Vast majority of public staff have defined-benefit pension

THE VAST majority of the 357,000 people employed in the public sector are members of a defined-benefit pension scheme which provides a guaranteed income on retirement.

In general, pensions for public sector workers are worth 50 per cent of salary on retirement and a lump sum of 1½ times final-year salary. A spouse’s pension worth 25 per cent of final-year salary may also be paid in case of death.

The pension scheme is even more generous for those who joined the public service prior to 1995. They may collect a public service pension as well as the State pension.

Another feature of public sector pensions is they are typically linked to the salary scale of a pensioner’s former employer, meaning a pension rises with benchmarking and national pay agreement increases. This does not occur with private sector pensions.

Government officials estimate the State pension bill will increase by 50 per cent over the next seven years, double in 15 years, and almost treble by mid-century. In other words, it would increase from €2 billion in 2006 to some €6 billion in about 50 years. These figures do not factor in future pay rises.

Typical pensions across the public sector range from €116,000 per annum for a retired secretary general of a Government department to about €20,000 for a staff nurse.

Most public sector workers – 110,000 – are in the health sector where pension rates for a hospital consultant on the top pay scale would be about €120,000. Typical pension rates for administrative staff in the health sector range from €12,500 for a clerical officer on the lowest pay scale to €97,000 for a director of national hospitals.

In education, the majority of the 55,000 employees are teachers. A teacher on a higher pay scale can expect a pension of about €32,000, not including allowances for additional responsibilities.

In the Civil Service, the largest group of the 35,000 employees are clerical officers. Pensions for such employees are some €18,400, rising to €32,000 for higher executive officers and about €60,000 for higher principal officers.

The contributions required of public sector workers differ, depending on a number of factors.

For example, prior to 1995, civil servants were not required to make any explicit contribution to their payment, while other public sector workers made contributions of around 3.5 per cent.

For those who have joined since 1995 – an estimated 40 per cent of the public sector – the average contribution rate has increased to 5 per cent. However, salaries were increased by up to 5 per cent at the time to incorporate this payment. The pension rate for employees who have joined since 1995 includes the State pension.

Changes to retirement age were introduced for public servants who joined since April 2004. Previously, staff could retire from age 60 on a full pension. Since 2004, any public servant who retires early incurs an “actuarial reduction” in their benefit.

However, a number of occupations in the public sector continue to benefit from early retirement.

Gardaí can retire on full pension from 50 years of age as long as 30 years’ service has been completed. Teachers with 35 years’ pensionable service can retire from age 55, while nurses can also retire on pensions from the same age.

Public service pensions

Public service pensions are defined benefit schemes which provide a guaranteed income on retirement. They differ by occupation and the time of joining the public service.

PENSIONA pension is worth 50 per cent of salary on retirement. (For those who joined since 1995, this pension includes the State pension).

LUMP SUMA lump sum of 1.5 times a final year's salary is payable on retirement.

CONTRIBUTIONSEmployees are required to pay a contribution of around 5 per cent to the pension scheme. (Employees who joined prior to 1995 – around 60 per cent of the public sector – pay around 3.5 per cent, while civil servants who joined after 1995 are not required to pay any contribution.)

STATE CONTRIBUTION In the public sector, the employers' contribution rate is around 19 per cent of salary. The estimated value of this benefit for a similar employee in the private sector would be around 25 per cent of salary, according to Ibec.

By contrast, average employer contributions in the private sector are around 7 per cent for defined contribution pensions and 16 per cent for defined benefit pensions.

EARLY RETIREMENTCertain professions in the public sector have the option of early retirement. Gardaí, for example, can retire from 50 years onwards, and teachers and nurses from 55 years on full pensions, subject to time served and a cap on numbers.

PAY PARITYRetirement benefits in the public sector are linked directly to the salary scale of a pensioner's former employment. This means public sector workers can benefit from higher pension increases as a result of benchmarking and national pay agreement increases.

TYPICAL PENSIONSSubject to time served and when a person took up employment, a pension of €116,000 may be payable to a secretary general in a Government department, €113,000 for a Garda commissioner, €45,500 for a Garda superintendent, €40,000 for a school principal, €23,000 for a staff nurse and €30,000 for a community welfare officer.

Sources: Review Body on Higher Remuneration in the Public Sector, Department of Finance documentation and Ibec.