Pension entitlements more valuable than salaries for Ministers of State

The pension entitlements accumulated each year by Ministers of State while in office can be more valuable than the salaries they receive.

The salary for a Minister of State is €37,370. They also receive a TD’s salary of €92,672, making for a total of €130,042.

Ministers of State who serve for five years (a full Dáil term) are entitled to 35 per cent of their Minister of State salary as a pension, or €13,079 per year.

A married man aged 60 when appointed and who served a full five-year term as a Minister of State would accumulate a pension entitlement that would cost €432,327 if bought today. A lump sum entitlement would be extra.

That value translates into €86,465 per year, in accumulating pension entitlements, or more than twice the value of the salary received for the office.

On this basis, such a Minister of State would be getting a total annual remuneration of €123,835 a year for his or her work as a Minister of State.

The Minister of State is also earning his or her TD’s salary of €92,672 and the associated pension benefits under that scheme.

Most Ministers of State will be aged less than 65 when this Dáil term comes to an end in 2016. Those that were elected after 2004 will have to wait until they are 65 until they become entitled to a pension, while those who were elected before that date become entitled to a pension once they reach 50 years of age.

Minister of State for Public Service Reform and the Office of Public Works Brian Hayes will be 46 when this Dáil term comes to an end.

He was first elected to the Dáil in 1997 and was first appointed a Minister of State by this Government. He will be entitled to begin drawing down a pension at age 50 if he is no longer in politics.

The pension he will be entitled for his five years as a Minister of State, should he remain in that position until 2016, would cost €657,152 if bought in the marketplace today.

Entitlement

This translates into an accruring entitlement worth €131,430 a year. When salary is added, his remuneration as a Minister of State is €168,800 a year, with his TD’s salary of €92,672 and his pension entitlements under the TD pension scheme being additional.

As well as Ministers and Ministers of State, six other office holders also qualify for pensions under the ministerial pensions scheme. These are the Ceann Comhairle, the Leas Cheann Comhairle, the Attorney General, the Cathaoirleach of the Seanad, the Leas Chathaoirleach of the Seanad and the Leader of the Seanad.

Ceann Comhairle Seán Barrett will have a pension entitlement at the end of the Dáils term that would cost €2.2 million if bought in the marketplace today. He will also have an entitlement to a lump sum of €139,008.

Cathaoirleach of the Seanad Paddy Burke will have a pension entitlement that would also cost €2.2 million today, and an entitlement to a lump sum of €98,432.

The six officer holders concerned will have pension rights at the end of the Dáil term that would cost €10.2 million if bought by way of annuities today.

A spokesman for Minister for Public Expenditure and Reform Brendan Howlin said he had no comment to make on the figures.

Methodology How the figures were calculated

Working out an Oireachtas member’s pension entitlement

To calculate a TD or Senator’s basic pension divide his or her salary by 40 and multiply it by the number of years they’ve served in the Dáil/Seanad, capped at 20 years.

TDs and Senators are also entitled to a once-off pension lump sum of three times their annual pension.

So, for example, a TD to which the 20-year cap applies would receive €46,336 annually and a lump sum of€139,008 on retirement.

On top of this, TD and Senators who have served more than six months in the Oireachtas are also entitled to a termination lump sum equal to two months’ salary (for a TD this sum is currently €15,445).

If TDs/Senators have served for longer than three years they are also entitled to up to 12 monthly payments based on their length of service (for a TD the maximum payment total over 12 months is €57,920).

Only after these payments end do they begin to get an annual pension.

Working out the pension of a Minister/ Minister of State/ Ceann Comhairle/ Cathoirleach, etc

A number of positions attract a pension entitlement over and above that earned by a TD or Senator. These are Taoiseach, Tánaiste, Minister, Attorney General and Ceann Comhairle (called “ministerial” offices for pension purposes) and Minister of State, Leas Cheann Comhairle, Cathaoirleach, Leas-Chathaoirleach and Leader of the Seanad (called “secretarial” posts for pension purposes).

To receive this pension entitlement a TD/Senator has to have served for at least two years in one of these offices. The pension is then worked out as a percentage of the office holder’s salary.

After two years a retiring office-holder is entitled to a pension equal to 20 per cent of his or her salary. After three years this becomes 25 per cent, four years 30 per cent, and five years 35 per cent. The maximum entitlement is 60 per cent after 10 years’ service. If a TD/Senator is in line to receive a “ministerial” pension but previously served in a “secretarial” office, half the time they spent in the latter post is reckonable at the “ministerial” rate. So, for example, if a TD has served both as a Minister and a Minister of State then half their service as a junior minister is reckonable at the higher rate.

Working out an office-holder’s long-term pension projection (ie how much the annuities would cost in the private sector).

First add together the pension entitlements reached in steps 1 and 2 above.

A senior Minister who has served 20 years or more would be entitled to €46,336 (their TD pension) plus €45,962 (their “ministerial” pension), making a total pension entitlement of €92,298.

This figure is then entered into a pension calculator using an inflation cap of 3 per cent to work out how much the annuities would cost in the private sector.

Working out an office-holder’s long-term pension projection in cases where the TD/Senator is not yet the requisite age to receive a pension.

In the case of office holders who would not yet be entitled to a pension, you use a further calculation to work out the annuity cost.

You first work out how much the pension would cost in the private sector (as per steps 1, 2 and 3 above). The resulting figure is then divided by 1.02 (where 1.02 represents a 3 per cent inflation cap and a 5 per cent return on investment – a net 2 per cent).

This figure ( X) is put to the power of the number of years until the Minister reaches retirement age. (So if a Minister has seven years before he/she reaches retirement age, the calculation is X to the power of 7.)

The small print

All calculations are estimates based on Oireachtas/government guidelines and worked out on “new scheme” pension arrangements that have been in place since 1993.

Ages and lengths of service were taken from the Oireachtas website and calculated up to March 9th, 2016 – the end of the current Dáil term.

All TDs/Senators elected after April 1st, 2004, cannot receive a pension or pension lump sum until they reach 65 unless they previously served in a public service body. Those who served as a TD/Senator prior to this date are not entitled to a full pension until they reach 50 (although they may receive a reduced pension and pension lump sum between the ages of 45 and 49). TDs and Senators pay 6 per cent of their gross salaries towards their pension entitlements.

The ministerial pension scheme does not involve any deductions from salary.

Since May 1st, 2009, public servants’ remuneration is also subject to the following annual pension-related deductions: up to €15,000 – exempt; between €15,000 and €20,000 – 5 per cent; between €20,000 and €60,000 – 10 per cent; above €60,000 – 10.5 per cent.

In working out an office-holder’s long-term pension projection, spouses were included in the calculation where the office holder is married.

On the death of a former office holder, his/her spouse is eligible for half the pension. When calculating office holders’ long-term pension projections, where a TD/Senator was married, wives were assumed to be two years younger than their husbands, while husbands were assumed to be two years older than their wives.

The small print

All payments are estimations based on Oireachtas/Dept of Finance pension guidelines. Calculations have been made as per “new scheme” pension arrangements in place since 1993.

Dates of birth/lengths of service are as stated on the Oireachtas website.

* In cases where a serving TD also served in the Seanad their senators pension is not included. Similarly where a serving Senator also served in the Dáil their TDs pension is not included.

** Calculated on full years’ service as a sitting TD/senator. Maximum 20 years.

*** Not entitled to a pension payment (in 2016) as office holder is not the requisite age.