Employers group Ibec has called for a series of changes to public sector pensions as part of any cost-saving measures introduced by the Government to deal with the worsening Exchequer deficit.
Ibec director Brendan McGinty said the proposed changes should be included in discussions on ways to secure cost savings of €2 billion.
Among the most controversial of the Ibec proposals is that new entrants into the public service would not be entitled to a defined benefit provision. Instead, Ibec suggests new employees should be offered a defined contribution pension with a State guarantee of minimum investment returns.
However, David Begg, Ictu general secretary, said he did not think the proposals from Mr McGinty had been carefully thought through.
Ibec has also called for an end to the pay parity link for 313,000 staff in the public service that allows for guaranteed pensions based on the ongoing salary of the job they held.
Ibec has also called for a cap be placed on pension contributions and said the cost of any payments beyond that limit should be met equally by the employee and the State.
Employers want all public servants contribute to the cost of funding their retirement and Ibec has called on the Government to conduct a detailed actuarial analysis of the pension liabilities for public sector employees.
Mr McGinty said his data indicated that the average public sector pension is worth a premium of 13.5 per cent of salary compared to the average private sector pension.
“A target of €5 billion reduction in total government expenditure by 2012 is needed. In that context, the public service pay and pensions cannot be exempt when one considers that the public sector pay and pensions bill will account for 51 per cent of all tax revenue in 2009,” he said.
“This is now urgent, with a shortfall in tax revenues of €8 billion for 2008 and an exchequer deficit spiralling to €20 billion.”
He said three quarters of defined benefit schemes in the private sector were unable to meet funding standards last year. “The situation will deteriorate further in 2009 and without serious reform, a number will collapse or benefits will have to be seriously restricted,” he added.
Mr Begg, speaking on RTÉ's Morning Irelandtoday, said: "Governments can't transfer the risk on to the employee . . . what the employers have done in the private sector is they've transferred the risk in the first instance to their employees, but ultimately the risk is transferred to the State because if the pension is insufficient [for a pensioner] ultimately the State has to take up that responsibility."
"The State can’t behave irresponsibly like a private sector employer and transfer the risk to the individual [via a defined contribution pension] as ultimately it has to pick up that risk."
Mr Begg said a move to defined contribution pensions would probably cost the State money.
The State, he said, “pays pensions out of its available day-to-day revenues, so it would have to set money aside for that purpose, and no benefit, in terms of the ultimate pensions burden on the State, would accrue until the person retired, which would be 40 years hence”.
“We are facing a crisis in pensions for the future . . . the idea of providing for a fund for a pension appears now not to be sustainable. Ninety per cent of the pension schemes in the country are underfunded at the moment and have lost 50 per cent of their value in the last year alone,” he said.
“The rest of Europe has had . . . essentially State-provided, income-related pension schemes, and it seems to be that ultimately we have no choice but to move to a more mainstream European model”.
But Mr Begg said nothing could be done immediately to reduce the cost of the public pension bill as people who have entitlements retain them, and pension issues being discussed by Ibec are “way into the long distance”.
He said there were new ideas from the unions to save money that he would discuss with the Government but refused to say what these were.
A spokesman for Ictu added there were would be ongoing discussions with Government on pensions, among other issues.
The Impact trade union today accused Ibec of exploiting the recession to drive down the value of public and private pensions.
It said Ibec’s proposals to devalue public service pensions “would do little to help the present crisis in public finances, but would effectively signal the end of employers' responsibility for pension provision”.
Impact deputy general secretary Shay Cody said: "Throughout the boom years, Ibec sat idly by while many of its members dismantled occupational pensions in the private sector”.
“Now it's exploiting the present crisis as a tool for employers to escape what responsibilities remain and place the entire pensions' burden on employees and the taxpayer.”
The Garda Representative Association (GRA) described Ibec's proposal as an "opportunistic attack on pension entitlements to divide public opinion over public servants' pension entitlements."
The association said the proposal was a divisive measure which would not "significantly" improve the exchequer's current finances but would create "confusion that public servants are better off than their private sector counterparts."
GRA General Secretary PJ Stone said, "It is extremely disappointing that a body like IBEC should be taken at face value on this issue. Their reason to exist is to ensure that workers do not detract from the riches of the employers. They are proposing to reduce working and living standards and employee benefits so that the fat cats can get fatter."