Pension deductions remain ‘integral’ to reducing deficit

Report on emergency financial measures says levy raises over €900 million a year

Report by Minister for Public Expenditure and Reform Brendan Howlin says pension deductions are ‘integral’ to meeting the  deficit reduction target has said. Photograph: Eric Luke

Report by Minister for Public Expenditure and Reform Brendan Howlin says pension deductions are ‘integral’ to meeting the deficit reduction target has said. Photograph: Eric Luke


The pension deduction levied on public servants as part of emergency financial measures introduced in recent years remains “integral” to meeting the overall deficit reduction target, a report by Minister for Public Expenditure and Reform Brendan Howlin has said.

In his annual review and report on the Financial Emergency Measures in the Public Interest (Fempi) Act 2013 for the Oireachtas, Mr Howlin said the measure, which was introduced in 2009, currently raised €900 million per year.

The June 29th report was published by the department in recent days.

It says the 2014 provisional outturn for the Exchequer pensions bill is €2.46 billion net, a drop of €0.13 billion on 2012 figures. The decrease was due to the large number of retirements in 2012.

Financial emergency legislation in 2009 introduced a number of measures, the principal of which was the introduction of a new deduction from the salaries of pensionable public services, known as the pension-related deduction (PRD).

The measures also reduced the remuneration of public servants, including members of the Oireachtas and certain office holders.

Provisionally, the total pay bill for public servants in 2014 will be €14.8 billion, down some €2.7 billion on the 2009 figure.

“While unprecedented efforts have been made to reduce the cost of the public service pay bill since 2009 through the operation of the Acts and other measures, pay costs still account for nearly 30 per cent of current expenditure,” the report says.

Under an initiative to restore pensions announced by Mr Howlin in June, most retired public service staff are to receive about €1,680 more in their pensions over the next three years.

By 2018, a total 65,000 lower-paid pensioners will be removed from the scope of the pension reduction scheme. The measures will cost about €30 million per year or €90 million over three years to the end of 2018.

Talks on ameliorating the pension situation for retired public service personnel took place in parallel with the recent negotiations on public service pay restoration, leading to the Lansdowne Road agreement.

In his review, Mr Howlin said he was satisfied the measures put in place by the emergency Acts continue to be needed in 2015.

Speaking on Sunday, Mr Howlin said that if he had the power he would not allow any increase to top pension earners in the public service.

But he said everybody would have to have their pay and pensions restored in time because the emergency legislation under which cuts were made could not last forever.

A report in The Sunday Times noted former ministers and taoisigh would get an increase in their six-figure pensions as part of the restoration measures.

By 2018, however, those former office holders with pensions in the region of €130,000 will have seen an overall reduction of €18,800 (more than 14 per cent) in their annual pension.

Speaking on RTÉ’s The Week in Politics Mr Howlin said none of the proposals he now had on the table would go anywhere near restoring the very significant pension cuts that were brought in, and they would remain in place.

Separately, the Fempi report contradicts recent statements made by Taoiseach Enda Kenny in relation to Ireland not having increased taxes during the recession.

On June 25th, Mr Kenny told his Greek counterpart Alexis Tsipras that Ireland, as one of the three countries in an EU-IMF bailout programme, had emerged by pursuing pro-growth policies and not by increasing income tax, VAT and PRSI as was being proposed in Greece.

Mr Howlin’s Fempi review says that since mid-2008, there has been a reduction in public service pay and pensions as well as in social welfare expenditures.

“There has been a significant widening of the tax base with the introduction of the USC and Local Property Tax while income, capital, inheritance, indirect, carbon, pensions and property related taxes have all been increased since the adjustment process began.”