Paschal Donohoe (Dublin Central, Fine Gael)
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As the deputy may be aware, I have overall policy responsibility in relation to public service occupational pension schemes, including Additional Superannuation Contribution (ASC).

The deputy has raised a concern in relation to the difference in ASC rates payable by an individual who is a member of a pre-existing public service pension scheme (pre-2013 scheme) versus an individual who is a member of the Single Scheme. For information members of a pre-existing scheme pay ASC at the rate of 10% on pensionable remuneration between €34,500 and €60,000 and 10.5% on pensionable remuneration above €60,000, while members of the Single Scheme pay 3.33% on pensionable remuneration between €34,500 and €60,000 and 3.5% on pensionable remuneration above €60,000 (this is shown in tabular form below).

Background to Public Service Pension Schemes

The Single Scheme was introduced by way of the Public Service Pensions (Single Scheme and Other Provisions) Act 2012 (the “2012 Act”) [1]. Prior to the introduction of the Single Scheme, individual sectors and/or public service bodies had their own superannuation schemes, these are referred to herein as Pre-2013 schemes and are sometimes also referred to as non-Single Scheme terms or pre-existing public service pension scheme terms. In general, all Pre-2013 schemes have standard public service pension scheme terms. The most notable differences between the Single Scheme and pre-existing public service pension scheme benefits are as follows:

1. Single Scheme members have a minimum pension age of 66 (rising in line with State Pension Age), whereas Pre-2013 Scheme members generally have a minimum pension age of 60 (if appointed before 1 April 2004) and age 65 (if appointed on or after 1 April 2004 and before 1 January 2013).

2. The pension benefits in the Single Scheme are based on career average pensionable remuneration (uprated each year by reference to the Consumer Price Index (CPI)), while the Pre-2013 scheme pension benefits are based on one’s final pensionable remuneration.

3. Post retirement pension increases are linked to CPI in the Single Scheme, whereas in Pre-2013 schemes post retirement pension increases are linked to pay as agreed under the current Public Service Stability Agreement 2018-2020 (“PSSA”) [2], as extended.

All pensionable public servants appointed on or after 1 January 2013 are members of the Single Scheme. However, it should be noted that the 2012 Act makes provision for an individual appointed on or after 1 January 2013 who has been a member of a Pre-2013 scheme in the 26 weeks prior to that appointment to be a member of the appropriate Pre-2013 scheme of their new organisation.

PRD & ASC

As provided for in the PSSA, the majority of public servants pay an Additional Superannuation Contribution (ASC). ASC replaced the Pension Related Deduction (PRD) which had been introduced in March 2009 [3] as part of a suite of Financial Emergency Measures. Whereas PRD was a temporary deduction from the salary of serving public service employees who had a public service pension entitlement regardless of whether the individual was pensionable in their current employment, ASC became a permanent contribution. PRD was chargeable on all taxable remuneration while ASC is chargeable on pensionable remuneration only.

ASC provides a permanent source of revenue to the Exchequer which helps to defray the cost of providing pensions to public servants into the future and places public service pensions on a more sustainable footing in light of the significant accrued liabilities that exist.

A key difference between PRD and ASC is that different ASC rates and thresholds apply depending on whether a public servant is a member of a standard accrual pension scheme (Pre-2013 scheme), a fast accrual pension scheme (Pre-2013 scheme) or the Single Public Service Pension Scheme (Single Scheme). ASC is provided for under the Public Service Pay and Pensions Act 2017 [4].

Pensionable public servants are liable for ASC at the following rates

Member of a standard accrual PS pension scheme	Member of a fast accrual PS pension scheme	Member of the Single Scheme
€0 - €34,500 @ 0%	€0 - €28,750 @ 0%	€0 - €34,500 @ 0%
> €34,500 - €60,000 @ 10%	> €28,750 - €60,000 @ 10%	> €34,500 - €60,000 @ 3.3%
> €60,000 @ 10.5%	> €60,000 @ 10.5%	> €60,000 @ 3.5%

The different ASC rates applicable to those in the pre-2013 schemes and the Single Scheme reflect the findings of the Public Service Pay Commission (“PSPC”) in 2017 [5]. In accordance with this Department submission to the PSPC, the value of retirement benefits under the Pre-2013 pension schemes is significantly higher than that of the Single Scheme. My Department estimated that the average notional employer contribution in respect of pre-2013 members of the public service is 29% p.a. while the corresponding rate is 9% p.a. in respect of Single Scheme members.

Following the implementation of existing ASC rates, it is estimated that the notional employer contribution rates fell to c. 26% and 8% in relation to the pre-2013 schemes and Single Scheme, respectively. See rates set out in Table 1 below.

Table 1. Comparison of cost of pension less normal employee’ contributions pre and post implementation of ASC

	Employer Cost – pre ASC	Employer Cost – post ASC
Pre-2013 pension schemes	29%	26%
Single Scheme	9%	8%
Differential	20%	18%

As mentioned above, pension benefits are payable earlier to Pre-2013 scheme members. Again, the lower rates of ASC paid by Single Scheme is reflective of the fact that benefits are payable at a later age. Pre-2013 scheme members are able to retire at age 60/65, as applicable, while Single Scheme members are able to retire at age 66, in line with the State Pension age.

As also mentioned, it is worth noting that pension increases post-retirement for Pre-2013 scheme members are currently applied by way of pay parity, whereby increases are linked to the salaries of serving staff. Pension increases in respect of Single Scheme members are index-linked and are increased in line with the CPI.

[1] Public Service Pensions (Single Scheme and Other Provisions) Act 2012 (#37 of 2012)

[2] Public Service Stability Agreement, 2018 – 2020

(www.gov.ie/en/publication/432f22-public-service-stability-agreement-2018-2020/)

[3]Financial Emergency in the Public Interest Act 2009 (as amended) – (No. 5 of 2009)

[4] Public Service Pay and Pensions Act 2017 (No. 34 of 2017)

[5] DPER-pensions.pdf (paycommission.gov.ie)