PUBLIC SERVICE:THE GOVERNMENT is seeking to generate savings of €309 million on the public service pay and pensions bill for next year.
It wants the savings to come about as a result of reductions in the number of staff employed, greater efficiencies in the way services are delivered under the Croke Park agreement and reforms to pension arrangements.
The Government wants to see a reduction of €100 million, or about 4 per cent overall, in the cost of public service pensions next year.
The Government has set a target of reducing the numbers on the public service payroll from 308,000 this year to under 301,000 at the end of 2011.
By the end of next year, the number of staff in the Civil Service will be reduced to 36,200, down from 37,350 this year. Staffing levels in local authorities will be set at 30,750 – the level last seen in 2001, while Garda numbers will be brought back to the 2007 level of 13,500.
The Government has also set a maximum salary of €250,000 for all persons employed in the public sector.
Higher-earning public servants will also be hit by PRSI changes. Modified PRSI rates will be increased to 4 per cent for those on incomes of more than €75,036.
The Government has also introduced a 10 per cent pay reduction for all new staff recruited to the public service. In addition, all new entrants will start at the first point of the salary scale.
Minister for Finance Brian Lenihan said that while recruitment would be limited over the next few years, this measure would “ensure a medium-term reduction in the overall cost of public service pay”.
As widely flagged, the Government is sticking to the Croke Park deal on public service pay and reform. However, Mr Lenihan signalled that for the Government to continue with the agreement in the future, the promised reductions in costs must materialise.
“Despite the economic constraints, the Government has abided by the Croke Park agreement on pay, compulsory redundancies and on pension terms,” he noted.
He added: “Public servants, their unions and their managers for their part must abide by their commitments to pursue flexibilities and reforms in every part and level of the public service. We have made commitments to a continued reduction in the cost of the public service. If the Government is to be held to its side of the agreement, those reductions must be delivered.”
In the main, retired staff and new entrants will be affected by the changes to public service pensions.
Those receiving public service pensions above €12,000 a year will see it reduced by an average of 4 per cent.
Retired staff on a pension below €12,000 a year will be exempted from the new cuts.
The cuts in public service pension payments will be implemented on a graduated basis.
Figures produced by the Department of Finance last night show that while those receiving a pension of €15,000 will face a cut of 1.2 per cent or €180, those on a pension of €30,000 will see a reduction of 4.2 per cent or €1,260 while those on a pension of €80,000 will experience cuts of 8 per cent or €6,360 per year.
Mr Lenihan said the cost of providing public service pensions had increased significantly in recent years. He said pensioner numbers had grown from 76,000 in 2006 to about 103,500 in 2010, an increase of 36 per cent, while expenditure has risen by 56 per cent from €1,433 million to €2,235 million in the same period.
As flagged first in the budget last year there are to be changes in pension arrangements for new staff in the public service from the start of next year.
These will see public service pensions for future staff linked to career-average pay rather than final salary. People will also retire later and pension increases in retirement will be set in relation to the consumer price index rather than increases in pay for serving public servants as at present.
The Government is also to extend the grace period – under which salary levels that were in place prior to the pay cuts introduced over the last year or so are used to calculate pension entitlements – to the end of February 2012.
This was “to prevent a logjam of public service retirements in 2011 and to spread the extra pension lump sum costs over a more manageable period in both 2011 and 2012”.
Mr Lenihan said that public servants or office holders retiring during the grace period would be subjected to the pension reduction he introduced yesterday.