OECD proposals to alter public service pensions

Staff in the public service would face big changes to pension arrangements under fresh proposals recommended by the Organisation for Economic Co-operation and Development (OECD) which are to be published by the Government next week.

The report is expected to suggest, in effect, that the Coalition should consider transferring serving staff below a certain age or level of service into a pension scheme effective since last summer for personnel recruited after that point.

This new scheme is generally seen as less advantageous than arrangements in place for those taken on before last July. People in place before that point receive pensions of half their salary.

Under the new public services scheme, pension payments for staff are determined on an average of their career earnings and not final salary when they retire.

The report is understood to refer to its suggestion that the Government should apply the pension changes introduced last year retrospectively to serving staff as “radical”. But it recommends that this should be considered as an option.

Any such move would undoubtedly be opposed by public service trade unions.

Cuts in earnings
The OECD proposals

on public service pensions are separate to the proposed cuts in earnings and the introduction of revised and more onerous conditions of employment under Croke Park II.

The report deals largely with pension arrangements for workers in the private sector. But it also makes recommendations in relation to pensions for public service staff.

The OECD paper examines reforms to existing State pension arrangements. And it is expected to recommend that workers without private superannuation arrangements should be obliged to enrol in a scheme which would operate on a defined contribution basis.

Sources indicate that the report is expected to also recommend that any such new pension scheme introduced for private sector workers should also be extended to those working for the State.

New entrants
It is understood that the

paper will urge that, at a minimum, these proposed arrangements should be put in place for new entrants to the public service but that in an ideal world they would be extended also to some existing public service personnel.

The Paris -based OECD was commissioned by the Coalition to make recommendations on dealing with the difficulties facing the pension sector in Ireland.

About one million workers have no private arrangements in place and will have to rely on the State pension on their retirement.

However, the timing of the recommendations in relation to the public service could generate further controversy at a time when the Government has to make decisions on how to deliver savings of €300 million on its public service pay and pensions bill this year.

Several public service trade unions have warned of possible industrial action if the Government moves unilaterally to cut pay for about 300,000 public servants following the rejection of Croke Park II.

The Cabinet is expected to discuss the fallout from the decision by public service union members to vote against the proposed deal in ballots earlier this week.

Minister for Public Expenditure and Reform Brendan Howlin is expected to bring forward proposals on how the proposed €300 million savings will be realised.