Ibec urges pension reform

Public service pension arrangements are unsustainable, according to business lobby Ibec.

Brendan McGinty told the group's annual Human Resources Summit that there was need for urgent reform.

"While private sector businesses and their staff are adjusting to harsh realities, the public sector continues to provide old-fashioned expensive pension schemes," said Mr McGinty, who is director of industrial relations and human resource services at the business group.

He noted that rising pension costs were forcing private sector employers to seek higher contributions from employees. Many were also closing defined-benefit pension schemes - which pay a guaranteed pension based on length of service - to new members.

Mr McGinty pointed to a Mercer study indicating that up to one-third of defined-benefit schemes would be closed to new entrants within the next two years.

"The numbers of members in funded defined-benefit schemes has increased by 13 per cent [ about 30,000] in the past five years, while the numbers covered by defined contribution schemes has increased by 57 per cent [ 75,000]."

In a defined contribution scheme, the ultimate pension depends on the amount of contributions paid in over a working life and the investment performance of those funds.

He said rising pension costs "would further erode our competitiveness and we would inevitably lose jobs".

The Central Statistics Office had stated, he said, that, the earnings premium of the average public sector worker above a private sector worker was 40 per cent in 2003 and this had since risen to 45 per cent.

"The public service pension bill of €1.7 billion is projected to treble [ in 2004 terms] by 2040-2050 and from 1.3 per cent of GNP to 4 per cent," he said.