THE LABOUR Party and the trade union Impact have strongly criticised radical proposals put forward by the employers’ body Ibec for public sector pension reform, including the ending of the existing defined benefit pension arrangements for all new staff.
Ibec said the Government should introduce a “fundamental repositioning” of public service pension arrangements. It said this should involve a move away from a defined benefit scheme – under which the size of the payout is guaranteed – towards a defined contribution scheme for new entrants, under which the employee would bear the risk of any shortfall.
Ibec said that in such cases the State should guarantee certain minimum investment returns.
The employers’ group also proposed the Government should end the current pay parity link under which public servants receive pensions based on the current salary attached to the post they held while working.
It also urged the Government to set a contribution rate cap beyond which employees would have to fund any pension liabilities on an equal basis.
It also proposed that all public servants should be required to contribute towards the cost of funding retirement benefits and that the Government should complete and publish a detailed actuarial analysis of the pension liabilities for public sector employees.
Ibec director Brendan McGinty said the country was facing the most difficult economic circumstances since the foundation of the State and it was time for strong leadership and for taking difficult decisions.
“Business will support Government in its endeavours on the basis that a reduction in the cost of the public sector is a priority. The average public sector pension is worth a premium of 13.5 per cent of salary more than the average private sector pension. Necessary reform must involve capping public sector pension liabilities and introducing fundamental reforms of public sector pensions”.
“A target of €5 billion reduction in total Government expenditure by 2012 is needed. In that context, public service pay and pensions cannot be exempt when one considers that the public sector pay and pensions bill will account for 51 per cent of all tax revenue in 2009. This is now urgent, with a shortfall in tax revenue of €8 billion for 2008 and an exchequer deficit spiralling to €20 billion.”
However, Impact, the country’s largest public sector union, accused Ibec of exploiting the recession to drive down the value of public and private pensions.
The union said Ibec’s proposals to “devalue public service pensions would do little to help the present crisis in public finances, but would effectively signal the end of employers’ responsibility for pension provision”.
Impact deputy general secretary Shay Cody said: “Ibec’s proposals would be a green light to employers – public and private sector – to dismantle occupational pensions. It’s a classic case of an organisation exploiting the recession in its members’ self-interest.”
He also said Ibec habitually exaggerated the value of pensions to most public servants.
Meanwhile, secondary teachers have threatened strike action if the Government moves to cut their pay or pensions. A meeting of the ASTI executive agreed to consider the move in the event of cuts in teachers’ pay or an attack on teachers’ pensions.
ASTI general secretary John White said teachers and other public sector workers have become scapegoats for the drastic downturn in the economy.
“The Irish second-level education service is not bloated. Any Ibec representative or right-wing economist who believes it is should spend some weeks in a second-level school,’’ he said.
The Irish National Teachers’ Organisation and TUI also condemned the proposals.
Labour Party leader Eamon Gilmore accused Ibec of pursuing “an old and bitter agenda”.