McCreevy Announces Further Public Service Pension Reform

The Minister for Finance, Charlie McCreevy TD, today (14 September) announced the Government's decision to implement a number of further key recommendations of the Commission on Public Service Pensions. The main changes being introduced are summarised in the Appendix.

 These new changes complement those announced in Budget 2004 and implemented by the Public Service Superannuation (Miscellaneous Provisions) Act 2004, which increased to the minimum pension age to 65 and removed the compulsory retirement age for most new entrants to the public service.

In Budget 2004 the Minister indicated that further pension changes benefiting both serving and new entrant public servants were being considered and today's announcement reflects recent discussions with the public service unions and the decisions taken by the Government.

Commenting on the changes, Mr McCreevy said "today's announcement is a further significant element in the modernisation and reform of the public service which I have progressed significantly in my years as Minister for Finance. These further pension reforms continue the process of modernising and improving the public service pension system for both existing and future public servants".

Referring, in particular, to the changes affecting integration between social insurance and public service pensions to boost the aggregate retirement income of lower-paid public servants, the Minister said "these enhanced arrangements will represent a significant improvement for lower paid public servants, delivering improved pensions to many".

Mr McCreevy also announced that a number of other recommendations of the Commission on Public Service Pensions were under active consideration, including the establishment of joint management/union working group to consider the recommendations on SPEARS (a single AVC-type scheme for the public service) and proposed revisions to the Spouses' and Children's Pensions Schemes (including benefits for non-spousal partners). Proposals in relation to these and other recommendations will be brought to Government as soon as possible.

Noting that the Government had also agreed a proposed approach in relation to all other recommendations of the Commission, the Minister said "I expect the vast majority of the Commissions recommendations will be given effect. This is a major achievement and the resulting reformed public service pension system will help ensure budgetary sustainability in the long run while simultaneously providing acceptable income in retirement for all public servants".

As part of a wider initiative to improve the communication of pension information, a pensions' website has been developed by the Department of Finance. The website, which is scheduled to go live before the end of the month, will provide information to members of civil service pension schemes on their pension benefits and the choices available to them. It will take the form of Frequently Asked Questions (FAQs) and an on-line Pensions Modeller/Calculator which will allow staff to enter basic salary and service details and project their pension benefits for various retirement dates and work patterns. This facility will take account of the age related reforms in this year's Superannuation Act and the further package of pension reforms recently agreed by Government. The website will continue to be developed to include more complex elements such as the Purchase of Notional Service Scheme and, ultimately, to build a complete information centre on civil service pensions. The web address for the site will be www.cspensions.gov.ie.

Mr McCreevy said that the pension changes, taken with the recently announced Code of Standards and Behaviour for civil servants and the forthcoming publication of the Civil Service Regulation (Amendment) Bill, demonstrate the considerable progress which is being made towards the modernisation of the civil and public service and the Government's commitment to press ahead with the reform agenda.

Ends.

Appendix

The main changes arising from the Government decision are as follows:

Introduction of cost-neutral early retirement: A facility to allow public servants to retire (from age 50/55, as appropriate) with actuarially reduced superannuation benefits. This facility will be made available, immediately, to serving staff and the option will be extended to staff who resigned with an entitlement to preserved superannuation benefits as and from 1 April 2004. This facility should not be confused with a Voluntary Early Retirement Scheme, similar to that which existed in the public service in the 1980s.

Integration formula: This involves a new calculation formula for integration between social insurance and public service pensions to boost the aggregate retirement income of lower-paid public servants. The new formula will apply to existing pensioners with effect from 1 January 2004 and all relevant retirees as and from that date.

Integration "pro rata": "Pro rata" integration (as opposed to full integration which applies at present) will apply to part-time public servants (and relevant pensioners) with effect from 20 December 2001.

Teachers' access to the revised Spouses' & Children's Scheme: An option to join the revised scheme (available for a fixed period) will be extended to all primary and secondary teachers serving at 31 March 2004.

Notional added years: Existing schemes of notional added years will be replaced (for new entrants) by a single "transitional" scheme which will be reviewed in 2015.

Reckoning of allowances for pension purposes: Calculation will be based on "the best three consecutive years in the ten years preceding retirement." The new system will apply to relevant staff who retire (have retired) from the public service as and from 1 April 2004.

Compound interest rate: The current pension interest rate, which applies, in particular, to repayment of marriage gratuities, will be cut from 6% to 4% in respect of repayment due for periods from 14 November 2000 onwards.