IRELAND – The commission set up by the Irish government to investigate the future solvency of public service pensions has recommended the introduction of a new 1% contribution by civil servants.
And new entrants to the civil service should be pressed to retire at 65, as opposed to the current 60-65 age bracket, the report by the commission says.
The commission, chaired by professor Dermot McAleese presented its findings this week to Irish minister for finance, Charlie McCreevy.
It also proposes that the public service pensions element in the National Pensions Reserve Fund – created to meet future civil service pensions and social security payments - should be adapted to a separate, properly constituted fund – as opposed to the homogenous asset pool proposed currently.
Further recommendations are made on a range of issues with a view to increasing the sustainability of the growing expenditure of public service pensions – which the commission states is expected to double by 2012 and quadruple by 2027.
Among the measures are: new pension flexibilities in the lead-in to retirement; the introduction of a facility allowing for early retirement from age 50 at full cost to the individual; the introduction of a new scheme to enable public servants to contribute towards their own retirement decisions; and a new early retirement provision, allowing early retirement without actuarial reduction of benefits in certain cases.
“ This is the first comprehensive examination of public service pension arrangements since the foundation of the state. Through its work to date – particularly its interim report – the commission has already made a valuable contribution to the development of government policy on public service pensions,” says McCreevy.
The commission has not simply recommended ways to improve financial sustainability but also measures to address a desire for pensions choice.
According to the proposal for additional savings, named the Scheme for Public Employees’ Additional Retirement Savings (SPEARS), pension plans should include savings accounts and lump sum death benefits; much like other additional voluntary contribution (AVC) schemes.
In order to keep up with the increases in public service earnings, an earnings index should also be implanted for retirement benefits, says the report.
The management of the schemes should be improved through more transparent accounting for pension costs and the introduction of improved administration structures with better communication of benefits and options to the future pensioners.
To advise on the proposed changes a working group of the public service unions, relevant government departments and other bodies is to be established, following government consideration of the report.
Formal decisions on the commission’s findings will be made after official consideration of the study.