended.  As such it has been and remains an important element of the pay and pension measures under the financial emergency legislation which have been critical to the stabilisation of the public finances.

When introduced, PSPR applied to all pensions in payment above €12,000, with each affected pension subject to reduction based on a table of money bands and associated percentage reduction rates. It applied in the same way from that time to all new pensions awarded up to end-February 2012, which was the expiry date of a "grace period" during which the 2010 public service salary cuts were not reflected in new-award pension calculations. The PSPR table applying to all of these pensions, as commenced on 1 January 2011 was as follows:

Annualised amount of public service pensionReduction
Up to €12,000Exempt
Any amount over €12,000 but not over €24,0006%
Any amount over €24,000 but not over €60,0009%
Any amount over €60,000  12%
  

On 1 January 2012 an adjustment affecting a very small number of pensions was introduced by way of a new top rate of PSPR, of 20%, applied to that portion on any PSPR-affected pension in excess of €100,000.

On 1 July 2013, additional PSPR-based pension cuts were imposed as part of the further retrenchments of public service pay and pensions legislated under FEMPI 2013. These additional cuts were confined to higher-value pensions, defined as those with a pre-PSPR value exceeding, at least, €32,500, and were implemented in two ways.

First, the existing PSPR rates, which applied to qualifying pensions awarded up to up to end-February 2012, the "grace period" expiry date, were increased for all pensions with pre-PSPR values above €34,132.

Second, post-February 2012-awarded pensions greater than €32,500, which up to then had been exempt from PSPR, were subjected to a new group-specific PSPR rate regime, featuring lower rates than those applied to earlier-awarded pensions. The low-rate regime in respect of these pensions reflected the fact that, unlike earlier-awarded pensions, those pensions reflected actual rather than grace period-protected salary rates.

These 2013 changes effectively instituted three separate PSPR rate tables, differentiated by pension size relative to a threshold value, and by date of pension award. Commencing 1 January 2016, PSPR as applied by reference to these three tables is being significantly reversed in three stages under FEMPI 2015. This reversal is proceeding in three stages over the 2016 to 2018 period as follows:

On 1 January 2016, increases in the annual pension thresholds for PSPR application were activated. These exemption threshold increases fully removed PSPR from a significant number of pensions with relatively lower values, while those pensions which continued to be impacted by PSPR received a boost of €400 per year.

On 1 January 2017, additional PSPR amelioration, acting principally via further exemption threshold increases, fully removed PSPR from another significant tranche of public service pensioners, while at the same time boosting those pensions which remain affected by PSPR, in most cases, by up to €500 per year.

On 1 January 2018, the third phase of PSPR amelioration will ensure that all PSPR-impacted pensions with values up to €34,132 will be fully restored, meaning that PSPR will no longer affect such pensions, while those pensions which continue to be impacted by PSPR will get a boost of, in most cases, €780 per year.

Over the 2016-2018 implementation period of these FEMPI 2015 PSPR changes, the PSPR exemption threshold will progressively expand as follows: In 2016, all pensions up to €18,700 were exempt from PSPR; from 1 January 2017, all pensions below €26,000 are now exempt from PSPR; and from 1 January 2018 all pensions up to €34,132 will be exempt from PSPR.

This means that, when fully rolled-out from 1 January 2018, these PSPR amelioration steps will ensure that most public service pensioners are not affected by PSPR.  All public service pensions with pre-PSPR values of up to €34,132 will be fully exempt from PSPR from then on, while those pensioners not fully removed from the reach of PSPR will, in the majority of cases, benefit by €1,680 per year. The cost of these changes is estimated at about €90 million on a full-year basis from 2018.

In the past, the ocupational pensions received by public service pensioners were generally adjusted in line with changes in the wages or salary of the pensioner's grade at retirement.  Sometime referred to as "pay parity", this non-statutory linkage lapsed in 2010 when pensions were left unchanged notwithstanding salary cuts at the beginning of that year affecting all public servants. This pension protection, albeit tempered from 2011 in some cases by the imposition of PSPR, has worked to the benefit of pensioners, as indeed have the "grace periods" in respect of new-award pensions which accompanied the public service salary cuts in 2010 and 2013. PSPR is also being reduced at a faster pace and to a greater degree than the ameliorisation of the pay reductions.

In light of these developments, the issue of how to adjust the post-award value of public service pensions through appropriate pay or other linkages will be considered by Government in due course.

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