The Comptroller and Auditor General, John Buckley, said in a report published on Thursday that the State’s accrued liability in respect of public pensions for serving staff and pensioners was estimated at €108 billion at December 31, 2008.  Meanwhile, a survey in the Irish Times shows that Irish trade union leaders' pay/benefits top €200,000.

The pension payments to discharge the current liabilities will be spread over the next 60 years or more. 

The report says taking a 50 year horizon, gross outflows between 2009 to 2058 will amount to €367 billion at 2008 prices. However, after taking account of inflows in the form of standard pension contributions and the recently introduced pensions related deduction the net outflow is estimated at €157 billion over the same period.

The pension burden is set to rise significantly over the next 50 years.  Currently, net public service pension payments absorb 0.5% of GNP and as a result of demographic changes it will be necessary to devote 1.8% of GNP to meet the net cost of pension payments by 2058.

Overall, the report found, based on the cost of one year’s additional service, that the pension provision for an average public servant will cost around 9% of pay after account is taken of contributions made and the pension related deduction.  The gross cost is an average 20% of pay.  There are wide variations by sector as full pensions can be earned over a relatively shorter working life in certain sectors.

The gross cost has been estimated to range from 16.1% for the Health Sector to 29.6% in the case of Prison Officers.

Under the new entrant method the rates vary considerably – from 9.5% of pensionable remuneration for Non-Established Civil Servants to 41.2 % of pensionable remuneration for Commissioned Officers in the Defence Forces. The costs of a new entrant net of employee contributions and PRD can be as high as 28.3% of pensionable remuneration.

The Bord Snip/McCarthy report noted, that the real annual cost of providing public service pensions is some €7.7bn each year, made up of an annual accrual cost of €5.4bn each year over and above the €2.3bn cash cost of existing pensions in 2009 (on the assumption of an accruing pension cost of, on average, 30% of nominal salary).

Public servants are generally entitled to retire on a full Defined Benefit pension (calculated at half of the average annual salary over the final three years of service), after 40 years’ service, together with a lump sum of up to one-and-a-half times the final salary. Employees may retire after reaching the age of 60 (the compulsory retirement age is 65), with pro rata reductions for those with fewer than 40 years’ service, although those retiring between the ages of 50 and 60 incur an ‘actuarial reduction’ to reflect the longer retirement period. (The key benefit of the recently-introduced Incentivised Scheme for Early Retirement is that it eliminates the actuarial reduction for this age group.) After retirement, it has been the practice to index pension rates in line with earnings, which carries a very high actuarial cost and is not generally available in the private sector.

In addition to the basic public service pension system, BS noted the existence of a range of accelerated / ‘added years’ arrangements across various areas of the public service. These accelerated arrangements are more costly to the Exchequer, and their existence and budgetary implications do not appear to be widely known or appreciated by the general public. For example, Gardaí are free to retire on full pension at the age of 50 (an effective 10 years’ added service on the assumption of an entry age of 20); some engineers, who might enter the public service at the age of 35, would accrue full pension entitlements at age 65 (again an effective 10 added years); teachers with 35 years service are eligible to retire from age 55 on; some hospital consultants may be entitled to up to 10 added years of service; and a High Court judge, who might typically be appointed to the bench at 50 years of age, is entitled to full pension at age 65 (an effective 25 added years).