TENS OF thousands of serving and retired public service staff could in future have their pension increases based on inflation rather than linked to pay rises, under proposed Government reforms.
However, any such measure would not come into force until after 2014 when the provisions of the Croke Park agreement expire.
The Irish Times understands that new pension legislation to be published by Minister for Public Expenditure and Reform Brendan Howlin later this week will contain an “enabling provision” which would allow a government to change key pension arrangements for serving personnel in the public service.
However, in the main, the new legislation will deal with the introduction of a new pension scheme for new entrants.
The previous Fianna Fáil-Green administration had signalled in the 2010 budget that it wanted to review the pension arrangements for serving public service staff.
Then minister for finance the late Brian Lenihan said it would consider linking public service pensions’ increases to the cost of living. However the then government dropped the proposal in a bid to win support for the Croke Park agreement on public service pay and reform among public service staff in trade union ballots which were then under way.
In a clarifying document, the then government said that no change in the current arrangements for the indexation of pensions for current public service pensioners and serving public servants would be implemented during the period of the agreement
Under current practice, pension increases for retired public servants are based on salary rises awarded to serving staff in the grades they previously held.
However, the enabling provision set out in the planned new legislation will allow a government in the future to link pension increases to the consumer price index after the expiry of the Croke Park agreement in 2014.
Many public service staff believe that the current practice of linking pension increases to pay rises has been more beneficial than if they had been linked to inflation rates.
As the Croke Park agreement essentially provides for a pay freeze in the public service until 2014 – during which period inflation is expected to rise – there would be no financial incentive for the Government to introduce any such pension changes in the short term. However, this situation may change in the medium and longer term.
Under the Government’s planned new pension scheme for future entrants to the public service, to be unveiled officially this week, there will be a maximum retirement age of 70 and a minimum pension age of 66.
Pensions will be also be based on career-average earnings, rather than on final salaries.
The Government is committed to introducing a new public service pension scheme under the terms of the memorandum of understanding with the EU-International Monetary Fund.
Mr Howlin said earlier this month that, in time, “all civil and public servants will have the same basic pensions scheme, with appropriate accommodation for whatever terms and conditions might be required in particular areas, such as An Garda Síochána or the Defence Forces”.
The Minster said that public service pensions would cost the State €2.9 billion this year. He said that this represented a very substantial bill for the Government, which required structural change.