Pensions figures proved unpalatable
Muddying the water has long been a staple of political debate, especially when public representatives find themselves in uncomfortable positions.
Little surprise then that, faced with deeply unpalatable figures about the private sector cost of their generous pensions, the first instinct of some senior Ministers following The Irish Times disclosures was to introduce a series of items irrelevant to the issue.
The temptation was obvious. Figures compiled by this newspaper suggest that funding the retirement entitlements of Cabinet Ministers, if they were to retire at the next general election, would cost €36.3 million if they operated in the private sector.
Taking their departmental juniors into the equation brings that figure above €56 million, with the 15 Ministers of State between them accruing entitlements that would cost almost €19.8 million to fund in the private sector. Both figures include service as TDs as well as their ministerial pensions.
Taking into account other political appointees in the current Government – the Attorney General, the Ceann Comhairle, the Leas Cheann Comhairle, the Cathaoirleach, the Leas Chathaoirleach and the leader of the Seanad – adds a further €10.2 million to the figure, as the table shows.
Of course, that assumes that all the individuals involved retire at the end of the current Government – a major assumption in itself, given the political ambitions of many of those involved. It is not difficult to see why Ministers would be looking to deflect attention and suggest the figures were in some way inaccurate.
Minister for Public Expenditure and Reform Brendan Howlin was first out of the traps. As the man responsible for guiding the Public Service Pensions (Single Scheme and other Provisions) Act, 2012, through the Oireachtas, he is more familiar than most with the area – especially as he also has portfolio responsibility for reform of the public service.
Dismissing the figures as “not accurate”, he cited “mistakes” in the calculation.
He said the Government had taken steps to a different type of annuity, a sovereign annuity, which he said he had been advised would reduce the calculation by 20 per cent.
He also noted that increases in ministerial pensions were not tied to the consumer price index.
Sovereign annuities – essentially purchasing Irish Government debt – have indeed appeared on the landscape in an effort to reduce the cost of pension provision.
However, the pension regulator, the Pensions Board, has been extremely cautious in its view of how reliant private sector pension funds should be on them.
While they yield better returns than more traditionally used German bunds, that increase is due to the markets’ view that Ireland is more likely to default on its debt, rendering such products worthless.
As a result, private pension funds have been wary of using them to mitigate pension costs.
On the CPI, the Minister is correct. Ministerial pensions are currently benchmarked instead against future increases in ministerial pay. Precisely because this is usually more generous, the Minister opted to index new entrants to the public service to the consumer price index under the 2012 Public Service Pensions Act.
These issues aside, in his interview on Newstalk, the Minister also spoke of a claw- back he had introduced for pensions in excess of €100,000 and of Government moves to cut ministerial pay by between 25 and 30 per cent.
In addition, he referred to plans to introduce further caps on pension tax relief.
The first issue is irrelevant, as no Minister will receive an annual pension in excess of €100,000 under our figures; the second is irrelevant because our figures were based on the reduced pay levels for officeholders; the third is irrelevant because, although policy, it has yet to be introduced.
Minister for Finance Michael Noonan also cavilled against our figures, saying they were based on a “series of assumptions”, including that he will retire at the next election and that he will not survive very long, making him one of the lowest-cost people” – as though this undermines the exercise and produces what he called a “fallacious number”.
Quite the contrary. Colm Keena made clear we were making a series of assumptions – and stated what those were. These include that all Ministers retire at the next election, which clearly will not happen.
However, calculating a precise pension figure and cost requires a retirement date; so, for the purposes of the exercise, we chose the date of the end of the current Government term.
It merely serves to illustrate the cost of pension provision.
As to assessing him as one of the lower-cost ministers, Mr Noonan is the oldest member of the current Cabinet.
In 2016, at the age of 72 and widowed, he will have a lower life expectancy that say, Simon Coveney, who will be 43 and married.
Under basic actuarial assumptions used across the pensions industry, this inevitably makes the cost of providing his pension from 2016 lower.