Retirement: mind the gap

Decision to allow public servants work until they are 70 underlines continuing disparity with private sector

 

The decision to allow many public servants to work until they are 70 is appropriate, given extended life spans and changes in the State pension rules. However, it is essential that this is properly managed and that there is flexibility for the State as employer, as well as the employee. Also, it again highlights the disparity in pension arrangements between the public and private sectors, an area where change has been long promised but is slow to emerge.

While the details and timing of the new arrangements have yet to be spelled out, in general public servants will no longer be obliged to retire at 65. The change applies to those taken on before April 2004, as those hired subsequently either already have a retirement age of 70 or have no compulsory retirement age. Existing rules and advanced pension arrangements for front-line staff such as gardaí and firefighters will remain unchanged.

Under the proposed changes, those continuing to work beyond 65 will still be obliged to make pension contributions and if they already qualify for a full pension will not get extra entitlements. This must be properly managed. Maintaining older, generally better-paid staff will cost more.

The public sector pay bill needs to be controlled and there must be opportunities for younger people. In a buoyant jobs market and at a time of relatively strong tax revenues this may not be an issue, but it could be in future. It must be made clear that while the public service will try to facilitate people who want to remain until the age of 70, there are times when this may not be possible.

The move underlines again the disparity in pension regimes between the public and private sectors. While much of this is not the fault of the Government, the gap between public and private provision and options continues to widen. This is an issue for all the parties involved – the Government, employers and employees. A public sector scheme with tax-free lump sums and defined benefit pensions for many stands in stark contrast to the entitlements for much of the private sector. One regime looks unaffordable, in the long term. The other looks unsustainable.

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