Pay report says State employees should contribute more to pensions

Tens of thousands of State employees should contribute more towards their pension arrangements , the Public Service Pay Commission has urged.

In its report published on Tuesday, the Commission suggested this should be achieved by converting the existing public service pension levy - established in 2009 under financial emergency legislation and averages about 5 per cent at present - into permanent greater contributions to their pension provision.

Read the full pay commission report here.The Commission also urges that future pay rises should be linked to workplace reforms and continuous improvements in productivity, in addition to other relevant criteria.

The report says there is a basis for public service staff representatives and employers to enter into negotiations for a further collective pay agreement to extend the Lansdowne Road agreement.

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On pay the commission found in 2014 pay for public service employees at lower levels “still appeared to be higher than private sector pay levels for people with similar characteristics”.

The Commission report says: “Control of the public service pay bill is a central determinant of budgetary policy and it will be a matter for the parties to negotiate a timeframe that will provide for the orderly unwinding of the financial emergency (Financial Emergency Measures in the Public Interest) legislation having regard to”:

- Maintaining sustainable national finances and competitiveness

- Other Government spending priorities

- The public service reform agenda

- Equality considerations on public service pay

The Commission report finds “the values identified for those on legacy standard accrual pension schemes and fast accrual schemes should be addressed by providing for an increased employee contribution for those who continue to benefit from such schemes”.

Such a move would affect the 85 per cent of staff in the public service employed before 2013 as well as groups such as gardaí and judges who have accelerated pension arrangements.

“Rates of contribution would be a matter for negotiation while the Commission considers it would be reasonable to apply any agreed adjustments in contributions in conjunction with the discontinuance of the pension related deduction (pension levy) currently imposed under the Fempi Acts on public servants.”

‘Pay recovery’

Following publication of the report ICTU public services committee called for early talks with the Government on “pay recovery”.

It said there was now “near-parity between average public service pay and private sector earnings” and said average public service earnings were 8 per cent lower than in 2008.

Minister for Public Expenditure Paschal Donohoe said he welcomed the commission's "acknowledgement of the risks to the fiscal and economic environment in considering how best to unwind FEMPI legislation."

The commission says the value of public service pensions “could be reasonably fixed in a range of 12 per cent -18 per cent over private sector norms for pre-2013 standard accrual pension schemes but that fast accrual schemes incur greater costs”.

The report finds no significant recruitment or retention issues for the public sector but notes there are some problems for specific and specialist groups where there is international demand, such as with nurses.

Government sources expect an invitation will be issued to the Irish Congress of Trade Unions to enter talks at the end of this month on a new agreement.

The talks will be scheduled to conclude in June to allow balloting on the agreement to be complete before the budget, which takes place in mid-October.

Among the issues expected to feature in the talks are plans for major reforms to public service pensions, including potentially converting the existing pension levy into a greater staff contribution towards pensions.

At present the pension levy generates more than €600 million for the exchequer.

Public sector pensioners enjoy significantly greater benefits than most private sector employees, with guaranteed pensions of 50 per cent of final salary plus a 150 per cent tax-free lump sum for public servants retiring with a full 40 years service. However, many pensioners retire with less than full service.

The talks will also take account that about 15 per cent of public servants, recruited since 2013, have less generous pensions based on career, rather than final, earnings.

It is understood that the Department of Public Expenditure is prepared to offer public servants wage increases of about 6 per cent over three years. Additional pay rises could also emerge from local bargaining arrangements.