THE COST to the State of public service pensions has increased by 65 per cent in the past five years, according to Department of Finance figures.
The department’s revised estimates for 2010 predict that the net pensions’ bill for retired State employees will be €2.236 billion this year.
This compares to a comparable bill of €1.35 billion in 2005. The department recently carried out an analysis of pay and pensions over the past five years which confirmed an increase of 65 per cent.
The increase has been sharper in the past two years, some 35 per cent, or €600 million, higher in 2010 than in 2008. Payments for public sector pensions passed the €2 billion mark for the first time in 2009.
The report attributes the dramatic rise to a marked increase in retirements in 2009, including those under the Incentivised Scheme for Early Retirement.
The number of pensioners in 2010 is almost 120,000, an increase of 9,000 since last year.
A further report, published by Comptroller and Auditor General John Buckley has estimated that the State’s overall liability to current and future public service pensioners amounts to €108 billion.
It also disclosed the public service pensions bill will increase from 0.5 per cent of GNP to almost 2 per cent of GNP by mid-century, almost €8 billion per annum in current terms. Some commentators have said such a development is unsustainable.
Public service pensions have not been affected by either the pension levy or the cuts imposed in the pay of existing public sector staff in last year’s budget.
However, the Department of Finance has not ruled out measures aimed specifically at public service pensioners in the budget.
Asked about this a spokesman replied: “Given the scale of the adjustment, all areas of public expenditure are being examined for potential savings.”
At present, those in receipt of State pensions are not liable to income tax unless the income is higher than €20,000 for a single person or €40,000 for a couple. Pensioners do not pay PRSI and those over 70 do not pay the health levy. The income levy is applied.
Last year, the group chaired by economist Colm McCarthy which identified potential savings in State spending, said the rising cost of public service pensions was of concern and recommended the need for reform.
Under the present system, retiring staff get one and a half times their salary in a tax-free lump sum and are entitled to a pension of half their final salary.
Pay increases awarded to public service staff are also awarded to pensioners as a matter of course.
The highest public service pension is currently €155,000 per annum, while 10 others receive a pension of €135,000 or over. Some 100 former public sector employees have pensions of €95,000 or more. It is thought that if the pensions are targeted, the most likely approach will be by means of income tax.
PUBLIC SERVICE PENSIONS: THE KEY NUMBERS
103,413
Number of public service pensioners in 2010
95,122
Number of public service pensioners in 2009
€2.23 billion
The public service pension bill in 2010
€1.35 billion
The public service pension bill in 2005
0.5 per cent
The current cost of public service pensions as a percentage of GNP
1.8 per cent
The cost of pensions by 2058 as a percentage of GNP
65.6 per cent
The increase in the public service pension bill since 2005
* Public service pension for those who joined pre-1995:
For 40 years' service, a lump sum of one-and-a-half times final salary, tax free, plus a pension of half final salary. For example, a person earning €60,000 will get a lump sum of €90,000 plus pension of €30,000
