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News : Irish Economy Last Updated: Sep 23, 2010 - 5:07:55 PM


C&AG 2010 Report; Net cost of new Irish public pension entrant is 19.5% of salary; Net cost of additional 1 year service for ministers/ judges is 62% of salary
By Michael Hennigan, Founder and Editor of Finfacts
Sep 16, 2010 - 6:42:55 AM

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The Comptroller and Auditor General's (C&AG) 2010 report published on Wednesday, shows that the net annual cost of a new public pension entrant is 19.5% of salary while the net cost of an additional 1 year's service for ministers and judges is 62% of salary.

These costs are after allowing for the special pensions levy that was introduced in 2009. 

The number of public service pensioners increased from 113,384 in 2008 to 123,954 in 2009 and the accrued cost outstanding of pensions has risen 7.4% from €108bn to €116bn and adding in the Sate pension costs bring the total to €129bn.

There is 1 public service pensioner for 2.56 current workers.

There were more constitutional, ministerial and judicial office-holder pensioners (598) in 2009 than currently working in the category (404).

The pension-related deduction which came into effect in March 2009 reduced voted expenditure by €837m in that year.

The Bord Snip group, which was chaired by UCD economist Colm McCarthy, said in its report last year that 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.

The majority of private sector workers have no occupational pension and those who do, face the prospect of low payouts as many funds are in deficit and returns are expected to be low for many years.

In addition to the basic public service pension system, Bord Snip 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).

Finfacts article; July 2010: Irish public sector pay/pensions to rise 16% in period 2005-2010; Pay up 11%: Pensions up 66%; Pensioner numbers rise 43% to 103,400 (the C&AG's pensioner numbers include local authority staff).

On Wednesday we reported that according to the C&AG's report, that in January 2002, following a request for proposals from interested persons, the OPW (Office of Public Works) entered into a two-year contract with a professional historian to research and write a text for publication on the history of the OPW from the seventeenth century to 2000. The total fee specified for this commission was €76,184, with a completion date of January 2004.

In January 2004, the OPW agreed a further two-year consultancy contract with the author at a revised fee of €78,470. The deadline for the production of the final text was extended to January 2006. No signed contract beyond this date was entered into.

Up to 31 December 2009, the author has been paid a total of €341,714 (inclusive of withholding tax of €68,172). Two completed chapters of the book have recently been received by the OPW.

We Irish of course have a long tradition of taking life slow and last week we highlighted the glacial speed of handling the banking crisis - - Ireland' system of slow-motion government and the lingering death of Anglo Irish Bank.

Crisis? what crisis?

Deadline?

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