IRELAND - The Committee for Public Accounts has criticised the potential introduction of a hybrid pension regime for Ireland's National Treasury Management Agency (NTMA)employees, as the scheme is a defined contribution (DC) scheme but will still require members to pay the public sector pensions levy.
Member attending the Committee session last week to discussing the 2007 annual report of the comptroller and auditor general - in particular the chapter on the annual reports of the NTMA and the National Pension Reserve Fund (NPRF) - requested an update on the current status of the NTMA defined benefit (DB) scheme as it had previously shifted from a deficit to a surplus.
Dr Michael Somers, chief executive of NTMA, said the separate DC scheme for NTMA employees offers the same arrangements as other public service schemes, such as accrual rate of 1/80th of salary and 3/80ths as a lump sum, but with no early retirement or redundancy packages.
He confirmed the scheme had "got into difficulty in that the actuarial results showed that it was not able to meet its actuarial liabilities", partly because of an estimated retirement age of 60, so an additional amount was paid to the scheme at the end of 2007.
Even so, the DC scheme still suffered further last year, he added: "As a result of the general decrease in the value of pension funds, the fund was in deficit to the tune of approximately €5.5m at the end of 2008."
In addition, Somers said to "try to constrain the costs on the Exchequer in terms of pensions", all new recruits for the last five or six years have been members of a DC scheme, with employer contributions, resulting in around 100 of the 170 staff becoming members of the DC scheme.
But he revealed: "I am coming under considerable pressure in respect of this matter because some of the staff are quite upset that they are paying a levy in respect of pensions they will not receive. I may be obliged to consider introducing some form of hybrid arrangement in order to provide them with some basic guarantee of a pension when they retire. The area of pensions is fraught with difficulty."
Following his comments, Deputy Seán Fleming, from the Fianna Fáil party, stated: "I am shocked to hear the NTMA suggest special arrangements for the public service levy for the highest paid officials in the country. We could give many examples of people who might be on 1/30th of their salaries having to pay the full public sector pensions levy. Can Dr. Somers understand how people might be horrified to hear this issue?"
Somers claimed the NTMA "may be the only institution in the State" where people are regarded as State employees but a DC rather than a DB arrangement applies to a substantial number of staff, so for a number of these staff "the value of their DC has been wiped out, but they are stuck with the levy".
He added: "The Deputy is probably aware that many of the banks faced problems with their pension schemes and they introduced a kind of hybrid arrangement where one got a pension based on a certain amount of one's pay and on the rest of it one got a DC arrangement. That is what I am looking at."
Fleming argued it was not possible to compare the NTMA's pension arrangements with the hybrid arrangements in the private sector as it is funded by public money, and added: "I am amazed to hear the highest echelon of public servants is possibly being considered for a special hybrid arrangement in respect of their pensions because of the introduction of the pension levy."
"I am sure 350,000 other public servants would like to see if they could also make a special arrangement for their pensions. A number of people are paying the pension levy and getting no benefit. There are many anomalies. I am amazed to hear the poor people in the NTMA need to get this special arrangement because of the losses in the pension funds that essentially the NTMA is managing," added Fleming.
Meanwhile, Deputy Darragh O'Brien, also of Fianna Fáil, claimed that as the first of the 100 DC members are not expected to retire for at least 5-10 years, when it is assumed markets will have made an improvement, it was difficult to see why the NTMA was considering a hybrid arrangement.
O'Brien added: "I would ask Dr. Somers to have a serious think about it since there are no liabilities to be met for the guts of 15 years. I am not going to labour the point apart from being of the opinion that the NTMA should not go down that road."
However Somers emphasised, "I have not agreed to anything yet. I just mentioned it because the question of pensions had come up. We have done nothing yet. I have mentioned this as one of the issues we were thinking about."
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