ONE OF the more significant measures in Brian Lenihan’s emergency Budget didn’t merit even a word in his speech and, for many, it dipped below the radar altogether.
Hidden in the Budget documentation were details of the arrangement to transfer to the State a significant number of pension schemes in the semi-State sector. For all the tough talking about addressing State spending and curbing the public sector, the decision will inevitably leave taxpayers facing more significant bills in the future.
The Minister also disclosed for the first time the scale of the hole in the funds – roughly €1.3 billion at the end of 2008.
The good news for the Government, especially in its current financial straits, is that, ironically, the transfer will benefit its fiscal position under general government debt – the measure of debt used to ascertain our compliance with the euro zone growth and stability pact.
The €1.7 billion in assets will be set against other government debt while the liabilities will disappear as the Government commits to paying the pensions out of current expenditure as they fall due.
The transfer, which involves the pension funds of the State’s universities and a number of other non-commercial State agencies, comes following significant lobbying from the university sector in particular.
When the pension funds were established on a standalone basis, the understanding was that they would be responsible for their own investment performance and for addressing any deficits that might arise.
However, the generous nature of public sector pension provision alongside adverse market performance means they are struggling to meet the necessary payments.
