The price of integrity
Levels of pay and benefits for members of the Oireachtas (Irish parliament) have increased dramatically over the last few years as it became clear that low salaries had their own cost, other than low morale: corruption.
As of June last year the basic salary for TDs (members of the Irish lower house or Dáil) was E73,914. After seven years’ service this increases to E76,272, and after 10 years’ service to E78,627. The corresponding figures for Senators are E51,740, E53,390 and E55,039 respectively. Currently there are 166 TDs and 60 Senators.
On leaving the Oireachtas, members with at least three years’ continuous service qualify for a number of severance payments, paid on a monthly basis, up to a maximum of 12 after 14 years’ service. The first six payments are made at 75% of monthly salary; any additional payments are at 50% of monthly salary.
Payment of a pension does not commence until after the monthly severance payments cease. However, a member may opt to receive pension payments at any stage if the pension terms are more favourable than the severance payments.
There are currently two pension schemes in operation for members of the Oireachtas. The first scheme was introduced in 1986; the second came into effect in 1992.
The newer scheme requires that members serve at least three years in order to qualify for a pension. Those that serve for less than three years receive a full refund of their pension contributions.
The scheme is ‘pay as you go’ and members contribute 6% of their salary, the proceeds of which will total E927,000 this year.
The pension accrues at 1/40 of salary per year of service, subject to a maximum pension of half of salary. There is also a lump sum payment of 3/40 of salary per year of service up to a maximum of one and a half times salary. This is twice as generous as the common practice for public sector pensions.
For example, a TD retiring after 15 years’ service would receive an annual pension equivalent to 15/40 of the current salary or E29,485, plus a lump sum of 45/40 or E88,455. Pensions increase in line with salary.
The pension and lump sum entitlements are paid to former members when they reach the age of 50. From the age of 45 they may opt to take a reduced pension. However, this year’s budget has increased the minimum pension age to 65 for both members of the Oireachtas and office holders elected or appointed from next month.
Added service on retirement due to permanent infirmity is awarded on a sliding scale, based on age and actual service. Death in service benefit consists of a payment of one year’s salary, or (if greater) the gratuity that would have been paid based on actual service or if the member had retired due to permanent infirmity.
The spouse of a member who dies after retiring on grounds other than permanent infirmity receives one half of the member’s pension.
There is also an older scheme that was introduced in 1986. It is superior to the newer scheme in certain respects. For example, the maximum pension is two thirds of salary and there is no minimum age at which payments are made, ie benefits commence upon cessation of membership of the Oireachtas.
However, members need to serve over 26 years to accrue the maximum pension. A lump sum is payable but is equivalent to only one half of salary, and the price members pay for the privilege is a reduction of the annual pension to one half of salary. Furthermore, the minimum qualifying period is five years. There is also no special provision for retirement due to permanent infirmity. Members of this scheme were given the option to join the new scheme.
The schemes have three trustees – the Speakers of both Houses and the Minister for Finance. They administer the scheme and approve new members. Day-to-day responsibility for the operation of the scheme sits with the clerk to the trustees who is a member of the civil service staff of the Oireachtas. Changes to the scheme are the responsibility of the Minister for Finance and any major changes require legislation.
The cost of the scheme has increased significantly over the years. In 1994 the cost of the scheme was E2.4m. The trustees forecast an almost threefold increase to E7m for this year.
There are two main reasons for this development. Firstly, the two most recent general elections – in 1997 and 2002 – created 120 new pensioners. In total there are now 338 former members or spouses of former members who are now receiving pensions.
The other reason is that members’ salaries have increased significantly over recent years. Salaries are subject to independent review by the Review Body on Higher Remuneration in the Public Sector. In its last report published in 2000, it recommended that pay for members of the Oireachtas should be linked to a senior civil service grade. This meant an 18% increase in TDs’ pay to E59,050 which is still well below the current starting salary.
Ireland’s 32 ministers and ministers of state belong to a separate pension scheme. They do not have to make contributions, and they can accrue a full pension of 60% of salary after just 10 years of service. The minimum qualifying period is two years.
Most public service employees in Ireland contribute 5% of salary plus 1.5% for their spouses and children. Their pensions accrue at the rate of 1/80 of salary for each year of service up to maximum of half of salary, plus a lump sum of 3/80 of salary up to maximum of one and a half times salary. Teachers and nurses can retire at 55 but they then receive proportionately less pension.
There are more generous arrangements for certain more senior public service employees. For example, the pension for senior police officers accrues at the rate of 1/80 of salary for each year of service. The accrual rate doubles for the next 10 years so they accumulate their maximum pension of half of salary after 30 years. They can retire at 50 and must retire by the time they are 57. The same arrangements apply to prison governors except that they cannot retire until they are 60. Both make the standard contribution referred to above.
So isn’t the qualifying period of 20 years for a full pension – half that of most public sector employees – a little on the generous side?
“Not at all,” says Michael Ring TD, spokesman on social and family affairs for the opposition Fine Gael party. “The whole thing is related to the insecurity of the job. The average length of service of a TD is now between nine and a half and 10 years – much shorter than it used to be, thanks to a more volatile electorate. Furthermore Ireland has a multi-seat constituency system. My seat of Mayo has five TDs, and instead of competing against the opposition we’re competing against each other. So we have a faster turnover of TDs here than in a single-seat constituency system such as that found in the UK.”
He adds: “The other problem is the short parliaments: More recently there have been two Dáils that have lasted for as much as four and a half years, but that is the first time since the foundation of the state.”
The recent adjustment of TDs’ salaries to reflect their responsibilities had important moral grounds, as Ring explains: “Before that, when TDs left parliament they were very poor people. That system created a culture of corruption.”
There are also schemes that are at least as generous as the TDs’ scheme. For example, the pension scheme for senior judges is another generous scheme that in some respects is more generous than the TDs’ arrangements. They receive 1/40 of their salary for each year of service for the first five years and 3/80 for each subsequent year so that they accrue their maximum pension of half of salary after just 15 years.
However, they cannot draw their pension until the age of 65 and then only provided they have completed their 15 years of service. Otherwise they cannot draw their pension until they are 70. Judges do not make a contribution to their main pension.
Ring provides further examples: “Local government heads get more and have a less stressful life. Judges and other senior public servants have arrangements that are every bit as generous as ours. There are journalists here in the Dáil that are earning more than me. When you make comparisons, politicians are not overpaid: most TDs could be making a lot more money elsewhere. People do not enter politics for the money but they do expect a decent salary.”
And then there is the question of finding suitable employment after ceasing to be a TD. “If you are in the Dáil for 10 or 15 years it is very difficult to get back into the business that you were in,” stresses Ring.
But is it not the case that once having been an TD one’s employment prospects are enhanced? “That goes for about half a dozen people in the Dáil today,” says Ring. “They’re from all sorts of backgrounds and most will have to go back and rebuild their careers or their businesses.”
Ring admits that he is very pleased with his pay and benefits. “It’s the best salary I ever had,” says the former auctioneer. But judging by the benefits that certain other senior public service receive it would be unfair to describe TDs’ pension schemes as overgenerous. Especially when the integrity of public servants in general and members of the Oireachtas in particular is at stake.