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Irish public sector pensions hit €108bn

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  • Irish public sector pensions hit €108bn

IRELAND - The accrued present value of public sector pension liabilities was estimated at €108bn at the end of December 2008, according to figures from the Comptroller and Auditor General (C&AG).

In its Annual Report for 2008 the Irish C&AG outlined some of the findings from a special report presented to the Ministry of Finance last month on the pensions of more than 300,000 public sector workers and 100,000 pensioners. (See earlier IPE article: Irish public sector review to feed into pension policy)

Figures showed that at the end of 2008 the accrued value of these pension liabilities was estimated at €108bn. However taking into account assets of around €1.9bn held in funded pension schemes and a third (€5.4bn) of the National Pensions Reserve Fund (NPRF) notionally allocated towards public sector pensions, the net present value of the liabilities was reduced to €101bn.

Teachers' pensions reported the highest level of accrued liabilities, at €28.2bn, closely followed by €22.9bn attributed to health service workers, while the lowest pension liability of €785m was accrued by constitutional, ministerial and judicial office-holders. 

However the findings published in the annual report revealed if the discount rate used in the calculations - based on the International Public Sector Accounting Standards Board (IPSAS 25) - is increased by 0.5% this would reduce total liabilities from €108bn to €99bn. Alternatively a reduction in the discount rate by the same amount would increase liabilities. 

The document also noted the government's recent decision to transfer the assets of 14 funded pension schemes belonging to non-commercial State sponsored bodies and universities to the NPRF, will add around €1.7bn to the fund. Although the related liabilities of these schemes, which will now be met on a Pay-As-You-Go basis from the Exchequer, were estimated at €3bn. (See earlier IPE article: Ireland unveils uni pension transfer details)

In addition the C&AG highlighted that the public sector pension burden will "increase substantially" over the next 50 years, despite the introduction of the public sector pension levy in March. (See earlier IPE articles: Ireland takes uni pensions to boost treasury coffers and Dáil passed pension levy ahead of first strike)

It pointed out currently the net value of pensions paid to public sector workers are equivalent to 0.5% of GNP. But it warned "this will rise over time to 1.8% assuming the new pension related deduction introduced in 2009 is maintained". 

Meanwhile additional data in the annual report revealed at the end of 2008 the value of the NPRF stood at €16.1bn, equivalent to 8.9% of GDP, however this was actually less than the total amount of contributions paid into the fund by the Exchequer since its inception - calculated at €16.87bn to the end of 2008.

However figures to the end of June 2009 showed the NPRF had recouped some of the losses resulting from a -30.4% return in 2008, with the total value of the fund reaching €19.4bn. Of this 36% was invested in directed investments relating to the €7bn recapitalisation of the Bank of Ireland and Allied Irish Banks. (See earlier IPE article: Positive Q2 pushes NPRF above €19bn)

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com
 

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