CHAPTER 5 - ISSUES RAISED IN SUBMISSIONS

5.1 Introduction

5.1.1 Under its terms of reference, the Commission's examination of public service pension arrangements must have regard to claims for improvements in existing pension scheme benefits. An advertisement was placed in the national press in September 1996 inviting submissions on issues to be examined by the Commission (as listed at section 1.5 above). Public service employers were asked not to make submissions as the Commission would make direct contact with them at a later stage.

5.1.2 Submissions were received from 77 parties, including unions and staff associations, pensioner representative associations, individual staff members, former members, and pensioners, representatives of employers, pension funds, and the pensions industry generally. A list of parties who made submissions is given at Appendix 5.1. The Commission met 12 parties who made submissions during the period March - May 1997.

5.1.3 This chapter summarises the main issues raised by parties who made submissions. It does not cover every point made in the submissions, a detailed analysis of which will be given in the final report. The headings used in the summary of issues, which is not presented in any particular order, are as follows:

* Retirement Age and Early Retirement

* Integration of Occupational Pension Schemes with State Social Insurance System

* Pension Arrangements for Part-Time Staff (and other categories of atypical employment)

* Pensions Increase Policy

* Added Years

* Spouses' and Children's Schemes

* Cost of Public Service Pensions

* Financing Arrangements for Public Service Pensions

* Portability of Pensions

* Additional Voluntary Contributions (AVCs)

* Pensionability of Overtime and Allowances

* Ill-Health Early Retirement

* Other Issues

5.1.4 Preliminary comment on a number of the issues raised in submissions is given in Chapter 9. A fuller examination of these and other issues coming within the Commission's terms of reference will be given in the final report.

5.2 Retirement Age and Early Retirement

5.2.1 At the time of the Commission's establishment, early retirement was the subject of claims by a number of public service groups, particularly teachers and nurses. The importance of early retirement for staff interests was confirmed in the submissions received from unions and individual employees, and in the presentations made by those whom the Commission met. A number of different early retirement arrangements were proposed (with particular variations in the case of those groups which already had different retirement provisions to those applying generally in the public service), such as the following:

* Introduction of fast accrual type scheme in which all service greater than 20 years would count as double, coupled with an earlier minimum retirement age. This scheme would be similar to that applying currently to psychiatric nurses, fire brigade staff, and prison officers, who may retire after age 55 (age 50 for prison officers having 30 years' actual service), and qualify for full pension if they have 30 years actual service. Early retirement was sought particularly for those who considered themselves to be in hazardous professions or stressful occupations.

* Introduction of a more flexible approach to retirement so that staff members could retire at any age between 55 and 70, with a pension based on actual service, to be paid immediately. In addition, as a means of addressing the suddenness of transition between work and retirement, members might be allowed work half-time prior to retirement, and get pro-rata pension credit.

5.2.2 Arguments made in favour of a change in retirement age and the introduction of early retirement included:

* Comparison with public service groups which already had provisions for retirement earlier than the public service norm.

* Changes in the nature of everyday life and the working environment, particularly stress, reform of public services, demands of changing technology which, it was argued, led to some older staff members being unable to perform the full range of duties or suffering increased ill-health

5.2.3 A number of employer and pensions industry submissions argued against the reduction of retirement ages and the extension of early retirement provisions, on the grounds of extra cost and that people were living longer.

5.3 Integration of Occupational Pension Schemes with the State Social Insurance System

5.3.1 Public servants paying the full rate of PRSI and consequently entitled to receive the State Social Insurance contributory old age pension have their pension benefits (and contributions) integrated with the Social Insurance pension. The calculation of pension benefits takes account of the Social Insurance pension by using the lower net pensionable remuneration rather than pensionable remuneration (these terms are explained at paragraphs 2.4.3 and 2.5.4 above). In the case of staff members on relatively low rates of pay, including part-time staff, the effect of integration can be to produce a very low or zero rate of occupational pension. The payment of lump sum is not affected, as it is calculated on the basis of pensionable remuneration.

5.3.2 Union submissions argued that a staff member should have an entitlement to a reasonable level of occupational pension. They suggested a number of amendments to the integration arrangements:

• the introduction of a minimum level of occupational pension
• the exemption of a certain amount of pay from the integration process.

5.3.3 Pension industry and employer submissions argued for continuation of integration arrangements.

5.4 Pension Arrangements for Part-Time Staff (and other categories of atypical employment)

5.4.1 Many submissions argued for membership of pension schemes to be extended to part-time staff. A difficulty raised was the question of integration with the State Social Insurance system (as outlined at 5.3 above). An employee will qualify for the full rate of contributory old age pension under the Social Insurance system if he or she earns more than £30 per week and fulfils the PRSI contribution requirements. Under public service pension arrangements, net pensionable remuneration is calculated in the same way for part-time staff who may be pensionable as it is for full-time staff, with the result that for most part-time staff no occupational pension will be payable.

5.4.2 In addition to the suggestions listed at 5.3.2 above, a further union suggestion was the introduction of a supplementary pension scheme specifically designed for part-time workers, with a pro-rata abatement of State Social Insurance entitlements

5.5 Pensions Increase Policy

5.5.1 In public service schemes pensions are generally increased in line with the pay of serving members. This is known as "pay parity". Submissions received from unions and pensioner associations sought continuation of pay parity. A number of other submissions suggested that practice in the private sector, and in some European countries, was to increase pensions in line with changes in the consumer price index.

5.6 Added Years

5.6.1 A number of submissions argued that there were anomalies in the schemes for award of professional added years.

5.7 Spouses' and Children's Schemes

5.7.1 For most groups of public servants there is a separate spouses' and children's contributory pension scheme to provide for payment of survivor's pension following the death of the member whether in service or after retirement. In each case membership of the scheme was optional for those in service at the date of its introduction, and obligatory for all new entrants. In general, the scheme was offered to male staff members in the period 1969 - 1971, and to female employees in 1981. A revised scheme was offered to all members of the existing scheme, and to those who had not opted to join that scheme, in 1984. A number of submissions, from unions and particularly from individual female public servants, sought to have a further option to join the scheme. These submissions argued that when the scheme was originally offered it was not properly explained, and individuals opting not to join did so in ignorance of the possible future consequences.

5.8 Cost of Public Service Pensions

5.8.1 A number of union submissions argued that the current net cost of public service schemes was not excessive by comparison with other employments where reasonable superannuation benefits were provided. Some unions pointed out that the overall cost of occupational pensions would be reduced through the operation of integration with the State Social Security system, arising from the extension of full PRSI cover of public servants appointed on or after 6 April 1995 to positions formerly qualifying for the modified rate of PRSI. A number of other submissions argued that any improvements to be made to pension scheme terms should be done on a cost neutral basis.

5.8.2 Chapter 4 deals with the cost of public service occupational pension schemes.

5.9 Financing Arrangements for Public Service Pensions

5.9.1 The advance funding of public service pensions, or the creation of a partial fund to meet increasing pension costs, was suggested in a number of submissions. Others argued for retention of the existing pay-as-you-go approach.

5.9.2 Chapter 3 discusses public service pensions financing and administrative arrangements.

5.10 Portability of Pensions

5.10.1 Conditions affecting pensions portability between the public and private sector were raised in a number of submissions. Unions representing nurses and teachers argued that work in the public service abroad, particularly Northern Ireland and the UK, should be transferable for pension purposes.

5.11 Additional Voluntary Contributions (AVCs)

5.11.1 The possibility of using AVCs as a means of introducing greater choice and flexibility for the member within the pension scheme was raised in a number of submissions. Pensions industry representatives argued that there were a number of restrictions in existing arrangements.

5.12 Pensionability of Overtime and Allowances

5.12.1 A number of submissions by pensioner associations proposed that where an allowance was made pensionable from a specific date, the effect of the change should apply not only to those who retired on or after that date, but also to those who had retired before that date.

5.12.2 A further point was made in relation to the pensionability of variable allowances and the operation of the three-year averaging rule (see paragraph 2.4.3 above). It was suggested that where a member close to retirement became unable due to ill-health to qualify for these allowances in the final three years of service, the calculation of pensionable allowances should be based instead on the three years of pensionable service immediately prior to the period of ill health.

5.12.3 The pensionability of overtime payments was sought in a number of submissions

5.13 Ill-Health Early Retirement

5.13.1 Some submissions sought improvements in ill-health early retirement terms. It was suggested, for example, that the five year service requirement to qualify for ill-health early retirement should be lowered to two years.

5.14 Other Issues

5.14.1 A number of other issues raised in submissions included the following:

* increase sought in the Revenue limit of 15% maximum contribution qualifying for tax relief

* conversion of non-contributory schemes to contributory schemes, with consequent uprating of pay levels

* removal of the difference in retiring ages between established and non-established civil servants (i.e. allowing non-established civil servants retire from age 60)

* proposal to establish an independent pensions body to oversee public service pensions

* increase in age limit for payment of children's pension from age 21 to age 24 in respect of children in full-time education

* increase in size of gratuity payable in case of death-in-service

* absence of pension scheme for certain groups of public servants

* forfeiture of pension