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Irish government dismisses concerns over public servant pension contributions

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  • Irish government dismisses concerns over public servant pension contributions

IRELAND - Union concerns that Irish public servants will contribute more to their pension than they are likely to draw down have been dismissed as unfounded by the government.

Speaking in the Dáil, the minister for public expenditure and reform Brendan Howlin said concerns raised by several of the country's teaching unions were based on the misunderstanding that the public service pension levy - a charge on all public workers earning more than €15,000 a year and introduced in early 2009 by the previous government - should be viewed as part of a worker's pension contribution.

The concerns come in the wake of last month's Public Services Pensions (Single Scheme) and Remuneration Bill, which would see the creation of a new, defined benefit (DB) and career-average scheme for all new members in the public sector.

On publication of the bill, teachers' union ASTI claimed the compulsory nature of the new scheme would lead to over-subscription and was therefore "nonsensical" and "open to legal challenges".

It further warned that any teachers at the beginning of their career would end up paying more in contributions than they were likely to receive on retirement.

It said the scheme - if proposed in the private sector - would not be approved by the country's Pensions Board.

Referencing the Trident Consulting report on which ASTI's concerns were based, Deputy Howlin told the Dáil yesterday: "In quantifying employee contributions to the single scheme, the Trident report appears to regard the public service pension-related deduction as a pension contribution."

He stressed that the legislation introducing the levy "makes clear that the pension-related deduction is not a pension contribution" and would therefore not be considered as one in light of the 6.5% contribution rate in the new, single pension fund.

"I have indicated to them from my perspective that I do not regard the so-called pension levy to be a permanent feature," he added, saying that, if it were to become part of a permanent contribution, it would change the basis of pensions in the public service.

Howlin said the arguments put forward by the unions did not reflect the "true position", defending as a valuable commodity the fact the new scheme would be DB.

Meanwhile, Ireland's largest union has renewed calls for pension funds to be exempt from the 0.6% pensions levy charged on all scheme assets if they commit to "productive investments" seen to be stimulating the local economy.

First suggested by the Irish Congress of Trade Unions (ICTU) in July, the notion of encouraging infrastructure investment in place of the levy had also been floated by the Irish Association of Pension Funds.

SIPTU and ICTU president Jack O'Connor proposed that pension funds should invest 5% of their assets in Irish infrastructure projects, including the expansion of the transport and electricity network.

"The trade union movement is opposed to the pension levy," O'Connor said. "If pension funds could be persuaded to increase the proportion of their assets invested in the domestic economy by 5%, which is more than double the value of the levy, it would generate upward of €4bn for the exchequer."

The union, which estimated that around 10,000 jobs per €1bn of investment would be created, urged for its proposal to be included in next year's Finance Bill, with matching investments drawn down from the National Pension Reserve Fund.

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