1.1.1 The Commission on Public Service Pensions was established in February 1996 to examine and report on the occupational pension arrangements of public servants. It was asked to present its report to Government in 1998. As a result of matters subsequently referred to it by the Minister for Finance the Commission has agreed to make an interim report.

1.1.2 It will be clear from Chapter 9 that the Commission is not yet in a position to give a conclusive report on the issues coming within its terms of reference. The Commission notes that it was established with a three-year time frame in which to carry out the first complete examination of public service pension schemes in Ireland, including their financing arrangements, since the foundation of the State. It is undertaking a programme of work that will enable it make a definitive report to Government. The Commission appreciates that the issues referred to it for early examination, including early retirement, and integration of the occupational pension with the State pension, are of concern to significant groups of public servants. The Commission considers that these issues are central to the existing structure of public service pensions systems, and that it would be inappropriate to recommend changes at this juncture in the absence of reaching overall conclusions as required under its terms of reference. In adopting this position the Commission has taken account also of the current major policy debate being sponsored by The Pensions Board and the department of Social, Community and Family Affairs about the future development of pension structures in Ireland which is scheduled to reach a conclusion in the latter part of this year. The outcome of this debate will be considered in the Commission's deliberations.

1.2 Background

1.2.1 The Commission on Public Service Pensions was announced by the Government in a joint Government/ICTU Statement on 13 July 1995. Its membership and terms of reference were announced by the Minister for Finance, Mr Ruairi Quinn TD, on 11 February 1996.

1.2.2 The Commission was established at a time when a number of public service groups were seeking improvements to their pension arrangements and concern was growing generally about the emerging cost of public service pension schemes.

1.2.3 The Commission's terms of reference are:

"To examine and report on the pension terms of public servants employed in the Civil Service (non-industrial and industrial), Defence Forces, Gardaí, Education, Health and Local Authority Services, having regard to

(1) the present and future costs arising under the schemes financed by the Exchequer;

(2) claims for improvements in existing scheme benefits, including claims for voluntary early retirement;

(3) changes in the working environment and conditions of employment of public servants since the schemes were introduced; and

(4) the operational needs of the Services concerned."

1.2.4 The Commission's membership is given at Appendix 1.1. Members are drawn from the pensions industry, government departments, trade unions and employers. Its Chairperson is Professor Dermot McAleese, Whately Professor of Political Economy, Trinity College Dublin.

1.2.5 As part of the Partnership 2000 agreement it is noted that insofar as the Public Service is concerned no claim for the introduction of pension schemes or for improvement of existing schemes shall be submitted or processed further pending the report of the Commission.

1.3 Matters referred to the Commission by the Minister for Finance

1.3.1 A letter dated 7 January 1997 received from Mr John Hurley, Secretary, Public Service Management and Development, Department of Finance, referred for the Commission's consideration issues raised by SIPTU in relation to the pension arrangements of non-officer grades in the Health Service. The relevant extract from the letter is given below:

"The relevant provisions of the recently concluded draft Agreement on Pay and Conditions provides that insofar as the public service is concerned no claims for improvements in pension schemes shall be submitted or further progressed pending the report of the Commission on Public Service Pensions. During the course of the negotiations it was also agreed, at SIPTU's request, that the Minister for Finance would, as a matter of urgency, request the Commission to examine the specific issues raised by the Union in relation to the pension arrangements of non-officer grades in Eastern Health Board and Dublin Voluntary hospitals and to issue an interim report not later than 1 July 1997.

I am accordingly referring the matter to you for consideration by the Commission.

The SIPTU claim has already been the subject of extensive discussions between the parties and has also been considered by the Labour Relations Commission."

1.3.2 In its reply, the Commission indicated agreement to the Minister's request. The Commission stated that while issues in relation to the pension arrangements of the staff in question would be amongst those being examined within its terms of reference, the Commission did not have any role in adjudicating on matters being processed under the industrial relations machinery.

1.3.3 A request by the Labour Court in its recommendation on the pay and conditions of nurses that the Commission give priority to the nurses' pension claims was referred to the Commission by the Minister for Finance in a letter dated 18 February 1997. In his reply of 7 March 1997, the Chairperson stated that the issues arising in relation to the pension arrangements of nurses would be among those examined in the Commission's interim report. He again stated that the Commission had no role in the adjudication of matters being processed under the industrial relations machinery.

1.3.4 On 8 May 1997 a letter was received from the Department of Finance regarding the report prepared by the Civil Service Inter-Departmental Committee on Work Sharing in 1996, which recommended, inter alia, the following:

"The Commission on Public Service Pensions should examine a proposal to offer public service workers over 55 with a minimum of 30 years service who opted to job-share an advance payment of half the pension lump sum to which their service at that point qualified them. Employees who availed of such an incentive would forfeit the entitlement to return to full-time work."

1.3.5 The Commission agreed to examine this proposal.

1.4 Progress of the Commission to date

1.4.1 The Commission's first meeting was held on 21 March 1996. To date, it has held a total of 15 full meetings. In addition, a series of meetings have been held with parties making submissions, while a steering committee, chaired by Anne Maher, has been established to guide and oversee the implementation of the actuarial project on public service pension costs (see Chapter 4).

1.4.2 The Commission has carried out the following tasks, some of which are ongoing:

* researched current public service pension arrangements (see Chapter 2)

* identified the range of issues to be examined within the Commission's terms of reference (see 1.5 below)

* invited submissions from interested parties, excluding public service employers; analysed submissions received, and met representatives from a number of parties who made submissions (see Chapter 5)

* invited submissions from the Departments of Defence, Education, Environment, Finance, Health, and Justice; met representatives from the Department of Finance

* agreed a process for quantifying the current and long term cost of public service occupational pension schemes; agreed terms of reference for the hiring of actuarial consultants, and appointed a steering committee to oversee the collection of data and the completion of the actuarial project (see Chapter 4)

* carried out a review of public service pension arrangements abroad, and identified, for further study, countries whose experience in public service pensions matters might be of value to the Commission's deliberations (see Chapter 7)

* commissioned a report by the ESRI on a comparison of public service pension arrangements with those applying in the private sector (see Chapter 8)

* obtained briefing from the Department of Finance on ongoing industrial relations issues in certain areas of the public service in relation to pensions matters (a list of these is given in Appendix 1.2).

1.5 Issues to be Examined

1.5.1 One of the first tasks undertaken by the Commission was to agree the range of issues to be examined in its report. These are summarised in the guidelines for written submissions made available when submissions from interested parties were invited in September 1996. The relevant extract is given below:

1. Cost of public service pension arrangements

(a) present and future cost of public service pension schemes under current pension arrangements,

(b) cost implications of any amendment to pension arrangements proposed in submission, and how any new costs arising are to be financed.

2. Assessment of current pension scheme terms, with particular reference to the impact of changes in the working environment and conditions of employment of public servants, and of changing operational needs

(a) Admission to membership of pension schemes,

(b) Early Retirement,

(c) Pension arrangements of part-time staff,

(d) Integration of pensions with Social Insurance (Social Welfare) pension,

(e) Flexibility in pension scheme terms,

(f) Complexity in pension scheme terms,

(g) Variation in scheme terms between public service groups,

(h) Terms of public service pension schemes other than those listed.

3. Issues in relation to pensions currently in payment

(a) Policy in relation to pensions increases,

(b) Administration and pension payment arrangements.

4. Financing of public service pension costs

Most appropriate mechanism for financing future public service pension costs (for example, pension funding instead of the current system of pay-as-you-go, or alternative mechanism).

5. Management

System of management of public service pension schemes.

1.6 Content of Interim Report

1.6.1 The Interim Report has the following structure:

Chapter 2 gives a review of existing public service pension terms.

Chapter 3 outlines the current financing and administrative arrangements for occupational pensions in the public service and raises a number of issues for further examination.

Chapter 4 is a preliminary examination of the cost of occupational pensions in the Public Service.

Chapter 5 looks at issues raised in submissions received from interested parties.

Chapter 6 considers the changes which have taken place in operational requirements, the working environment and conditions of employment of public servants, and notes a number of reviews which are ongoing.

Chapter 7 is a preliminary review of public service pension arrangements in other countries and of recent developments in those arrangements.

Chapter 8 gives the results of a report carried out by the ESRI on a comparison of public service pension arrangements with those applying in the private sector.

Chapter 9 gives the Commission's preliminary comments on a number of issues it has examined. These are:

* Cost of public service pensions

* Financing and administration of public service pension schemes

* Pension contributions by public servants

* Normal retirement age and early retirement

* Integration between occupational pension and State Social Insurance benefits

* Pensions and part-time work

* Pension increases

1.7 Final Report

1.7.1 This report outlines the Commission's work to date and comments on a number of matters which have been considered by the Commission at this stage. The final report will comprise a much broader and detailed examination of public service pension arrangements in Ireland. It will take on board the outcome of a number of reviews and studies currently being undertaken by the Commission. As noted in Chapter 9, the Commission has not yet determined the shape of the recommendations it may wish to make. Thus the comments made in this report are incomplete and preliminary. They should not be taken as an indicator of what will be contained in the final report.